Tonna K. Faxon, Esq., Managing Partner

Part Two:

See: “The Colonial Life Decision and How it Helps Insureds Establish Bad Faith”

According to Colonial Life, a plaintiff may circumstantially prove a defendant knowingly engaged in unfair settlement practices concerning policy claims where direct proof is difficult to establish. Decisions rendered subsequent to Colonial Life have upheld a plaintiff’s right to obtain “pattern and practice” discovery in bad-faith actions. In Moore v. American United Life Ins. Co., the plaintiff sued her disability insurer for wrongfully denying her claim.

The plaintiff claimed that American United engaged in a pattern and practice of obtaining misleading opinions from physicians by providing them with a definition of “total disability” that was narrower than the applicable definition under California law. The plaintiff introduced evidence at trial regarding two other American United disability claims to establish that American United engaged in a pattern and practice of improper claims handling.  The jury awarded the plaintiff $30,000 for compensatory damages and $2.5 million in punitive damages.

The Court of Appeals upheld the trial court’s admission of evidence from other claim files to establish a pattern and practice of unreasonable claims handling, noting “[t]he jury could conclude that defendant consciously pursued a practice or policy of cheating insureds out of benefits by obtaining incorrect opinions of total disability from treating physicians” (Moore v. American United Life Ins. Co., 150 Cal. App. 3d 610).

Pattern-and-practice evidence is crucial to establishing punitive damages against an insurer. In J & M Assocs., Inc. v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA, citing with approval Colonial Life, found that insofar as the requests seek information pertaining to the same type of policy at issue, discovery regarding other claims handled by the insurer is relevant. 

Good cause can be shown justifying the discovery sought by a plaintiff, because the discovery is narrowly targeted to discover bad faith pattern and practices of any adjusters involved in the plaintiff’s claim, and targeted to elicit any evidence supportive of the plaintiff’s other potential claims, for financial elder abuse and or a prayer for punitive damages.