WHAT IS AN INSURANCE COMPANY REQUIRED TO PROVE WHEN DENYING AN INSURED’S CLAIM?
Sometimes the black letter law passed by the legislature is unclear. The legislature can’t anticipate every possible fact scenario when they pass a law, so it lay to the courts to interpret the law and give guidance to what it means. This interpretation is called case law. When the court decides a certain meeting to the law it essentially answers a legal question. Lawyers and other courts then can rely on that ruling when they have a similar issue in their case. The following case answers the question above.
ALLEN V. CONTINENTAL WESTERN INSURANCE CO., 436 S.W.3D 548 (MO. 2014).
This case addresses the following issue:
WHAT IS AN INSURANCE COMPANY REQUIRED TO PROVE WHEN DENYING AN INSURED’S CLAIM?
This case explored the issue of what an insurance company must prove when denying an insured’s claims. In exploring this issue, the court concluded that an insurance company must have a real and reasonable factual ground for contesting the insured’s claim. Id. at 561.
In this case, the court awarded the plaintiff, the wife of the deceased, the proceeds of a $300,000 accidental death policy issued by the defendant, the couple’s insurance company, insuring the plaintiff’s husband. Id. at 553. The husband was in a psychiatric unit and died from fatal burns in the bathroom of his hospital room. Id. He was being treated for major depression. Id. After his death, the plaintiff made a claim for the money under the policy and the defendant denied the claim on the basis that the death was the result of an intentionally self-inflicted injury, a suicide, and was not within the coverage afforded by the couple’s policy. Id. As a result of the defendant’s denial, the plaintiff brought this action to court and the district court found that the husband’s death was accidental. Id. Additionally, the court of appeals agreed with the district court’s decision. Id. The defendant disagreed with the lower court’s decision and brought the case to the Kansas Supreme Court. Id.
One of the main arguments that the defendant brought to the court was that the defendant felt like the lower courts were wrong in requiring them to pay the plaintiff’s attorney fees. Id. at 560. In order to support the argument, the defendant referenced Kansas law which stated that the plaintiff was able to recover attorney fees if the court found that the defendant refused without just cause or excuse to pay the full amount of the loss (pay the $300,000). Id. With that said, the defendant cited the insurance company’s investigation to show that just cause existed to deny the $300,000 claim. Id. at 561.
In examining the defendant’s argument, the court stated that the question of whether an insurance company had refused to pay without just cause or excuse was one of fact for the trial. Id. Moreover, the court noted that an insurance company had a duty to make a good faith investigation of the facts surrounding the claim if they decided to refuse to pay a claim. Id. Also, the court specified that there was no failure to pay without just cause or excuse if there was a real and reasonable factual ground for contesting the insured’s claim. Id. Furthermore, the court determined that it was up to the trial court in deciding whether there was just cause to refuse payment and, therefore, justification for the denial of attorneys fees. Id.
In this case, the court decided that the lower courts were right in making the defendant pay the plaintiff’s attorney fees because the court felt like the defendant was without just cause or excuse in denying the $300,000 claim. Id. In making their decision, the court relied on evidence from the husband’s health care providers who indicated that the husband’s depression had improved right before the incident and they did not consider him suicidal. Id. Also, the court relied on the reports from the local fire department and county coroner who did not rule the death a suicide. Id.
In sum, the defendant did not have a real and reasonable factual ground for contesting the plaintiff’s $300,000 claim; therefore, the defendant’s failure to pay was without just cause or excuse. Id.
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