TRYING THE BAD FAITH CASE

By William A. Daniels and Arnold W. Schwartz

Introduction

Trying a bad faith case is just like trying any other case and then again, it isn’t.

As in any trial, the plaintiff’s case of bad faith against an offending carrier must be presented in terms of right and wrong, social responsibility and doing justice by restoring balance between insurer and insured.

Yet, in a larger sense, the bad faith trial is in its essence a retelling of the Biblical tale of how David took on Goliath. In an insurance transaction, the carrier is the party with the power. The carrier has the power of the pen when the insurance contract is made, it has the power of knowledge when the claim is presented, it has the power of the purse when it decides to deprive its insured of benefits rightfully owed.

This tale of the use and abuse of power is set on a stage that is at both familiar, since we all have insurance, and strange, as insurance law can seem arcane and confusing.

When your tale of how the defendant abused its power position to the detriment of its trusting insured comes through, you will obtain a great result for your client.

Some tips . . .

Theme

The theme of your case should always be focused through the prism of jury instructions. It is not enough to point out that your client is a deserving David and the defendant an offending Goliath. You must look to the substantive law that the judge will provide the jury in crafting your thematic frame.

BAJI 12.90-12.98 are the foundational pillars that you should build your bad faith case upon from the first day you open the file.

BAJI 12.90 states, “In every insurance policy there is an implied obligation of good faith and fair dealing on the part of both parties.” This is the well-spring from which all your arguments must flow. Re-read Comunale v. Traders & General Ins. Co. (1958) 50 Cal.2d 654, 328 P.2d 198; Austero v. National Cas. Co. (1976) 62 Cal.App.3d 511, 133 Cal.Rptr. 107 and; Egan v. Mutual of Omaha Ins. Co. (1979) 24 Cal.3d 809, 169 Cal.Rptr. 691.

You must thoroughly understand the inner-workings of the implied covenant of good faith and fair dealing if your trial theme is to be accepted as persuasive. Approach the trial as a lecture on the principles of insurance. Do not assume that either judge or jury are more than passingly acquainted with bad faith.

Always remember: the touchstone of insurance bad faith is reasonable conduct. You must explore and enunciate upon just where the boundaries of unreasonable conduct begin. Your theme should consider the nature of insurance, its purpose in society, how insurance is meant to protect, how the law imposes various duties upon insurance companies so that they will act honestly in their dealings with insureds.

Consider the sensitivity of the insurer-insured relationship and develop that sensitivity as the basic lens through which all evidence will be assessed and weighed.

Voir Dire

During voir dire, ask the jury questions regarding insurance. Ask why people buy insurance, since this has the effect of reinforcing the purpose and scope of the insurance agreement.

Bring home the notion that insurance is there for protection and that given the insurance company’s overwhelming economic power, any abuse during the claims process has severe consequences to the insured and justifies tort penalties in general and punitive damages in particular.

In other words, insurance bad faith law is not about lawyers getting rich or their clients receiving a windfall. It is about holding insurance companies accountable because it is the public policy of the state that they shall be accountable to their insureds.

Opening Statement

The opening statement should develop your theme in a chronological manner so that the jury can understand exactly what facts are critical, where they fall in time and how the juxtaposition of documents and positions taken by the insurance carrier support the plaintiff’s case.

Again, look to your BAJI and special jury instructions in determining precisely what facts and evidence are key to your case in chief and where the stress of your opening statement should lie.

Percipient Witnesses

Particularly in a bad faith case, hostile witnesses examined under 776 will make up the bulk of your case in chief. You must utilize the claims examiner, supervisor and other claims personnel to illustrate just what went wrong with the claim. These are the witnesses who will allow you to present the deficiencies in claims handling, the neglect, abuse of power and malice that your case revolves around.

Hostile witnesses will allow you to set the stage for your lay witnesses and/or your own experts later in the case.

Be aware that your witness examination will often require your referencing multiple documents gleaned from claim files, correspondence, etc. Electronic presentation software such as Sanction or Trial Director is a must, though you should consider blowing up ten or so key documents so that you may emphasize them to the jury.

Experts

Generally, plaintiffs will utilize one or more liability and/and damage experts in presenting their case.

A claims handling expert is preferred, though not essential, since the case law allows the jury to determine on its own what constitutes reasonable versus unreasonable conduct.

