Your insurance policy is a contract between you (the "insured") and your insurance company (the "insurer"). Both of you receive a benefit from the contract. Your insurance company receives a premium and you receive payment for losses covered under the policy.
But what happens if your insurance company fails to hold up its end of the bargain?
In Tennessee, it may be appropriate for you to file a statutory bad faith claim or breach of contract claim.
Insurance companies in Tennessee have a legal obligation, under Tennessee Code § 56-7-105, to act in good faith. In essence, this means the insurer is required to accept valid claims so that the insured can receive the benefit provided by their contract.
If the insurance company, in bad faith, denies a valid claim, the insured can file a bad-faith lawsuit.
Just because your insurance company denies your claim doesn't mean you can sue them for bad faith. To establish a bad faith claim against your insurance company, you need to prove 3 elements:
The hardest element to prove is the last element. Denying a claim doesn't constitute bad faith if there's a genuine dispute as to coverage—even if the insurance company turns out to be wrong.
As the Sixth Circuit Court of Appeals explained:
A plaintiff [in a statutory bad faith case] must generally demonstrate that there were no legitimate grounds for disagreement about the coverage of the insurance policy.
In a Tennessee statutory bad faith lawsuit, you can recover the amount due under the insurance policy up to the policy limits. For example, if your insurance company improperly denied your claim for $100,000, you can recover the full $100,000 (assuming the amount is under the policy limits).
What's more, you can recover an amount of up to 25% of the underlying claim. This amount is a penalty intended to deter insurance companies from wrongfully denying claims.
In Tennessee, all insurance contracts have an "implied covenant of good faith and fair dealing." This simply means that your insurance company is required to deal with you honestly, fairly, and in good faith so that you can receive the benefits of the contract. If your insurance company breaches this implied covenant of good faith and fair dealing, you can sue them for breach of contract.
A breach of contract claim is broader than a statutory bad faith claim. Examples of potential actions that breach the implied covenant of good faith and fair dealing include those listed in the Tennessee Unfair Claims Settlement Act discussed below.
The Tennessee Unfair Claims Settlement Act contains a list of acts that constitute unfair competition or deceptive acts in the insurance business. The list is intended as a guide to help courts determine whether the insurance company committed bad faith.
However, the act doesn't provide a private right of action.
In other words, you can't sue the insurance company simply because it violated the Tennessee Unfair Claims Settlement Act. Rather, the insurance commissioner can use the act to penalize an insurance company.
Let's take a look at some of the actions listed in the Tennessee Unfair Claims Settlement Act, keeping in mind that you may be able to file a breach of contract claim if your insurer engaged in any of these acts:
Here are the steps you should take if you believe your insurance company is acting in bad faith:
123 Blind Curve Boulevard
Nashville, TN 37011
April 1, 2022
Missouri Insurance Company
St. Louis, MO 63105
Re: Claim No.: 345-EFGH5678
Dear Mr. Insurer:
On January 10, 2022, I filed a claim for $10,000 regarding the car accident I was involved in on Blind Curve Boulevard. I have attached a copy of the proof of lost statements that I filed, along with an email I received in response acknowledging receipt of the statements.
As of April 1, 2022, I have not received a response indicating that my claim has been accepted or denied. What's more, despite numerous follow-up emails (also attached), I have not been given an explanation as to the delay.
At this point, it appears that Missouri Insurance Company is acting in bad faith. Accordingly, if I do not receive a response by April 8, 2022, I will be forced to take legal action.
A personal injury lawyer helps individuals who have sustained injuries in accidents to recover financial compensation. These funds are often needed to pay for medical treatment, make up for lost wages and provide compensation for injuries suffered. Sometimes a case that seems simple at first may become more complicated. In these cases, consider hiring an experienced personal injury lawyer. Read more