In Oklahoma, an insurance company has a legal duty to fairly pay claims. This duty is technically to act in good faith and with fair dealing. An insurance company that refuses to fairly pay claims can be sued for bad faith for not complying with the law. The insured policyholder can claim emotional distress, financial losses, etc., caused by the bad faith.
It is good to keep in mind that the term bad faith is a short hand version of the duty of good faith and fair dealing. However, most adjusters and insurers use “bad faith” to describe this type of litigation. In everyday communication, saying breach of the implied duty of good faith and fair dealing is a mouthful. Bad faith is a whole lot shorter and easier to say.
Historically, there have been a few disreputable insurers who tried to take advantage of certain situations to avoid paying claims. Like every industry, there are always a few bad actors. On the whole, the vast majority of insurance companies pay their claims timely and appropriately.
In some respects, the Oklahoma bad faith laws protect honest insurance companies, not just the policyholder. The law acts as a shield to the good companies. Imagine how hard it would be for an insurance company to compete against another company that takes advantage of people by not paying claims. The bad actor company would reap profits by not paying. In time, the good companies would be forced out of business.
Not all lawyers understand Oklahoma bad faith law.
We have seen a lot of attorneys who threatened to sue for bad faith that did not exist. Some actually sued and wasted a lot of time and money. Just because an insurance company doesn’t pay the amount the insured wants does not make it bad faith.
Just like all litigation, bad faith requires proof.
Lawyers without experience in insurance may reach the wrong conclusion. The lawsuit is filed. Years later the court rules there’s not bad faith. Having sound knowledge about insurance coverage is a must. It is rare to see a successful bad faith lawsuit unless there is first coverage for the loss. There are very few exceptions.
Trained adjusters can spot an inexperienced attorney a mile away. One easy way is the misuse of common terms in the industry. Adjusters speak a language using words that have precise meaning to the claim industry. Lawyers who don’t speak the language stand out. In one or two conversations, it is apparent the lawyer doesn’t really know what he is talking about.
For example, the attorney may talk about a bad faith claim hoping to scare the adjuster. It doesn’t work. An experienced adjuster knows how to do their job. The lawyer’s threats of bad faith just illustrate how little the attorney really knows. Once the lack of experience is revealed, the attorney loses a lot of credibility.
In conclusion, bad faith is a separate right to sue, but only if the insurance company wrongfully adjusts the claim. The legal right to recover money for bad faith is not based upon mere conclusions. Evidence is necessary of the bad faith acts. If the bad faith causes financial loss, emotional distress, etc., damages can be awarded. Therefore, punitive damages can be given in severe cases.