When an insurance company fails to honor the obligations in your insurance contract, or fails to perform some other responsibility it has to you pursuant to the insurance you purchased, you may have a case against the insurance company for “bad faith.” It is important to note that bad faith cases arise from disputes between you and your own insurance company – if another driver’s insurance company is refusing to pay money to you, that is not bad faith since there is no insurance contract between you and another person’s insurance company. In oklahoma, and insurance company commits bad faith when it (1) intentionally (2) denies, fails to process, or fails to pay a claim (3) without a reasonable basis for such action, and the cause of action arises only when all three elements are present. Ness v. Western Sec. Life Ins. Co., 174 Ariz. 497, 851 P.2d 122 (Ct. App. 1992). Examples of bad faith can include all kinds of insurance, from health and dental to automobile and homeowners. Other examples may include failure to provide for a defense as required in the event you are sued, or failure to follow contractual procedures in the event of a dispute as to the amount of compensation to be provided to you under your own coverage after an accident.
Insurance companies have years of legal experience litigating the terms of their contracts - contracts written by skilled lawyers which have been carefully upgraded as new decisions are handed down by appellate court. Coverage attorneys incorporate new case law into policies and regularly re-write their contract. Terms that may appear to a consumer to be simple English may have their origin in a legal opinion and may have been given a special interpretation that consumers are not familiar with. Because companies make it their business to know how standard terms have been defined by judges, insurance carriers have the upper hand in drafting policies and selecting the language they find most advantageous for making a profit.
Interpreting Insurance Contracts
Insurance law routinely provides that should there be an ambiguity or uncertainty in a policy, an uncertainty in choice of wording or ambiguity in meaning would be resolved in favor of the policyholder and against the insurer. In the absence of a misrepresentation regarding coverage or exclusions, if the language of the policy is clear and explicit, the clear meaning will be enforced.
Insurance contracts are interpreted by judges and courts to effectuate only the objectively reasonable expectations of the insured. Any personal, or subjective, expectation of a policyholder which cannot be reasonably supported by the language of the contract is unenforceable. It matters not what the policyholder/customer truly and honestly believes in his or her own mind. That subjective opinion is never in issue in a court of law. The real contest is to decide what the words of the policy mean to an objective person or a disinterested, common reader. So, when reading an insurance policy, the words selected by the insurance company are to be interpreted by judges according to their plain meaning. A plain meaning is one which an ordinary person would attach to such words, not the meaning which might be utilized by an insurance company executive or an attorney.
Exclusions and limitations in a policy, because they often result in denying coverage when there is a loss, must be in clear and written in unmistakable language. It is for this reason that exclusions and limitations are always narrowly, or strictly, construed. If there is more than one meaning to be given to an exclusion or a limitation, the narrowest interpretation will be adopted by the court. Any exclusionary clause that is not clear and conspicuous will be interpreted in the interests of the insured.