Insurance Claims and Damages: What Consumers Can Expect

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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UPDATED: Jun 19, 2018

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If you’re successful in pursuing a claim against an insurer, what type of damages can you expect? The type of damages available will depend upon the claim you bring against the insurer. Obviously, dollar amounts will vary depending upon the injury, policy language, policy limits and the state in which you live, but there are some commonalities.

Charles Surrano, an attorney who has practiced in the insurance industry for 30 years and member of the Advocate Law Group network provides some insight into damages. “In a disability case, for example, if the insurance company has not paid the disability benefit, then you have a claim for what the disability benefit would be. That claim may include not only the past due unpaid benefits, but in some cases can also include all the future benefits under the policy if you can show that the insurance company has repudiated the disability policy or that they’ve acted in bad faith.

In a breach of contract claim, the insurance company is not honoring its promise to pay. In a homeowners’ case, if your home was destroyed by fire and they’re supposed to pay to rebuild it and don’t, obviously you’re entitled to the cost to repair or rebuild the home. So, depending upon what kind of insurance policy – that is – contract you have, you’ll be entitled to whatever benefits have been improperly denied.”

Bad faith takes it up a notch

A bad faith claim is a bit different. While insurers have a duty to deal fairly with policyholders and act in good faith, they sometimes don’t. Surrano explained why bad faith claims take it up a notch. “Bad faith is a tort. It’s not a contract claim. That means that the insurance company could be liable not only for the contract damages, but for additional damages that arise as a consequence of the insurance company’s bad faith conduct. Those damages, as in any tort case, can include all manner of consequential damages and emotional distress. For example, consequential damages in a disability case might include items such as house payments when the insured’s disability benefit is not paid. Other examples might include an insurer’s home being foreclosed upon or their credit being ruined. Those are consequential type damages that flow from the unreasonable denial of the benefit and from the commission of the tort.”

Emotional distress can also be a factor. Surrano continued, “The stress people are put under who are expecting the security, or the promise of security to be performed, can sometimes be enormous. That is also a compensable part of a bad faith claim. In some cases, I’ve seen insureds awarded millions of dollars simply for the emotional distress, the anguish that they are put through, sometimes for many years, by the insurance company and the processing of the claim.”

Punitive damages

Punitive damages are awarded in order to “punish” a party for their actions. They are the type of damages that insurance companies fear most. According to Surrano, “Insurance companies can sometimes be subjected to punitive damages in cases where they have acted in a way that is spiteful, deliberately harmful or if they have substantially disregarded a risk of harm to the insured. Mind you, it’s a tougher standard. It’s a higher burden of proof for an insured. However, punitive damages in bad faith cases are the thing that the insurance companies worry about most because they can far exceed contract and bad faith damages. Often times, you’ll see punitive damages awards in the many millions of dollars, sometimes in the tens of millions of dollars. That should concern insurance companies – and [believe me], it does.”

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