The term "bad faith insurance" describes situations in which an insurance company refuses to pay claims that are covered under the policy. One example is a car insurance company that says they will not pay damages related to a car crash caused by a driver they cover.
When consumers prevail over insurance companies in any state, all policyholders benefit. This week, a Tennessee jury sided with the policyholder against an automobile insurance company in a bad faith lawsuit.
The car insurance company involved in the litigation is a division of the Tennessee Farm Bureau. The company insured parents who allowed their 13-year-old daughter to drive the family car. When the daughter caused an accident that injured another driver, the company refused to pay the damages, even though the policy stated that they would.
The Details of the Accident
The 13-year-old daughter crossed the center line and crashed into a car driven by another unlicensed teen driver. The other driver was seriously injured, and her right leg was amputated as a result of the crash. The injured driver sued the 31-year-old and was awarded $1 million.
When the family filed a claim with the insurance company for the $1 million and other damages, it was denied.
Jury Came Down Against Insurance Company
When the family brought a lawsuit against Tennessee Farm Bureau, the jury sided with them. The family's attorney explained that "because of the wording of the policy, [the daughter] was a covered person under the terms of the policy." He said that the insurance company was wrong to deny the family's claim.
The jury agreed with him. The family was awarded $1.2 million in damages to cover the claim as well as an additional $500,000 in punitive damages.
Source: The Daily Herald, "Family wins suit against insurer," Skyler Swisher, 9 Sept 2010