Yesterday my partner, Laura G. Zois, tried a wrongful death auto accident case in Prince George’s County against Allstate. The jury awarded our client $8 million. Allstate made no offer to resolve the case.
We cannot collect the entire amount not only because of Maryland’s cap on pain and suffering damages but also because there is no first-party bad faith on uninsured motorist claims in Maryland. I understand that the Maryland General Assembly introduced a bill to bring the first party bad faith to Maryland.
I try very hard to keep the “insurance companies are pure evil” sentiment out of the Maryland Personal Injury Lawyer Blog because I think simplistic generalizations defeat real discussion of the issues. I teach Insurance Law at the University of Baltimore Law School and try even harder there to remain balanced in my approach to the class.
But I have a hard time presenting a balanced view of the need for first-party bad faith in Maryland, and the abuses personal injury lawyers and their clients must endure from insurance companies in the absence of first-party bad faith. Approximately thirty-five other jurisdictions appear to recognize a first-party bad-faith cause of action. See Bad Faith Actions, Liability and Damages, § 2.22, at 65.
Maryland needs first-party bad faith not only for auto and truck accidents but also for other kinds of first-party insurance, particularly those types of insurances where the insured depends on prompt receipt of the insurance proceeds. If you have just lost a high-income producing loved one or your house burns down, the absence of bad faith allows the insurance company to drive a hard bargain in settlement negotiations, regardless of whether there is a good faith reason to deny the claim. Who is stopping an insurance company in Maryland from offering 50% of the insurance proceeds to a needy widow, even if the policy covers the loss?
Not every insurance claim denial supports a cause of action for bad faith. But Maryland should adopt the majority rule that besides the situation where an insurance company knows it had no legitimate basis for denying the claim, an insurer is also liable when it recklessly disregards the rights of its insured.
There is a bill before the Maryland legislature this year to bring first-party bad faith to Maryland. The bill lacks the teeth of punitive damages but it is a step in the right direction.