Tips on Handling the Latest Bad Faith Trends

Institutional attack, reptile theory and rules of the road are three recent bad faith trends, according to Douglas Wood, partner and Insurance Group Practice leader for Morris, Polich and Purdy.

Purdy, sat down with Claims Journal during the most recent Combined Claims Conference held in Orange County, Calif., to discuss tactics used in conjunction with the trends and provided tips on how to handle them.

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Rather than try a thin liability case, in an institutional attack plaintiffs’ counsel “will systemically attack the insurance company for its practices, for what it did or didn’t do against the claim manual,” Wood explained.

Reptile theory is the next evolution of turning a so-so case into a good one.

“Its essence is to play on human fears and perceptions,” Wood said.

Plaintiff’s counsel will identify a safety rule that is aimed at preventing those harms and then proceed to show how the defendant didn’t comply with the rule. It’s a black and white tactic, according to Wood, that doesn’t allow for a big picture look at the facts.

“The goal is to turn a general reasonableness standard of care into this little, specific checklist devoid of context or circumstances, so they can just check the boxes turning any of those things into defacto bad faith,” said Wood.

Rules of the road is the next evolution to turn regular cases into big cases, he said.

Similar to reptile theory, in that fear of harm and society’s rules and laws are used as a juxtaposition against the idea of the big, bad insurance company.

“What they are trying to do is transform a general duty of care into a little checklist of things taken from statutes and regulations,” said Wood.

He said there’s usually a twist where the rule is broadened and the context is changed. An insurance company representative deposed in a rules of the road case may get tripped up and agree to the broadened rules presented by plaintiff’s counsel.

Wood offered a few tips to insurers and adjusters on how to avoid these types of bad faith claims. He explained that adjusters need to do the following:

  1. Communicate well and timely.
  2. Show empathy to the insured.
  3. Explain why information or documentation is needed.

His recommendations on avoiding bad faith claims are nothing new, he said.

“Those kinds of simple things make a lot of difference, in no small part because they’re countering those common jury perceptions that we [insurers] end up fighting,” said Wood.