Michael L. Cohen
Heather M. McKeon
Using claims-adjusting experts in bad-faith cases Insurers are smarter today and their files don’t reveal the obvious abuses that they did in the past Bad-faith cases can be fun. You are
protecting a policyholder whose carrier has reneged on the promises that it made in the insurance contract. You always feel like you’re wearing the white hat. But these cases are also hard to win. This article gives you six tips for
using claims-handling experts in bad-faith cases. These tips are distilled from the experience we have earned representing policyholders in hundreds of cases over the last 15 years.
1. Do not take these cases unless you intend to litigate them We occasionally hear our fellow con-
sumer attorneys say that an insurance company will be afraid to litigate a partic- ular case when the client is an especially sympathetic policyholder. When we hear this, we promptly disabuse our colleagues of this misconception. Most insurance car- riers have adopted a strategy of “delay, deny, defend”: delay paying the claim as long as possible; deny as much of the claim as possible; defend any lawsuit that follows. Whatever fear insurance carriers might have once had in trying bad-faith cases to verdict evaporated after the United States Supreme Court imposed drastic limits on punitive damages in State Farm Mut. Auto. Ins. Co. v. Campbell (2003) 538 U.S. 408 [123 S.Ct. 1513]. With only rare exceptions, insurers
will not resolve these cases with letters and telephone calls, even in cases where liability seems clear. Do not waste your time with these cases unless you intend to litigate them.
2. Determine whether you need an expert to prove consequential damages for the carrier’s breach of contract Attorneys sometimes seem to forget
that insurance policies are contracts. 58— The Advocate Magazine JULY 2011
Consequently, the law governing damages for breach of contract apply to an insur- ance company’s failure to provide policy benefits regardless of whether the carri- er’s decision was unreasonable (that is, in bad faith).
California Civil Code section 3300
governs damages for breach of contract and applies to the breach of an insurance contract. (Comunale v. Traders & Gen. Ins. Co. (1958) 50 Cal.2d 654, 658 [328 P.2d 198] (applying Civ. Code, § 3300 to insurance contract).) Section 3300 reads as follows: For the breach of an obligation
arising from contract, the measure of damages, except where otherwise expressly provided by this code, is the amount which will compensate the party aggrieved for all the detriment proximately caused thereby, or which, in the ordinary course of things, would be likely to result therefrom. Determine whether you need an
expert to establish “the amount which will compensate the party aggrieved [the poli- cyholder] for all the detriment proximate- ly caused” by the carrier’s failure to pay policy benefits.
3. Retain a claims-handling expert There was a time when attorneys
could successfully represent policyholders in bad-faith cases without relying on experts. One of the pioneers in the field of insurance bad-faith litigation, Bill Shernoff, has said that if you need an expert, it’s not a good bad-faith case. That’s because when the field was new, insurers often were ham- fisted in their disregard for policyholders. You would see claim files with notes like this: Have Dr. Smith examine insured. If he does not give us what we need, send insured to Dr. Jones. He will. No longer. After more than three
decades of bad-faith litigation and thousands
of bad-faith lawsuits, insurers have become more sophisticated about how they handle claims. Many of the larger carriers that consumer attorneys confront most often – including Allstate, State Farm, and Farmers – have implemented claims-handling processes that make it seem to the uneducated observer that the carrier conducted a fair, thorough and objective investigation of the claim. These processes are usually nothing more than elaborate simulations of virtue, but to the untrained outsider, that simulation can be persuasive. To successfully pierce through the
illusion, you need a competent, experi- enced expert on claims handling. But who qualifies as an expert on claims han- dling?
According to Evidence Code section
720, which governs qualification as an expert witness, “[a] person is qualified to testify as an expert if he has special knowl- edge, skill, experience, training, or educa- tion sufficient to qualify him as an expert on the subject to which his testimony relates.” “It is well settled,” however, “that an expert’s qualifications must be estab- lished with respect to the subject matter of his testimony. The fact that the pur- ported expert may be qualified in one field vaguely related to another does not mean that he is qualified in that other field.” (California Shoppers, Inc. v. Royal Globe Ins. Co. (1985) 175 Cal.App.3d 1, 66-67 [221 Cal.Rptr. 171, 208].) In California Shoppers, Inc. v. Royal
Globe Ins. Co., a corporate policyholder (California Shoppers) sued its carrier (Royal Globe) for refusal to defend and indemnify and for tortious breach of the implied covenant of good faith and fair dealing. At trial, California Shoppers called plaintiffs’ attorney Wylie A. Aitken “to testify as a so-called expert on the
See Claims adjusting, Page 60
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