Over at FMG Law's BlogLine, Seth Kirby has posted an interesting article on the marketing risk to insurers of insurance coverage litigation. I agree with his points. On the one hand, insurers have an absolute right -- perhaps even a duty as public corporations -- to determine both liability and damages before settling, even in cases that initially seem obvious. Bad faith comes in when the insurer takes an unreasonable amount of time to do so, or when it continues to deny a claim or it fails to make a reasonable settlement offer after it has determined that its insured is liable and the claimant suffered damages.
Kirby points out that in this age of blogs and social media, an insurer runs a risk of appearing to act in bad faith even when it is reasonably investigating or litigating a claim. The case he discusses is that of a woman who was killed in a car accident. Her family sought coverage under the uninsured motorist coverage of her policy and the insurer litigated rather than paying immediately. This is a case I have heard of before -- thanks to publicity the case has gained on the internet. I haven't seen enough to convince me one way or another about whether the insurer is acting in bad faith in its investigation and litigation of the claim. But, as Kirby states in the article, insurers now need to be aware of how easy it is to paint them as a bad actor in such a situation.