When Can an Insurance Company’s Bad Faith Handling in Auto Accident Claim Lead to Penalties?

storm-over-barcelonetta-1463885-1024x679Automobile accidents can be terrifying experiences.  Severe automobile accidents that involve injuries can be truly devastating and life altering.  In the event one is injured in an automobile accident, he/she has several options available to him/her in obtaining compensation for his/her losses.  More specifically, one may have a claim against the other driver(s) who caused the automobile accident or have the ability to bring a claim against the other driver’s insurance company.  Depending on the circumstances of the automobile accident, one may also have the ability to bring a claim against his/her own insurance company for compensation.

An insurance company is required to act in good faith with any individual making a claim, regardless of whether he/she is a policyholder with said insurance company.  Generally, an insurance company has acted in bad faith if it fails to fulfill the obligations stipulated in the insurance policy language or if it fails to abide by the laws of the state where the claim has been filed.  Some examples of bad faith include but are not limited to: refusing to pay a claim owed; failing to timely pay a claim owed; requiring unreasonable unnecessary paperwork to process the claim filed; failing to deny a claim within a reasonable amount of time; and failing to explain the reasons(s) for why a claim is denied.  Consequently, having a great attorney who is competent in identifying bad faith can assist you pursuing a legal claim against the insurance company for its actions, while also assisting you with the original claim presented to the insurance company for the property damage and bodily injury you suffered in the automobile accident.

The following case out of East Baton Rouge, Louisiana is an example of an insurance company acting in bad faith and being legally penalized for doing so.  On May 20, 2010, the plaintiffs, Dedra and Sheddrick Griffin filed a petition for damages against State Farm Mutual Automobile Insurance Company as a result of an automobile accident that occurred on January 13, 2010.  On January 13, 2010, Jacob P. Savoy driving a 2001 Mitsubishi Spyder struck Mr. and Mrs. Griffin driving a 2000 Infiniti I30 from behind while traveling eastbound on U.S. Highway 190 in West Baton Rouge, Louisiana.  The accident caused extensive property damage and personal injuries to Mr. and Mrs. Griffin.  More specifically, Mrs. Griffin, the driver of the Infiniti sustained injuries to her shoulder, neck, and chest wall, in addition to aggravating pre-existing injuries to her neck, back, and legs, while Mr. Griffin sustained injuries to his left knee, chest wall, and back.  Mr. and Mrs. Griffin were both treated by Dr. David Wyatt, an orthopedic surgeon.  At the time of the accident, Allstate Insurance Company insured Mr. Savoy with liability limits of $10,000.00/$20,000.00, while State Farm insured Mr. and Mrs. Griffin.

The trial record reflects that on January 19, 2010, State Farm initiated a claim for Mr. and Mrs. Griffin, and on or about January 25, 2010, the uninsured/underinsured motorist (“UM”) and medical payment coverage inuring to Mr. and Mrs. Griffin’s benefit had been confirmed.  Shortly after, State Farm commenced its investigation of the accident, resulting in State Farm finding Mr. Savoy solely responsible for the accident.  Prior to Mr. and Mrs. Griffin filing their petition against State Farm, they each made separate demands for UM benefits.  On April 22, 2010, Mr. and Mrs. Griffin made their initial demands; Mrs. Griffin’s demand included medical expenses totaling $25,200.55, whereas Mr. Griffin’s demand included medical expenses totaling $23,897.20.  Then on June 16, 2010, Mrs. Griffin made a subsequent demand including medical expenses totaling $27,859.55.  The trial court concluded that all three demands incorporated sufficient proof for their losses.  Roughly thirty days after Mr. and Mrs. Griffin’s initial demand, State Farm tendered $2,000.00, to Mrs. Griffin and $1,200.00, to Mr. Griffin.  Upon completion of written discovery and Mr. and Mrs. Griffin’s depositions on December 6, 2010, State Farm tendered the remainder of the UM benefits.  On March 10, 2011, approximately eleven months after Mr. and Mrs. Griffin’s initial demand, State Farm tendered $8,000.00, to Mrs. Griffin and $8,800.00, to Mr. Griffin.  State Farm claimed that its delay in tendering the remainder of the UM benefits was due to the delay in the completion of discovery, and its adjuster’s suspicions of Mr. and Mrs. Griffin’s attorney and of Dr. Wyatt.  However, the trial record shows that State Farm obtained no additional information regarding Mr. and Mrs. Griffin’s claims with the aforementioned discovery nor could it produce supporting evidence of its adjuster’s suspicions.

