Lockwood v. Geico – Unreasonable Delay in Payment of Insurance

May 15, 2014 - Car Accidents, Tuscaloosa by Cross & Smith

The contract you hold with your car insurance companies is probably filled with numerous caveats designed to minimize the firm’s risk of paying up when the time comes. But an element that is inherent in these contracts – no matter what the language – is the implied covenant of good faith and fair dealing.

If an insurance company acts in bad faith in dealing with the client, it could be subject to severe punitive damages. Examples of bad faith dealings would be if an insurer denies a claim without proper cause or delays a claim unreasonably.

Our Tuscaloosa car accident lawyers have a detailed understanding of uninsured motorist law. You are entitled to coverage for which you paid, and we are committed to helping you obtain that compensation.

The recent case of Lockwood v. Geico General Insurance Company illustrates the complex nature of uninsured motorist law. The lower court initially decided in favor of the insurer, but the Alaska Supreme Court reversed in favor of the plaintiff, and remanded the case for additional proceedings.

According to court records, this case started because the insured was struck by an uninsured drunk driver and sustain severe injuries.

She exhausted her policy’s medical payment coverage, and then sought payment through the policy’s uninsured motorist coverage. The insurer offered to settle with her for $750, but she rejected that offer.

Then, the insurer began to question the size of her medical bills, arguing that they seemed too high and pointing to the fact that she had previously received treatment for a pre-existing back condition. However, the insurer did not take any action to attempt to resolve the alleged uncertainty as to the veracity of her bills. For example, administrators never requested an independent medical exam or voluntary arbitration with the medical provider.

In the meantime, the victim paid some of her treatment expenses out-of-pocket, and was forced to take out a loan to recover the remaining bills. She continued to experience ongoing pain, but was forced to cease treatment because she couldn’t afford it.

The uninsured motorist claim was eventually settled for $25,000 (33 times more than the amount the firm originally offered her).

However, the plaintiff later sued the company for alleged breach of fair dealing and good faith implied in the contract. She asserted that her claim was unreasonably delayed.

In reversing the lower court’s order in favor of the insurer, the state supreme court noted that there was a genuine issue of material fact concerning whether the company had reasonable grounds on which to delay its customer’s uninsured motorist claim.

The case will now be allowed to move forward. In addition to the $25,000 she received on her initial claim, the insured may now be able to collect punitive damages plus attorneys’ fees from the insurer.

Additional Resources:

Lockwood v. Geico General Insurance Company, May 2, 2014, Alaska Supreme Court

More Blog Entries:

Vicarious Liability in Alabama Car Accident Injury Cases, April 14, 2014, Tuscalooosa Personal Injury Lawyer Blog