Bad Faith Penalty Against an Insured?
My learned friend Parks Chastain recently posted here that Tennessee law provides for a reverse bad faith penalty of not more than 25% of the amount claimed when a policyholder does not bring an action in good faith. Parks' use of the adage "what's good for the goose is good for the gander" is right on point. I agree that a policyholder that files a clearly fraudulent claim should be held accountable. For example, if an insured files a claim for theft that is clearly proven to be staged and fraudulent, a reverse bad faith penalty is appropriate.
However, the facts necessary to bring such a claim are not commonplace, and if alleged in the wrong case, could prove catastrophic for the insurance company. If a jury finds in favor of the insured and believes he or she to be truthful, the fact that the insurance company has added insult to injury by filing a counterclaim will just add fuel to the fire as to the insured's bad faith or Consumer Protection Act claim against the insurer.
http://www.tninsurancelitigation.com/admin/trackback/144790
Dear Mr. McWherter:
Greetings.
At least you and Attorney Chastain agree on the obvious:
"...Parks' use of the adage "what's good for the goose is good for the gander" is right on point. I agree that a policyholder that files a clearly fraudulent claim should be held accountable."
Of course they should be held accountable - it's a crime to commit fraud! I worked for a Plaintiff's insurance attorney for 20 years and have seen my share of people that "wanted more" from their insurance company than their claim was worth. These type of people are usually of the mentality believing "Gee, I've paid the ins. co. ALL THOSE PREMIUMS FOR ALL THOSE YEARS, IT'S TIME FOR THEM TO PAY - I'VE NEVER MADE A CLAIM BEFORE!!"
Indeed, both the Insured and Insurer should be (and are) held to the same standard if caught committing fraud: THEY GET PUNISHED.
SHIRLEY HEFLIN