In evaluating State Farm’s delay in tendering the UM benefits, the trial court looked to La. R.S. § 22:1892(A)(1) and La. R.S. § 22.1973(B)(5), which both impose an obligation of good faith and fair dealing on an insurer, as well as mandatory imposition of penalties and attorney’s fees for the collection of UM benefits in the event that the insurer arbitrary or capricious fails to tender the amount within a period of time after sufficient proof of loss has been provided. Ibrahim v. Hawkins, 845 So. 2d 471, 476 (La.App. 1 Cir. Feb. 14, 2003).  The primary difference between the two statutes is the time periods allowed for payment of the UM benefits. Lemoine v. Mike Munna, L.L.C., 148 So. 3d 205 (La.App. 1 Cir. 2014).  Under La. R.S. § 22:1892(A)(1), the insurer must pay the claim within thirty days of receiving sufficient proof of the loss, whereas under La. R.S. § 22:1973(B)(5), the insurer must pay the claim within sixty days of receiving sufficient proof of the loss.  Consequently, the trial court concluded that State Farm did not have substantial or legitimate questions as to the extent of its liability, and therefore were arbitrary and/or capricious in handling Mr. and Mrs. Griffin’s claims.

In addition to seeking damages, Mr. and Mrs. Griffin also sought an award of statutory penalties and attorney’s fees for State Farm’s bad faith in handling their claims.  Typically, the sanctions of penalties and attorney’s fees are not assessed unless there is sufficient proof that the insurer was arbitrary or capricious in refusing to pay a claim. Lemoine, 148 So. 3d at 215.  Because the trial court determined that State Farm had been arbitrary and/or capricious in handling Mr. and Mrs. Griffin’s claims, as its tendered amounts were insufficient and untimely, Mr. and Mrs. Griffin were entitled to attorney’s fees.  As a result, in determining the amount of attorney’s fees Mr. and Mrs. Griffin were entitled to, the trial court looked to La. R.S. § 22.1982(B)(1) and La. R.S. 22:1973(C).  Although La. R.S. 22:1973(C) may provide a greater penalty and supersede the penalty set forth in La. R.S. § 22.1982(B)(1), Mr. and Mrs. Griffin are still entitled to recover attorney’s fees under La. R.S. § 22.1982(B)(1) La. R.S. § 22.1982(B)(1).  Furthermore, the trial court examined the services that Mr. and Mrs. Griffin needed to effect recovery, the degree of professional skill exercised, the amount of work performed, the time devoted to their case, the amount of money in controversy, and the percentage fixed for attorney’s fees in Mr. and Mrs. Griffin’s contract. Ibrahim, 845 So. 2d at 477.  Ultimately, the trial court awarded Mrs. Griffin $16,000.00, in penalties, Mr. Griffin $17,600.00, in penalties, and a total of $8,000.00, in attorney’s fees.

On appeal, State Farm argued that the trial court erred in finding it responsible for penalties and attorney’s fees because there was no proof that it had been arbitrary and/or capricious in handling Mr. and Mrs. Griffin’s claims.  Additionally, State Farm argued that in the event it had acted in bad faith, the law did not support the penalties and attorney’s fees awarded by the trial court.  The appellate court affirmed the trial court’s conclusion that the damages sustained by Mr. and Mrs. Griffin were the amounts due to them, but not paid following their separate demands on April 22, 2010.  Furthermore, the trial court’s assessment of penalties under La. R.S. 22:1973(C) were not manifestly erroneous.  Additionally, the appellate court concluded that the amount of attorney’s fees awarded by the trial court represented about one-fourth of the total amount recovered by Mr. and Mrs. Griffin, and therefore were not excessive or unwarranted.  Consequently, the appellate court found that the trial court was reasonable in its findings, and affirmed the judgment in favor of Mr. and Mrs. Griffin.

Additional Sources: DEDRA GRIFFIN AND SHEDDRICK GRIFFIN VERSUS STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

Written by Berniard Law Firm Blog Writer:  Ashley Werdann

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