Arizona Injury Lawyer & Attorney : Koplow & Patane Law Firm : Insurance Bad Faith, Personal Injury, Auto Accidents : Phoenix, Scottsdale, Tempe, Arizona

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According to a recent press release from the Arizona Department of Insurance, in 2007 the Department responded to 5,020 complaints and assisted thousands of Arizona consumers to recover $7,483,107 in claim settlements and refunds. These figures increased from 2006 when the department received 4,393 complaints and assisted in recovering $3,607,496 for consumers.

The Department of Insurance reports that the majority of complaints involve delay or denial in paying automobile, health or homeowners insurance claims.

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Ken Alltucker of the Arizona Republic has reported that an insurance-industry practice of retroactively dismissing individual health policies and leaving some people with costly medical bills has come under fire in Arizona and other states.  His article states:

The practice is generating many complaints to government regulators and some lawsuits claiming insurers have improperly dropped coverage.

Insurance companies say such cancellations are a rare but necessary tool to stop consumer fraud and lower costs for all individual policyholders.

Yet, consumers and lawyers who have challenged insurance cancellations say there are many examples of insurers targeting patients who have been diagnosed with chronic or life-threatening diseases that require costly medical care.

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Victims of Arizona bad faith may pursue their insurance company for several types of damages. Damages in a bad faith lawsuit may include:

• monetary losses
• unpaid policy benefits due
• damage to credit
• humiliation
• inconvenience
• anxiety
• punitive damages

The amount of damages a plaintiff receives....

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In Arizona, there are two general types of bad faith claims – first party and third party. The names can be a bit confusing, particularly the term “third party bad faith” as that term means something else in different states.

In Arizona, insurance companies have a duty of good faith and fair dealing only to the insured. The insurance company does not have a duty of good faith and fair dealing to a third party making a claim against an insured.

In other words, when an insured presents a claim against his or her insurance policy, or when a person presents a claim or lawsuit against an insured, the insurance company owes the insured a duty of good faith and fair dealing in handling the claim.  This is because the insurance agreement between insured and insurer implies a duty of good faith and fair dealing. Where a claimant presents a claim against an insured, the insured’s insurance company does not owe the claimant a duty of good faith and fair dealing because there is no insurance contract between the insured and the claimant. Other states may require good faith and fair dealing in such a circumstance and where the insurance company breaches this duty, these states may call this third-party bad faith. However, Arizona does not recognize this type of third-party bad faith claim.

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When a claim is presented against an insured and the insured turns to his or her insurance company for help, or when an insured presents a claim to his or her insurance company for benefits, the insurance company has a number of duties to its insured, including:

• The duty to defend
• The duty to indemnify and pay claims against the insured that are covered 
• To deal with the insured in good faith and fairly deal with the insured.

What does is the duty of “good faith and fair dealing”? In Arizona, when handling an insured’s claim, an insurance company must, for example:

• Promptly pay a legitimate claim
• Immediately conduct an adequate investigation
• Act reasonable in evaluating a claim
• Refrain from doing anything that jeopardizes the insured’s security interest
• Refrain from forcing the insured to jump through needless adversarial hoops
• Refrain from low-balling claims
• Refrain from delaying in hopes the insured will settle for less.

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“Bad faith” is the legal term for when an insurance company breaches the covenant of good faith and fair dealing implied in every insurance contract. Generally speaking bad faith occurs when an insurance company unreasonably refuses to provide coverage or pay an insured insurance benefits. Legally, bad faith is considered a breach of the covenant of good faith and fair dealing implied in every insurance agreement.

With very limited exception, the person who can file a bad faith claim in Arizona is the insured. Arizona does not allow an injured person to sue the other driver’s insurance company for bad faith where, for example, the insurance company low-balls a claim or refuses to settle. Arizona’s bad faith law is based on the relationship between the insured and the insurer.