In property loss cases, there are often multiple layers of liability experts, beginning with technical subjects such as engineering, construction and the like, providing foundation for the claims handling expert to opine of how the adjusters unfairly bent or ignored evidence to the carrier’s advantage.

An economist may or may not be necessary for fixing economic loss. So far as the net worth of the carrier for punitive damages purposes, an economist may be used, or the defendant may well stipulate to a number. Insurance carrier net worth is generally on file with the Department of Insurance and a certified copy may be subpoenaed to trial. Also, where the carrier is local, the chief financial officer may be subpoenaed to testify during the punitive damage phase.

Defenses

There are some key defenses that seem to arise in every bad faith case and these need to be dealt with.

One is the genuine dispute doctrine, which is detailed in cases such as Chateau Chambrey Homeowners Association v. Associated International Ins. Co. (2001) 90 Cal.App.4th 335, 108 Cal.Rptr.2d 776 andGuebara v. Allstate Insurance Company (9^th Cir. 2001) 237 F.3d 987. Learn the intricacies of this defense and prepare to address it. Every effort should be made to reduce what the carrier will characterize as a genuine dispute into a one-sided problem with the insurance company unfairly taking advantage of the situation, misconstruing policy language, etc.

Watch for the advice of counsel defense. During your case work up you should seek to eliminate it from the equation by propounding a request for admission. Where the defense seeks to utilize advice of a lawyer as a defense, strive to show how the lawyer was not providing legal opinions, but instead was providing only factual analysis. Challenge the basis of the lawyer’s opinions, show that the opinions lack basis or that the lawyer in fact changed his or her opinions to support the plaintiff’s case.

Closing Argument

Closing argument and jury instructions should all be wrapped up into one neat presentation. The jury instructions, as the rules that the jury will apply to the facts, should be presented in a Powerpoint presentation to give your closing argument a nice, logical and orderly structure with an end point for punitive damages when they are available, an explanation about what punitive damages are and why they are deserved in your particular case.

In Sum

Don’t forget to always provide a trial brief to your judge with enough time so that your jurist can absorb the factual and legal basis for your case. Do not assume that the Court is familiar with insurance law; often it is not sufficiently versed that you can rest comfortably.

Be prepared, be thorough, be persuasive. You are on the right side of the argument.

Go get’em.

