Insurance disputes involve a claim that an insurance company has failed to pay what it owes under an insurance contract. The person making the claim can be either the “named insured” under the policy, or someone, like a passenger in a motor vehicle, who is an “insured” under another person’s insurance policy.
Insurance bad faith occurs when an insurance company takes action towards its insured that has no reasonable basis, such as offering an unreasonably low amount on a claim, or taking an unreasonably long time to investigate and evaluate a claim, or giving an insured incorrect advice about coverage.
Insurance bad faith can occur with any type of insurance policy, be it auto, homeowner’s, life, disability, or health (if the health insurance policy is privately bought, rather than obtained as an employment benefit). Not all insurance disputes rise to the level of insurance bad faith, but those that do fall under a law that Pennsylvania adopted in 1990 to protect victims of insurance bad faith. Under that law, if an insurance company acts in bad faith, the court may award any or all of the following against the insurance company:
- punitive damages,
- attorneys’ fees,
- costs of suit, and
- interest at the prime rate plus 3%.
Mr. Roda became involved in insurance bad faith cases shortly after Pennsylvania adopted its insurance bad faith law, and has become a recognized leader in this field in Pennsylvania.
Case Study: Accident Insurance Bad Faith
- In 1996, Mr. Roda obtained a $5.5 million dollar verdict in an insurance bad faith case, for a family that had lost its husband and father in a motor vehicle accident.
- The family made a claim for underinsured motorist benefits, but a dispute arose with the insurance carrier as to what the limits of those benefits were.
- The family asked the insurance carrier to pay at least the lower amount that the insurance company agreed was owed, while the parties resolved whether any amount above that was owed.
- The insurance company, however, refused to pay even the undisputed amount unless the family would sign a release waiving any claim to a higher amount.
- The family refused to sign the release, and Mr. Roda sued the insurance company for bad faith, contending that there was no reasonable basis for an insurance company to refuse to pay an undisputed amount and try to leverage payment of that amount into a release of any claim to a higher amount.
- A federal jury agreed, and awarded the family $5.5 million in punitive damages against the insurance company, a verdict that was at the time the highest in Pennsylvania in an insurance bad faith case, and still remains one of the highest today.
Case Study: Life Insurance Bad Faith
- In another case, Mr. Roda represented a retired, mentally disabled man whose life insurance company had him cash in a paid-up life insurance policy and buy a new policy with annual premiums equal to 25% of what the policy would pay when the man died, which meant that he would pay more in premiums, in just four years, than the policy would ultimately pay out.
- When the man’s wife discovered what had happened, she pleaded with the insurance company to reverse the transaction, emphasizing the very limited means that she and her husband had, but the insurance company refused.
- Mr. Roda sued the company for bad faith and punitive damages, arguing that there was no reasonable basis for the company to sell that policy to the man, and that the company had taken advantage of him to sell a policy that made no sense for him.
- The case went to trial and settled for a substantial payment to the man, just before the jury was to begin its deliberations.