Monthly Archives: March 2016

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What Is Bad Faith in Insurance Cases?

Category : Insurance Defense

The relationship between an insurance company and insured is governed by the insurance contract. However, if the insurance company fails to pay out on a valid claim, the insurance company risks being liable for bad faith. In order for an insured individual to prevail against his or her own insurance company, there are certain legal elements that the insured must prove.

Bad Faith Explained

Bad faith occurs when an insurance claim wrongfully denies a claim without a reasonable basis. Even if the insurance company made a mistake or error in assessing the claim but it had a reasonable basis to make the mistake, bad faith has not been committed. Bad faith principles are based on state law.

Elements

States lay out the elements that a claimant must prove in order to prevail on a bad faith insurance claim. The plaintiff has the duty to prove each and every element by a preponderance of the evidence. In some jurisdictions, the insured individual must show that the insurance company failed to conduct a proper investigation before it denied the claim. In other jurisdictions, the insured individual has an even higher burden and must show that the insurance company ignored or missed obvious facts that would have shown that the claim was valid. Other jurisdictions require the plaintiff to show that the insurer intentionally conducted an inadequate investigation or failed to conduct an investigation at all so that it could maintain its ignorance of facts that would haves shown the claim was valid. Showing a systematic failure of the insurance company of not complying with state regulations can establish bad faith in some states.

Bad Faith Damages

Claimants may be able to receive a number of different types of damages in bad faith claims if they win the case. The first portion of damages covers the amounts that should have been paid on the initial claim. The insured may also be able to recover consequential damages that arose because of the denial. These damages may include the cost of defending a lawsuit because the insurance company denied the claim, including attorney’s fees and the judgment. Attorney’s fees incurred to sue the insurance company may also be included.

In some cases, the claimant may be able to recover damages for emotional distress that resulted from the improper denial. This is more likely to be awarded if the denial caused other issues in the policy owner’s life, such as having to defend against a lawsuit. State laws determine whether this type of damage claim is available.

Some states have specific damages that are available per a bad faith statute. In these instances, the state law may be to award the claimant three times the amount of his or her compensatory damages. If the insurance company’s actions were particularly egregious, the trier of fact may award punitive damages. Whether plaintiffs receive punitive funds directly is also based on state law. In some states, punitive damages are placed in a victim’s relief fund or split between the plaintiff and such a fund. Punitive damages are rarely awarded and usually require a showing of particularly bad conduct on the defendant’s part.

Defenses to Bad Faith Insurance Claims

Insurance companies will likely raise a number of defenses against a claim of bad faith. One common defense is to show that the claimant does not have clean hands. This may be accomplished by showing that the claimant made an intentional misrepresentation during the claims process. Another defense to a bad faith insurance claim is that the denial was based on a reasonable ground. Even if the denial was wrong, the insurance company can argue that the denial itself was based on information after a thorough investigation was completed. As long as the denial is not unreasonable, the insurance company can argue that it should not be found guilty of bad faith.

In some instances, the insurance company may seek advice on whether or not it should deny a claim. It may consult with legal counsel or review judicial decisions based on similar circumstances. If it can show that its decision was reasonable, it will not be found guilty of bad faith. Additionally, if an insurance company specifically asks a court for a declaratory judgment as to whether it should cover the claim and the court finds that it should not, a bad faith claim is improper.

Copyright HG.org

Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.


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Managing Your Business’s Online Reputation

Category : Business Management

The Internet is an effective and low-cost way for many small businesses to spread the word about their products and services. But what happens when you are hit with a bad review?

Yelp, Google Local, Citysearch, Trip Advisor, and other online review sites are becoming increasingly popular. In fact, a survey by the Opinion Research Corporation found that 84 percent of American consumers consult online reviews when making purchasing decisions.

Social media sites like Twitter and Facebook can also be a way for businesses to interact with their customers. However, you should be prepared to deal with both praise and complaints. Designating a staff member to monitor social media and online review sites. In most cases, quickly addressing concerns can remedy the situation. Of course, it is imperative to always respond in a respectful and courteous manner, no matter how justified your position may be.

While no one wants to read unflattering (and often untrue) statements about their business, it is also generally not a good idea to try and manipulate online reviews. Regulators and online review sites are increasingly cracking down on the practice of “astroturfing,” which is defined as “[t]he practice of preparing or disseminating a false or deceptive review that a reasonable consumer would believe to be a neutral, third-party review.” It is essentially a modern day form of false advertising.

Trying to game the system can lead to administrative penalties and costly lawsuits. In New York, the state attorney general levied more than $350,000 in fines against companies who attempted to manipulate consumer-review websites by posting fake reviews. In California, Yelp filed a lawsuit against a firm that used its own employees to post favorable reviews.

The bottom line is that despite advances in technology, delivering a quality product or service in conjunction with superior customer service is still the best way to generate positive reviews.

How We Can Help?

Marketing activities can lead to significant liability, if you don’t play by the rules. Our knowledgeable business attorneys can evaluate your current marketing program and offer personalized legal advice. Contact us today to schedule an initial consultation.


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Buying a Business: A Thorough Investigation Can Save Legal Headaches

Category : Business Management

Buying a business can be a cost-effective way to launch a new venture or expand an existing one. However, prior to signing on the dotted line, it is imperative to conduct a thorough, objective investigation.

After you have identified a potential business acquisition, you should gather as much information as possible about both the potential risks and benefits. Below are several key areas to consider:

  • Financial documents: Key financials that you should obtain and review with an experienced accountant include a current balance sheet, profit and loss statements, audited financial statements, and accounts payable and receivable. To verify any outstanding debts, you should also review any existing tax liens and UCC-1 forms, which are publicly available.
  • Business assets: To get a complete picture of the company’s worth, you should inventory and appraise all of the business’s tangible and intangible assets. This includes physical assets, as well as intangible assets like copyrights, trademarks, patents, licenses, and good will.
  • Tax liability: Review of the company’s tax returns reveals an array of valuable information, ranging from the profitability of the business to its potential tax liability.
  • Employees: If you plan to retain key staff members after the sale, you should review all relevant personnel files to determine any ongoing obligations and liabilities. Issues to look out for include employment agreements, ongoing grievance investigations, and government audits.
  • Licenses and permits: You should verify that the company currently holds the proper permits and licenses and determine the process for transferring them after the sale.
  • Lease agreements: If the business leases commercial space, you should determine whether the lease addresses the sale of the business or whether you will need to negotiate a new lease with the landlord. The same applies to leases of office equipment, company vehicles, etc.
  • Property concerns: If you are purchasing land in conjunction with the business sale, it is advisable to conduct due diligence regarding any potential contamination or other environmental concerns. You should also verify that the type of business you intend to operate satisfies any applicable zoning requirements.

Because some issues may not be readily ascertainable, it is always advisable to hold back payment of a portion of the purchase price. Spreading out the payments over a period of months provides financial assurance should you later discover that the former owner failed to disclose significant liabilities.

How We Can Help

 Our business attorneys can help you evaluate both the risks and benefits of a potential business opportunity and help ensure that the transaction proceeds smoothly. Contact us today to schedule an initial consultation.