THE END


	TRYING THE BAD FAITH CASE By William A. Daniels and Arnold W. Schwartz Introduction Trying a bad faith case is just like trying any other case and then again, it isn’t. As in any trial, the plaintiff’s case of bad faith against an offending carrier must be presented in terms of right and wrong, social responsibility and doing justice by restoring balance between insurer and insured. Yet, in a larger sense, the bad faith trial is in its essence a retelling of the Biblical tale of how David took on Goliath. In an insurance transaction, the carrier is the party with the power. The carrier has the power of the pen when the insurance contract is made, it has the power of knowledge when the claim is presented, it has the power of the purse when it decides to deprive its insured of benefits rightfully owed. This tale of the use and abuse of power is set on a stage that is at both familiar, since we all have insurance, and strange, as insurance law can seem arcane and confusing. When your tale of how the defendant abused its power position to the detriment of its trusting insured comes through, you will obtain a great result for your client. Some tips . . . Theme The theme of your case should always be focused through the prism of jury instructions. It is not enough to point out that your client is a deserving David and the defendant an offending Goliath. You must look to the substantive law that the judge will provide the jury in crafting your thematic frame. BAJI 12.90-12.98 are the foundational pillars that you should build your bad faith case upon from the first day you open the file. BAJI 12.90 states, “In every insurance policy there is an implied obligation of good faith and fair dealing on the part of both parties.” This is the well-spring from which all your arguments must flow. Re-read Comunale v. Traders & General Ins. Co. (1958) 50 Cal.2d 654, 328 P.2d 198; Austero v. National Cas. Co. (1976) 62 Cal.App.3d 511, 133 Cal.Rptr. 107 and; Egan v. Mutual of Omaha Ins. Co. (1979) 24 Cal.3d 809, 169 Cal.Rptr. 691. You must thoroughly understand the inner-workings of the implied covenant of good faith and fair dealing if your trial theme is to be accepted as persuasive. Approach the trial as a lecture on the principles of insurance. Do not assume that either judge or jury are more than passingly acquainted with bad faith. Always remember: the touchstone of insurance bad faith is reasonable conduct. You must explore and enunciate upon just where the boundaries of unreasonable conduct begin. Your theme should consider the nature of insurance, its purpose in society, how insurance is meant to protect, how the law imposes various duties upon insurance companies so that they will act honestly in their dealings with insureds. Consider the sensitivity of the insurer-insured relationship and develop that sensitivity as the basic lens through which all evidence will be assessed and weighed. Voir Dire During voir dire, ask the jury questions regarding insurance. Ask why people buy insurance, since this has the effect of reinforcing the purpose and scope of the insurance agreement. Bring home the notion that insurance is there for protection and that given the insurance company’s overwhelming economic power, any abuse during the claims process has severe consequences to the insured and justifies tort penalties in general and punitive damages in particular. In other words, insurance bad faith law is not about lawyers getting rich or their clients receiving a windfall. It is about holding insurance companies accountable because it is the public policy of the state that they shall be accountable to their insureds. Opening Statement The opening statement should develop your theme in a chronological manner so that the jury can understand exactly what facts are critical, where they fall in time and how the juxtaposition of documents and positions taken by the insurance carrier support the plaintiff’s case. Again, look to your BAJI and special jury instructions in determining precisely what facts and evidence are key to your case in chief and where the stress of your opening statement should lie. Percipient Witnesses Particularly in a bad faith case, hostile witnesses examined under 776 will make up the bulk of your case in chief. You must utilize the claims examiner, supervisor and other claims personnel to illustrate just what went wrong with the claim. These are the witnesses who will allow you to present the deficiencies in claims handling, the neglect, abuse of power and malice that your case revolves around. Hostile witnesses will allow you to set the stage for your lay witnesses and/or your own experts later in the case. Be aware that your witness examination will often require your referencing multiple documents gleaned from claim files, correspondence, etc. Electronic presentation software such as Sanction or Trial Director is a must, though you should consider blowing up ten or so key documents so that you may emphasize them to the jury. Experts Generally, plaintiffs will utilize one or more liability and/and damage experts in presenting their case. A claims handling expert is preferred, though not essential, since the case law allows the jury to determine on its own what constitutes reasonable versus unreasonable conduct. In property loss cases, there are often multiple layers of liability experts, beginning with technical subjects such as engineering, construction and the like, providing foundation for the claims handling expert to opine of how the adjusters unfairly bent or ignored evidence to the carrier’s advantage. An economist may or may not be necessary for fixing economic loss. So far as the net worth of the carrier for punitive damages purposes, an economist may be used, or the defendant may well stipulate to a number. Insurance carrier net worth is generally on file with the Department of Insurance and a certified copy may be subpoenaed to trial. Also, where the carrier is local, the chief financial officer may be subpoenaed to testify during the punitive damage phase. Defenses There are some key defenses that seem to arise in every bad faith case and these need to be dealt with. One is the genuine dispute doctrine, which is detailed in cases such as Chateau Chambrey Homeowners Association v. Associated International Ins. Co. (2001) 90 Cal.App.4th 335, 108 Cal.Rptr.2d 776 andGuebara v. Allstate Insurance Company (9^th Cir. 2001) 237 F.3d 987. Learn the intricacies of this defense and prepare to address it. Every effort should be made to reduce what the carrier will characterize as a genuine dispute into a one-sided problem with the insurance company unfairly taking advantage of the situation, misconstruing policy language, etc. Watch for the advice of counsel defense. During your case work up you should seek to eliminate it from the equation by propounding a request for admission. Where the defense seeks to utilize advice of a lawyer as a defense, strive to show how the lawyer was not providing legal opinions, but instead was providing only factual analysis. Challenge the basis of the lawyer’s opinions, show that the opinions lack basis or that the lawyer in fact changed his or her opinions to support the plaintiff’s case. Closing Argument Closing argument and jury instructions should all be wrapped up into one neat presentation. The jury instructions, as the rules that the jury will apply to the facts, should be presented in a Powerpoint presentation to give your closing argument a nice, logical and orderly structure with an end point for punitive damages when they are available, an explanation about what punitive damages are and why they are deserved in your particular case. In Sum Don’t forget to always provide a trial brief to your judge with enough time so that your jurist can absorb the factual and legal basis for your case. Do not assume that the Court is familiar with insurance law; often it is not sufficiently versed that you can rest comfortably. Be prepared, be thorough, be persuasive. You are on the right side of the argument. Go get’em. THE END