THIRD PARTY CLAIMS AND BAD FAITH
Third party claims are claims made under a policy by someone other than the insured. Claims for injuries due to someone else’s negligence are one form of third party claims. For example, when a person sues a property owner after a fall on their premises, this is a type of third party claim. The standard for bad faith litigation in third party claims is the insurance company’s obligation to settle within the policy limits or be held liable to any excess judgment.
For example, if a claimant sues under a policy with inadequate coverage limits, the insurer has an obligation to settle that case by paying its policy limit in a timely fashion or be subject to bad faith damages above their policy limit.
A $15,000.00 car insurance policy is clearly inadequate to compensate a claimant who suffered a fractured leg. Here the insurance company had an obligation to pay the claimant the $15,000.00 in a timely fashion or can be held liable for additional bad faith damages.
