No Bad Faith By Insurer That Properly Evaluated Claim
Description Court dismissed a suit brought by an insured hotel owner who was unhappy with the insurer's evaluation of the damage caused by a hurricane. The insurer appeared to properly evaluate the claim, notifying the insured at all stages of the process; only later did the insured protest and hire its own expert.
Topic Insurance
Key Words Claims Evaluation; Bad Faith
C A S E   S U M M A R Y
Facts After a hurricane struck Alabama, a beach-front hotel that was damaged in the storm was inspected by Engle, an independent claims adjuster. Engle was accompanied by hotel managers. Engle's report was supplemented by a report provided by an engineering firm about the extent of damage and cause of various losses. The owners met with Engle and the consulting engineers after their reports were finished. The owners argued for more of the losses to be covered by the policy, but Engle and the engineers did not agree and filed their report. The insurer accepted the report they filed. The hotel owners sued the insurer for bad faith claim evaluation, claiming that more damages should have been covered. Insurer moved for the suit to be dismissed.
Decision Suit dismissed. An insurer can be liable for the tort of bad faith when it fails to properly investigate a claim. To show bad faith in the investigation of an insurance claim, "the insured must show (1) that the insurer failed to properly investigate the claim or to subject the results of the investigation to a cognitive evaluation and review and (2) that the insurer breached the contract for insurance coverage with the insured when it refused to pay the insured's claim." Here there was no evidence of bad behavior by the insurer. The insured did nothing until it did not receive all the money it wanted; then, many months after the hurricane, it hired its own engineers to rebut the conclusion of the adjuster and consulting engineers used by the insurer. The insurer did not act recklessly and so cannot be held liable for bad-faith failure to investigate the claim.
Citation SW Legal Beach Development Co., LLC v. Royal Indemnity Co., 2000 WL 1367994 (S.D., Ala., 2000)

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