Articles Posted in Trial Strategy

STRATEGY FOR NEGOTIATIONS The environment for seeking redress for insurance company wrongs is not always “plaintiff friendly.” While juries may be sympathetic, the barriers posed by evidentiary rules, punitive “caps,” and the views of judges and appellate courts to class actions or large punitive “windfalls” must be evaluated before committing your law firm to these suits. They require careful planning and consideration before filing.

Tort reform and the courts’ approaches to punitive damages claims have made some carriers feel more secure that bad faith and punitive damages are not a threat as they were in the 1970’s and 1980’s when insurance bad faith cases matured.

Now, there are still cases where punitive damages are warranted, but the commitment of time, money and the client’s emotional and physical resources is large. For example, Ray Bourhis, a well known insurance bad faith lawyer in San Francisco, has written a telling story of one of his more recent insurance bad faith cases. Anyone doing insurance bad faith work is well advised to read this book.

In Negotiating and Settling Insurance Bad Faith Cases , insurance expert witness Guy O. Kornblum of GK Consultants, LLC, writes:

THE SEVEN POINT TEST FOR EVALUATING A “BAD FAITH” CASE Here is a quick checklist for looking at the potential for bad faith and punitive damages in an insurance tort case:

1. What is the personal plight of the insured/claimant plaintiff? In short, how sad is the story? Will the story justify “ringing the bell” in the minds of the jury?

In Negotiating and Settling Insurance Bad Faith Cases , insurance expert witness Guy O. Kornblum of GK Consultants, LLC, writes:

CAN YOU CONVERT THE CONTRACT CLAIM TO A TORT CLAIM?

It is obvious from the above that either using traditional tort principles or those requisites for the tort of insurance bad faith, it is critical to the recovery of extra-contractual damages to convert the contract claim to a tort. This requires going outside the four corners of the contract and examining carefully the conduct of the insurer in administering and managing the claim.

In Negotiating and Settling Insurance Bad Faith Cases , insurance expert witness Guy O. Kornblum of GK Consultants, LLC, writes:

Insurance companies have increasingly relied on what they perceive as an emerging “defense” to their denials or wrongful handling of claims from their insureds: the “good faith dispute.” Initially, this doctrine arose in the context of a genuine coverage dispute, in which the Ninth Circuit advanced the proposition that a “genuine dispute” as to coverage suggests that an insurer acted reasonably. However, the doctrine is greatly overstated by insurance companies, as confirmed by Wilson. Indeed, prior to Wilson, there was a notion in at least one case that the principle was being relied on too heavily, and being misapplied. At least one case has held that even reasonable conduct can expose a carrier to bad faith in certain circumstances.

The cases concede that this doctrine cannot be applied if:

In Negotiating and Settling Insurance Bad Faith Cases , insurance expert witness Guy O. Kornblum of GK Consultants, LLC, writes:

The duty to investigate is an important duty of an insurer. Hence, it can be an important part of a bad faith case. The erroneous withholding of policy benefits based on the insurer’s failure to investigate a claim may constitute a breach of the implied covenant of good faith and fair dealing. In order to protect the insured’s peace of mind and security, “an insurer cannot reasonably and in good faith deny payments to its insured without thoroughly investigating the foundation for its denial.” An insurer must “fully inquire into possible bases that might support the insured’s claim.” The investigation must be prompt, thorough, reasonable, and conducted in good faith. That is to say, the insurer must consider facts favorable to the insured’s position as well as those that favor the insurer. This is one aspect of the insurer’s duty to give equal consideration to both the insurer’s and the insured’s interests.

California has codified the duty to investigate in the Unfair Practices Statute (“UPA”) which requires the insurer “to adopt and implement reasonable standards for the prompt investigation and processing of claims arising under insurance policies.” Even though no private right of action may exist under these statutes, the application of the duty to investigate remains important. The UPA confirms the industry standards. Alternatively, other standards may be adopted by the company as fair standards for processing a claim. A violation of the statutory, industry, or self-imposed standards provides support for a bad faith claim. They can serve as standards for determining the bad faith conduct of the insurer.

