Defendant's Attorney: New Haven, Connecticut insurance defense lawyer represented the Defendant.

Description: New Haven, Connecticut insurance law lawyer represented the Plaintiff who sued on a bad faith breach of contract theory.

If an insured believes that his insurance company acted in bad faith, he can file a complaint with the Insurance Department. He can also file a civil lawsuit alleging a breach of the implied duty of good faith and fair dealing or tortious bad faith.

If a court decides a case under contract law, remedies are limited to consequential damages, meaning those damages that were foreseeable at the time of contracting. By claiming the tort of bad faith, a court can consider not only consequential damages, but also damages for mental anguish and punitive damages. A claim for punitive damages needs to be based on a specific statute or common law requirements. According to case law, punitive damages will only be awarded if the evidence shows reckless indifference or disregard of others' rights, or an intentional or wanton violation of those rights.

In cases that involve an insured employee benefit plan, the federal Employee Retirement Income Security Act (ERISA) preempts certain state common law tort and contract claims, including bad faith. In such cases, ERISA's remedies are exclusive. ERISA remedies include the benefits due, enforcement of rights under the plan, and clarification of future benefits under the plan. Bad faith claims concerning insurance that is not part of an employee benefit plan can still be made.

In Connecticut, a person also has a private right of action for damages for alleged unfair trade practices by an insurer if an administrative remedy is not applicable. Under the Connecticut Unfair Insurer Practices Act, alleged unfair actions must be “committed or performed with such a frequency as to indicate a general business practice” (CGS § 38a-816).

The federal Racketeer Influenced and Corrupt Organizations (RICO) law provides both criminal penalties and civil remedies for violations of its provisions. Civil RICO defendants can be subject to treble damages and attorney's fees. To prove a RICO violation, one must show conduct of an enterprise through a pattern of racketeering activity (18 U.S.C. § 1962). RICO is not limited to organized crime, but has been applied in a wide range of scenarios. In Humana, Inc. v. Forsyth, the Supreme Court ruled that a RICO claim could be brought against an insurer that was overcharging insureds for medical copayments by not passing on negotiated provider discounts (525 U.S. 299 (1999)). The federal claim did not conflict with or impair Nevada's law, which authorized a private right of action, but added to the available remedies (i.e., RICO treble damages).

Outcome: Settled for an undisclosed sum and dismissed with prejudice.

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Defendant's Experts:

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