How can an insurance company’s evaluation of its policyholder’s personal injury claim be considered fair, reasonable and in good faith if the insurance company cannot explain how it arrived at the dollar value it assigned to the claim?  I don’t believe it can.

This issue often arises in uninsured motorist (“UM”) breach of contract/bad faith cases.  As part of the handling of such a claim, an adjuster must place a value on the policyholder’s personal injury claim so that the adjuster can then determine what amount (if any) of UM benefits are owed to the policyholder. To assign a value to the policyholder’s personal injury claim, the adjuster must determine what amount of medical bills are recoverable by the policyholder as well as what amount of money is recoverable by the policyholder for “general damages.” General damages include subjective items of damage like past and future physical pain-and-suffering, past and future mental and emotional pain-and-suffering, disability, disfigurement, etc.  The duty of good faith requires the adjuster to place a fair and reasonable value on each of these elements of damage suffered by their policyholder.

All too often, insurance adjusters pluck a number out of the air to assign to the general damage portion of the personal injury claim. In my experience, adjusters often choose this number on the basis of what amount they would like to pay for the claim, not on the basis of what the claim is actually fairly worth.

Sometimes, adjusters choose the number assigned to the damage portion of the claim based on the amount of money they think the policyholder might accept to settle the claim, as opposed to what the claim is actually fairly worth. Then, when called to account for their evaluation in the context of a deposition in a bad faith case, the adjuster will almost always default to the position that the number was chosen on the basis of their “experience.”  Of course, an insurance adjuster’s “experience” is derived from settling claims as cheaply as possible to garner the favor of their managers at an insurance company.

Further, to complete the loop, the adjuster will almost always argue their evaluation is as good as anyone else’s, and therefore any dispute about their evaluation is simply a “legitimate dispute.”  Adjusters often act as though they don’t know the law on insurance bad faith during a deposition, but they somehow always seemed to know what a “legitimate dispute” means from a legal standpoint.

In my experience, the determining factor as to whether an insurance company’s evaluation is fair and reasonable is whether the adjuster can explain it in detail under oath in a deposition. I have found adjusters can rarely, if ever, do so credibly. Almost without fail, the adjuster will have chosen an arbitrary dollar figure to place on the entire amount of general damages, and will not have analyzed each recoverable element of general damages individually. Therefore, for example, when an adjuster is asked what portion of the general damage dollar amount in his evaluation was assigned to past physical pain-and-suffering or future mental pain-and-suffering, the answer will almost always be “I don’t know.” If the answer is anything else, it will likely not be documented in the claim file as such and will appear to be nothing more than an effort by the company’s lawyers to come up with an explanation of the evaluation that did not exist at the time the evaluation was done.

When the bad faith case is tried, the question for the jury will be: how can the insurance company’s evaluation be considered fair, reasonable and in good faith if the adjuster who did the evaluation cannot tell the jury the good faith basis for the dollar figure placed on each element of recoverable damage?