In Good Data Drives Out Bad Cases, marketing expert witness and president of Applied Marketing Science, Inc, Robert L. Klein writes on the value of early data:

Often just the threat of a survey or the designation of a survey expert can motivate a plaintiff to rethink their strategy. A shoe manufacturer sued a boutique shoe store alleging that their distinctive product design was being infringed. Rather than giving up and rolling over, the alleged infringer retained a survey expert and indicated their intention to fight. This caused the plaintiff to take another look at the cost of proceeding and possible damages should they win. Their reevaluation of the case made continued litigation look like a poor business decision and the matter was dropped.

Surveys can be a powerful weapon in helping each side in a dispute see the real value of their position. And when the parties see both the truth and the beauty of their cases, settlement can occur. Because good data drives out bad cases.

In Negotiating and Settling Insurance Bad Faith Cases , insurance expert witness Guy O. Kornblum of GK Consultants, LLC, writes:

While not an exhaustive list, the following are indicia of bad faith conduct under various standards:

• Failure to investigate a claim thoroughly;

In Good Data Drives Out Bad Cases, marketing expert witness and president of Applied Marketing Science, Inc, Robert L. Klein writes on the value of early data:

Sometimes even the results of a survey pre-test can be valuable. Pre-testing or pilot testing a survey is a standard research practice that often improves the survey by eliminating confusing wording or awkward question sequences. In addition, pre-testing can provide a rough indication of the likely results of a full-scale study. While the information that comes from pre-testing is not as precise as the results of a full-scale survey, the data can have an important impact on the strategy of the parties.

• In a case alleging trade dress infringement, the parties were attempting to negotiate a settlement while a pre-test of a survey was being conducted on behalf of the plaintiff. When the plaintiff’s representative in the negotiation introduced that very day’s pre-test results into the discussion, the defendant accepted the settlement offered.

In Negotiating and Settling Insurance Bad Faith Cases , insurance expert witness Guy O. Kornblum of GK Consultants, LLC, writes:

Thus, a bad faith claim has these three very separate and distinct components: A breach of contract is not bad faith – there must be an examination of the conduct of the company to determine if the manner of handling the claim was consistent with “good faith” principles. However, proof of bad faith is not enough to impose punitive damages – “something more” is required, which has been expressed as an “evilness” in the corporate scheme of things, or the “collective corporate conduct.”

The different standards and burdens applied must be evaluated. If not, they offer the defense an excellent opportunity to “compartmentalize” the case and defeat the plaintiff’s effort to obtain relief for the wrongs done in an amount sufficient to accomplish the goal of giving notice that such conduct should be stopped.

Good Data Drives Out Bad Cases marketing expert witness and president of Applied Marketing Science, Inc., Robert L. Klein writes on the effective use of surveys in legal cases:

A survey can be a very effective way of helping a client see the true “beauty” of her case. For example, a survey showing that a patent infringement caused minimal lost sales can encourage a party to accept a smaller than hoped for settlement. A survey showing significant confusion due to packaging or trademark similarity, can motivate a defendant to negotiate rather than fight on. A survey establishing that marketplace realities bear little resemblance to the allegations can persuade a plaintiff to drop the case. When both sides are able to look at the same information and consider how that information will impact a judge or jury, cases settle. Armed with valid and reliable survey data, attorneys are better able to assess the merits of their case and advise their clients as to the best way to proceed.

Some attorneys may resist commissioning a survey for fear that the results will not be supportive of their client’s case. Surveys are not cheap, and sometimes the attorney’s instincts will be correct. But if a survey is going to expose the weakness of one side’s case, the other side should reasonably be expected to conduct the same survey and see the same result. The first side to know the truth can set the agenda for how the suit proceeds.