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Berks County Court Awards $18 Million in Bad Faith Case

An insurance company has a duty to act in good faith and fair dealing in both the defense and indemnity of third party claims (claims of others against you, as an insured) as well as a duty to pay for first party claims (your claims against others).  When the insurance company fails to live up to these duties when a valid claim exists, then a case of bad faith may exist.  

Recently, a Berks County Judge found in favor of plaintiff's who alleged that their insurance company, Nationwide, engaged in bad faith in the handling of their first party insurance claim.  This case was unique in that the case began some 16 years ago.  The plaintiffs, Daniel and Sheryl Berg, alleged that Nationwide knowingly returned to them a vehicle that was beyond repair in an effort to avoid paying for the claim.

In finding in favor of the plaintifffs, the Judge stated that Nationwide spent millions litigating this case in an effort to discourage the plaintiffs, and others like them, from disputing small claims.  The Judge said Nationwide admitted that it spent $2.5 million dollars on this case as of April 2013.  Such money spent on legal defense, said the Judge, "screamed to the litigation world that it is a defense-minded carrier in the minds of the plaintiff legal community."  

The $18 million dollar damages award was set by the Judge to punish Nationwide and prevent similar conduct in the future.  Nationwide argued that the award was much too high because no one was injured.  The Judge disagreed and said that the fact that they permitted a damaged vehicle to remain on the road and took their chances that on one would be hurt was reckless.   

This case is a win for all policy holders because it sends a message to the insurance companies that they must live up to the duty of good faith and fair dealing.  The plaintiffs in this case proved that they would not be discouraged by lengthy litigation.  It is sad that they had to endure such a long road (16 years) to get a verdict.  

Source:  "Insurer Hit with $18 Mil. Punitive Damages Award", by Zack Needles, The Legal Intelligencer, June 25, 2014.

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