Fewer Homeowner's Policies may mean fewer bad faith claims but the claims that are made may result in larger awards.
Beware of averages and the meaning of averages. "New-home sales tumbled 61.8 percent in the Northeast" and averaged 11.5% over the entire country. "Economists Unfazed as Sales of New Homes Slip 11.5%," p. B5, col. 1 (Reuters report, New York Times Nat'l ed., Tuesday, October 27, 2015).
Do fewer homeowner's policies -- in particular, disproportionately fewer homeowner's policies to be issued in coming weeks and months in the Northeast -- mean fewer homeowner's insurance bad faith claims? The numbers of these claims will undoubtedly decrease as well, but the awards on these bad faith claims may rise.
There are at least three reasons, all related to the economy. All three are going to be in the minds of homeowner's insurance companies and their defense counsel:
- There are fewer homeowner's policies because there are fewer people who can afford to buy new homes. When these new homeowners make bad faith claims, it will be because they are looking for large awards to compensate them for financial distress in what is for them a bad economy.
- Attorneys who represent these policyholders will have fewer bad faith claims available for representation and thus for awards and for their fees. Attorneys will have incentives to maximize the awards and their fees in the few homeowner's insurance bad faith claims available in this distressed economy.
- To the degree that the future bad faith claims are decided by juries, the jury pool will necessarily include people who cannot themselves afford new homes and who do not even have the opportunity to purchase homeowner's insurance. To the extent that they may be inclined to blame anyone, as between the homeowners and the homeowners' insurance companies, they will not blame the homeowners.
Please Read The Disclaimer. ©2015 by Dennis J. Wall, author of Litigation and Prevention of Insurer Bad Faith (3d ed. Thomson Reuters West in 2 Volumes, with 2015 Supplements). All rights reserved.
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