Why Foley & Small?

The Duties and Responsibilities of an Insurance Company

Indiana as most states, requires insurance carriers to act in good faith and deal fairly with their insureds in responding to a presented claim. An insurer has an obligation to reasonably investigate facts and circumstances involving the loss and then make a fair and adequate assessment of the value of the injury or loss sustained. The insurance carrier then must make a reasonable offer to the insured to properly compensate the insured for that loss as provided for under the policy. If an insurance carrier fails to act in such a manor, they can be found to be in a breach of their policy obligations and to have engaged in bad faith insurance claims practices. Such findings renders the insurance company liable to pay fully for the loss incurred and for all consequential damages to the insured for having to go through a protracted claims process and likely to have suffered additional losses and inconvenience in having to battle the insurance carrier for proper payment on the claim. Beyond that, the insurance carrier can be held liable for punitive damages.

In the landmark case of Erie Insurance Company v. Hickman, the Indiana Supreme Court recognized the common law tort claim of bad faith that can be brought against insurance carriers. An insurance carrier is obligated to act in good faith and deal fairly with its insured. Such obligations include the duty to refrain from the following:

• (1) Making an unfounded refusal to pay policy proceeds;

• (2) Causing an unfounded delay in the payment of a claim;

• (3) Deceiving the insured; and

• (4) Exercising any unfair advantage to pressure an insured into a settlement.

Many insurance bad faith claims have been brought during the years since the 1993 decision in Hickman. Beyond this common law basis to assert a claim, Indiana has adopted the Unfair Claims Practices Act, but that statute does not create a private cause of action that could be asserted by an individual insured. Insureds can, however, use the unfair claims settlement practices identified in the Act as a basis of showing bad faith by the insured in asserting a common law claim for bad faith settlement practices.