Can an Insurer Evade Bad Faith Responsibility of an Outsider Makes the Opinion?

Recently, the California appellant's tribunal ruled that an insurer could not shirk responsibility for an infringement of the implied good faith and fair trade (bad faith) agreement, since its coverage position is founded on the findings of an out-patient consultant. The court considered the bold contention of State Farm, Fadeeff v. State Farm General Insurance Company, that an insurer should be automatically considered acting in good faith if the decision in its claims was based on the findings of an independent expert. See how the bad faith insurance lawyer worked here.

The smoke and soot damage to the insured house caused by Valley Fire in 2015. The insured hired an adjuster who submitted a claim for an additional $75,000 for damages after State Farm paid $50,000 for the damages. The State Farm retained the Forensic Analytical Services in an inspection to determine whether further repairs / remediation were necessary to carry out the damage claimed. Subsequently, forensic analysis predictably determined that no additional cleaning was required to deal with the damages to smoke and fire of the insured. The State Farm relied on the report of Forensic Analytical to deny the additional claim of the insured.

The Fadeeffs then took legal action against State Farm for violating the implicit Good Trust and Fair Treatment Pact, often known as Bad Faith Insurance.

State Farm filed a summary decision requesting the court to establish that the insured’s claim had not been adjusted in bad faith. State Farm's summary judgment was granted by the court and the Fadeeffs appealed.

State Farm maintained that it could not have acted in bad faith because the findings of forensic analytical, a so-called "self-regulating" expert retained to decide whether a claim had been merited were the basis for the findings of the $75,000 additional claim. State Farm argued that its claim decision was basically not a product of its behavior as it logically relied on Forensic Analytics. State Farm has relied on law, furthermore, to prevent misrepresentation of insurers' opinions based on an external expert.

The Appeals Court focused on the word and concluded that relying simply on an external expert does not save an insurer automatically from misconception. Instead, reliance on an external expert only serves to consider whether the insured agreed a claim in bad faith.

In this case, the court instructed that when determining the misconduct, all factors concerning the conduct of the insurer should be investigated rather than just the retention of the independent consultant. In this context, the Court considered also that: (1) State Farm had initially found that all damages claimed were caused by fire, but a new adjuster for the additional claim contending certain earlier damages had now been regarded as caused by wear; (2) State Farm failed to recognize that damages caused to the supplementary claim were damages caused by State Farm's power washing. The Court of Appeal reversed the dismissal by the court of the bad faith claim for the insured.

Not only was the reliance by State Farm on external experts not automatically protecting it from claims of bad faith an important takeover from the Court rulings, but the reliance was actually a factor showing its misconduct. State Farm could not explain why it was justified to rely on the consultant. Therefore, the reasonability of an insurer's conduct does not depend on the hiring of a specialist. The behavior of the insurer should be assessed on the basis of the findings of the expert.

An insurer is essentially obligated to examine and examine the findings of a consultant as best he could. In case of doubts as to the findings of the consultant, the question in favor of the insured should be put. A large number of insurers only place the rubber stamp on a report by an expert. It should be argued under Fadeef that this behavior is a proof of bad faith.

If you have the feeling that your insurer is also acting in bad faith, reach us for the bad faith insurance lawyer at The West Law Firm.

**Disclaimer: The above article does not imply a relationship between attorney and client, nor is it legal advice.