An insurance company has the duty to act in good faith toward an insured. When an insurer unreasonably withholds the benefits of an insurance policy from its insured, it is considered to be in “bad faith.”
One type of “bad faith” is the failure to settle a claim against an insured. The insurance company has a duty to protect its insured. If the insurance company has an opportunity to settle the case but fails to do so, the insurance company may be sued and found liable for bad faith. If a jury verdict is obtained above the policy limits, the insurance company may have to pay the entire verdict.
Under Missouri law, an insured whose claim has been wrongfully denied can bring a cause of action for vexatious refusal to pay. The Missouri statute authorizes damages for vexatious delay and provides for damages and attorney’s fees in addition to the amount of the loss actually suffered by the insured.
In order to recover vexatious damages, the insured “must show that the insurer’s refusal to pay the loss was willful and without reasonable cause, as the facts would appear to a reasonable and prudent person before trial.” This does not mean that the denial of any claim is a vexatious refusal to pay. An insurer has the right to refuse payment if it has reasonable grounds for denying the claim.
The following are just a few of the many situations in which vexatious refusal penalties have been awarded:
- Refusal to pay based on a suspicion that is unsupported by substantial facts
- Persistence in refusal to pay after insurer becomes aware that it has no meritorious defense
- Refusal to pay based on an inadequate investigation and a denial of liability without stating a ground for denial
- Refusal to pay founded not on what appeared to be the facts, but on a possibility that later investigation would develop facts justifying a refusal to pay, even if such investigation did develop such facts
- Proposing settlement offers for much less than the claim is worth
- Unnecessarily delaying payment of the claim
If your insurance company has denied your claim in bad faith, it is imperative that you obtain an experienced attorney to handle your case. The Missouri statutes are complex and contain many specific legal requirements for bringing a cause of action for vexatious refusal to pay. Please call DBJ today at 1-800-875-5972 for a free consultation.