Tennessee Consumer Protection against Bad Faith Denial of Insurance Claims
Tennessee’s bad faith statute imposes upon Tennessee insurance companies a penalty of 25 percent if a loss covered under the insurance contract occurs and the insurance company refuses in bad faith to pay the loss within 60 days after a demand has been made by the holder of the policy. This means the plaintiff must prove that the insurance company had no legitimate reason for denying the claim. Further, the plaintiff must show that the company’s bad faith inflicted additional expense, loss, or injury. This additional loss requirement is satisfied by proof of any costs associated with having to prosecute the insurance claim in Tennessee.
Estate of Wilson v. Arlington Auto Sales is a good example of a successful case tried in Tennessee courts under the bad faith statute. In that case, the insurance agent represented to the plaintiff that she would be covered under a life insurance contract despite her cancer. When her survivor attempted to make a Tennessee insurance claim under the contract, the insurance company refused to pay the claim without first trying to determine the terms of the contract that had been formed between the deceased and the insurance agent. Based on these facts, the court held that the insurer’s refusal to pay the claim within 60 days of the insured's death was in bad faith and exposed it to an additional liability of 25 percent of her total claim under the insurance contract.
Having acted in bad faith, the insurance company can also be liable under the Tennessee Consumer Protection Act (CPA) for having engaged in “deceptive or unfair” business practices. This is important because the CPA allows an attorney who takes your case to recoup attorney’s fees, which encourages attorneys to take a case even when the claim is relatively small.
If you believe that your insurance company has wrongly denied your claim, you may have a private right of action against your insurance company for breach of the insurance company’s contractual and statutory duty to act in good faith. Enforce your rights under Tennessee law; call the skilled and experienced Knoxville personal injury attorneys at Baker Associates today for a free consultation.
