What Damages Can Be Recovered In A Bad Faith Case?
You can recover three types of damages in a bad faith case. These are the contract damages, the extracontractual damages, and punitive damages.
What are contract damages?
The contact damages are damages representing the amount of the claim that was denied plus interest. For instance, if you had a health insurance claim for $50,000 that was denied, the contract claim is that amount plus interest at 10% a year.
What are extracontractual damages?
Extracontractual damages are damages to compensate you for any economic loss, emotional distress, and attorney fees.
Economic loss damages include any type of financial loss you sustained as a result of an insurer’s bad faith refusal to pay your claim. For instance, if you had to borrow money to pay for medical care that should have been paid by the insurer, you can recover for interest paid on that loan. If the insurer’s action forced you into bankruptcy, you can recover for the damage to your credit, etc.
Emotional distress damages can be recovered when there is an economic loss that results from the insurer’s bad faith. These damages are a form of general damages that compensate the insured for any suffering, anguish, worry, anxiety, etc. he or she has suffered. In any type of insurance claim, the insurer’s bad faith in delaying or denying a claim, canceling a policy, etc., can create significant emotional distress for the insured because he or she was relying on the insurer’s promise of protection in a time of need.
Attorney fees can also be recovered when it is shown that the insurer committed bad faith. The fees that can be recovered are those incurred to prove the amounts due under the policy, as opposed to the insurer’s bad faith. At Gianelli & Morris, we take insurance bad faith cases on a contingency fee basis, which means our fees are taken as a percentage of any award we recover. Our clients are never responsible for paying their own fees in any event, but by recovering our fees from the insurance company, our clients are able to keep a larger part of their damages award for themselves.
What are punitive damages?
California Civil Code section 3294 authorizes punitive damages for conduct that is malicious, fraudulent, or oppressive. Whereas contract and extracontractual damages are meant to compensate plaintiffs for their loss, punitive damages are intended to punish the defendant for their especially wrongful conduct. Punitive damages are referred to in California law as exemplary damages, as they serve as an example to others of the types of conduct our society does not tolerate. Punitive damages may be appropriate against an insurance company for conduct that is intentionally wrong, such as deliberately concealing a material fact from the insured, or for activities conducted with a willful and conscious disregard for the rights or safety of the insured.
Punitive damages must be proven with “clear and convincing” evidence of the insurer’s wrongful conduct. Other facts in a civil case have to be proven by a “preponderance of the evidence,” which means proving a fact is more likely true than not. “Clear and convincing” is a significantly higher standard. Not only are punitive damages reserved for the most egregious cases of bad faith, but they are also substantially harder to prove than compensatory damages. At Gianelli & Morris, our California insurance bad faith lawyers put in the extra time and effort to prove punitive damages when facts warrant it.
