Insurance Bad Faith Coverage in OhioWhen an individual signs up for insurance, whether on their automobile or home, the insurance company has a contractual obligation to provide insurance benefits (usually money) to the insured when there is an event triggering coverage. If the insurance company denies the claim and says that either the claim is not payable or there is an exclusion under the policy, then usually the insurance company and the individual seeking coverage get into a dispute of coverage. It is initially the insurance company that interprets their own insurance policy and then determines, based on their interpretation, whether they have to pay or not. If the individual who is denied coverage wants to take legal action against the insurance company for denying their insurance claim, then they will usually do so under a Ohio's breach of contract and insurance bad faith laws. The attorneys at Harris & Engler help individuals with insurance coverage disputes across Ohio and they can be reached at (614) 610-9988.
What is Insurance Bad Faith in Ohio (the lack of Good Faith)?Ohio law imposes upon an insurance company a duty to act in good faith in the handling and payment of the claims of its insured, and a breach of this duty gives rise to a cause of action in tort against the insurer. Hoskins v. Aetna Life Ins. Co., 6 Ohio St.3d 272, 452 N.E.2d 1315 (1983). A "tort" is a type of lawsuit that enables the plaintiff to sue for both compensatory damages and punitive damages. The Ohio Supreme Court set forth the standard for analyzing a bad faith claim against an insurer in Zoppo v. Homestead Ins. Co., "[a]n insurer fails to exercise good faith in the processing of a claim of its insured where its refusal to pay the claim is not predicated upon circumstances that furnish reasonable justification therefor." Zoppo v. Homestead Ins. Co., 71 Ohio St.3d 552, 644 N.E.2d 397 (1994). Zoppo basically says that if an insurance company is going to deny your insurance claim, then they need a good reason to do so, otherwise they could be liable for bad faith.
Punitive Damages in Bad Faith Cases
In a bad faith case against the insurance company for wrongful denial of the insurance claim, the insured may recover compensatory damages as well as punitive damages. Compensatory damages are damages in an amount designed to "compensate" the plaintiff for their actual losses. Punitive damages are damages over and above the actual value of the claim and are designed to punish the wrongdoer. Punitive damages can generally be awarded in any amount up to a maximum of two times the underlying damages award (See Ohio Revised Code § 2315.21(D)).
Punitive damages may only be recovered against an insurer "who breaches his duty of good faith in refusing to pay a claim of its insured upon proof of actual malice, fraud or insult on the party of the insurer." See Hoskins. Actual malice is defined as "(1) that state of mind under which a person's conduct is characterized by hatred, ill will or a spirit of revenge, or (2) a conscious disregard for the rights and safety of other persons that has a great probability of causing substantial harm. Zoppo at 558. Pursuant to the Hoskins and Zoppo cases the awarding of punitive damages against insurers for bad faith is usually reserved for particularly bad cases, such as where the insurer knew that they should provide insurance coverage to an individual and they deny the individual anyways. Honest mistakes are usually not subject to punitive damages, but are still subject to normal damages.