Institutional Bad Faith: Avoiding and Defending Allegations of Company-Wide Schemes to Suppress Claims Payment

This CLE course will discuss what happens when insurance claims handling goes awry and a plaintiff attempts a frontal assault on the insurer's long standing claims-handling practices and procedures in a claim of institutional bad faith.

The allegation of institutional bad faith is a direct attack on the integrity and character of the insurance company as a whole. The typical theme of institutional bad faith litigation is that to meet financial earnings or goals, the insurer implemented a company-wide scheme to reduce valid payouts and settlements.

Institutional bad faith claims stand or fall on the ability of the claimant to demonstrate evidence of alleged company-wide "bad practices." Discovery is necessarily broad and top-down. Plaintiffs seek documents and testimony about the insurer's finances, claims-handling manuals, policies, training, claims handlers, management decisions, the claim file at issue, files on other similar claims, and reserves.

Insurers have developed different approaches to defeat allegations of institutional bad faith and to prevent overreaching discovery. Staged discovery, robust protective orders, and confidentiality orders can protect the privacy of non-parties, trade secrets, and proprietary information. Opposing "apex" depositions until the end of discovery can prevent unnecessary and unproductive discovery.

Listen as the panel discusses what practices tend to create institutional bad faith claims, best practices to minimize the risk of institutional bad faith claims, the most difficult to defend against, and how to address a claim if it arises.