One of the things that I find readily amazing is that notwithstanding a veto proof progressive majority, bad faith reform cannot pass the Legislature. The current law, which comes from the 1994 Pavia standard, on third-party claims requires an almost criminal indifference before bad faith is actionable. In my thinking, the only sure fire way to get third party bad faith is to prove on motion: (1) liability; (2) threshold; and (3) 30-day demand letter to tender, assuming the injuries are in excess of the policy. Outside that formula, you may end up with the recent NYCM case were the opinion of their IME doctor denying causation was sufficient beat back a bad faith claim as a matter of law. Yes, you can give the bad faith speech before you open, prove your case and hope the defense does so bad that you can get to trial on the assigned bad faith claim that comes post trial.
Now, what is most interesting is that first-party bad faith (PIP and UM/UIM/SUM) is actionable when the carrier behaves poorly and the benefit denial or settlement offer is unreasonable. This fits under 349 and standard bad faith. For the no-fault practitioners, your bad faith/349 is probably going to be limited to a wage case where your client was significant injured and the carrier’s behavior is quite inappropriate.
What is some of the bad behavior? Repetitive EUOs, Unjustified defenses based upon IME results, Harassment through DJs that on their face are contradicted by arbitration decisions and the lack of a come to jesus moment when called on it, Trial de novos that are inconsistent with reality , disclaimers not based in fact or reality. Also, make sure you obtain the claims notes in litigation. There is always a treasure trove in those documents. Privilege in NY is narrow – it only comes into play after litigation is commenced. Florida has a claims note privilege by the way – NY does not.
On the SUM side? A bad injury where claim reps refuse to settle for the value of the case. These cases require a back and forth dialogue I believe where the value is understated (prior to suit or arbitration) or the IME that is consistent with the Claimant’s position but disregarded by the carrier. I do believe the first-party bad faith is generally easier to prove, but it is by no means an easy fete. It takes tried and true patience to beat summary judgment.
What I do notice, however, is that the absence of a stringent bad faith law often incentives the conduct that forms the bad faith. For those in a southern state (I use Florida because I practice there also), bad faith is usually proven through a facial submission that the claim is worth more than the policy and the absence to tender within the confines of a time demand letter was negligent. Some states require the filing of something called a “Civil Remedy Notice” (CRN) which is a condition precedent to ascertaining bad faith. But under the modern bad faith structure, the carrier has to look at the liability, the board-able medicals (bills), the non-economic injury (presented) and make a business decision: will this break the policy? Because once the time demand expires, the bad faith train has left the station.
But what is really interesting is that even in bad faith world, it is the rare case that a case qualifies for the green geico check (amounts over policy get a different color check since the funds are drawn from a different account). The reason is that the carriers will usually put up a decent some of money to resolve a case and the Plaintiffs do not want to risk a defense verdict. Or the carrier tenders untimely and the Plaintiff just wants the case done and over with,
Why will a carrier try a “bad faith” case? Liability is always a reason but lets assume a rear end collision and the absence of a liability defense. It is going to be the belief that the Plaintiff attorney is a “pre-suit lawyer” and cannot try a case (not a bad bet) or that the injuries are overstated that will cause the carrier to risk the policy.
And generally, the bad faith cases are within the 10-100 thousand policy zone. Once a policy of $250k and above is on the table, the risk of bad faith diminishes because most successful jury verdicts for standard soft tissue cases are in that ball park.
If New York passed bad faith reform, you would see your $25-$50k policy cases following 6 months of treatment with + MRI and+ EMG + 3 epidurals settle quickly. The risk is too great. Your $100K cases with a scope (the standard surgery here in NY) will most likely resolve because the risk, again, is too great that the case will “hit”. Surgery in metro New York that beats threshold is a 6 figure number.
I also tend to thin “no surgery” cases on a 25-50 will probably settle at or near policy at TAP because at that point, there is real risk. No, I am not talking about the 3 month and living normal life again. The risk of a carrier losing those under current law is minimal. I do not see “rolls of the dice” on slower impact fusions at the $250k level because that surgery is 0 or $1m at trial. Again, the risk is tremendous.
The cases that will get tried will involve lower tiered carriers who will game New York’s slow court system and the one’s where the Plaintiff thinks that s/he got defendant into a bad faith trap and a has a client who is willing to play some roulette.
The causalities of bad faith will be outside defense counsel. More jobs will go in house as the amount of trials diminishes tremendously. Another casualty will be lawyers looking for jobs as most cases settle pre-suit. Combined with post Covid changes to the practices will force “litigation” lawyer to try a different track or field. The court system will lose 50% of its PI cases because the NY model of file first and ask questions later will appropriately change to file only when the carrier is perceived as being unreasonable. The higher policy cases will still involve litigation because bad faith really does not play a factor in the $1M and up policy club.
Is a more robust bad faith law a bad idea? I leave that to you,