We all know how prevalent bad faith claims are. It seems like almost every case involving disputed policy benefits includes one. Many have no merit and should be disposed of on summary judgment. The rest, however, arguably have at least some degree of legitimacy. While it may not seem that difficult to identify those that present significant exposure, the large verdicts we continue to see suggest otherwise. So how can insurers distinguish between a garden-variety bad faith claim with, at most, low six-figure exposure versus one that could result in a multimillion-dollar verdict?

First, it’s important to recognize that insurers instinctively evaluate cases based on factors that are insurer-centric: What is the amount of policy benefits? What are the terms of the policy? Did the company make the right decision? What kind of witness will the corporate representative(s) make? What will it cost to defend the case? These questions are familiar to all of us—and rightfully so. They are particularly useful for evaluating a breach of contract claim, or even a bad faith claim prior to summary judgment. However, they have less relevance once it becomes clear that the bad faith claim will be submitted to a jury. Good plaintiffs’ lawyers rely on different factors when evaluating a case: How sympathetic is the plaintiff? How badly did the plaintiff need the benefits? Has the plaintiff changed his or her position based on the denial? Did the insurer give the plaintiff the runaround? Does the basis for denial resonate with an average person? Is there evidence indicating the insurer was more concerned about the financial impact of the coverage decision than processing the claim correctly? The answers to these questions often provide the most reliable indication of whether the jury may render a headline-grabbing verdict.

$25.5 Million Oklahoma Verdict: Jackpot Justice or Case StudyA good example is the recent $25.5 million verdict in Oklahoma against Aetna. The case involved the 2014 denial of health insurance coverage for a specific cancer treatment on the basis that it was experimental. The plaintiff, Orrana Cunningham, who died in May 2015, suffered from stage 4 nasopharyngeal cancer near her brain stem. Her doctors at M.D. Anderson recommended proton beam therapy, a targeted form of radiation that could pinpoint her tumor without the potential for blindness or other side effects of standard radiation. After Aetna denied coverage for this treatment, Cunningham and her husband Ron, a retired Oklahoma City firefighter, mortgaged their dream home to pay for the $92,000 therapy. They also started a GoFundMe page.

At trial, plaintiff’s counsel presented evidence that Medicare covers proton beam therapy and that insurers often cover it for an array of pediatric cancer patients. He also presented evidence that Aetna did not carefully review the claim. For example, Aetna’s medical director testified that he sometimes reviewed up to 80 claims per day. At the same time, Aetna’s counsel told the jury that Aetna was proud of how the claim was handled. The jury disagreed. It concluded that Aetna recklessly disregarded the duty it owed to Ms. Cunningham, rendering a verdict for $15.5 million in mental anguish damages and $10 million in punitive damages.

Reviewing the factors noted above, the risk of a large verdict was obvious. The plaintiff was sympathetic. She and her husband badly needed the benefits. They had to mortgage their house as a result of the denial and ask their friends for money. And the jury didn’t buy the basis for the denial, finding instead that the insurer was more concerned about its profits than carefully administering Ms. Cunningham’s claim.

Bad faith claims are so prevalent, it is easy to become desensitized to the risk they pose.  Nevertheless, once summary judgment has been denied, these claims can present significant exposure for insurers. The factors listed above that are considered by both insurers’ and insureds’ attorneys will help you decide when to fight and when to write a check.

The Bradley team will continue to monitor and report on significant bad faith developments.