Bad Faith Litigation: Proving Emotional Distress and Other Damages

Plaintiffs in bad faith cases can seek several different types of damages, such as withheld or unpaid insurance benefits, statutory damages in some states, attorneys' fees, pain and suffering and emotional distress, and sometimes even punitive damages. 

Much depends on the theory of bad faith being alleged, who is asserting it, and the type of conduct at issue. Normally, a plaintiff must first establish bad faith by the insurance company, either at common law or under a specific statute. Often this requires showing gross negligence or deliberate mishandling of a claim and some type of economic loss caused by the insurer's bad faith. However, one commentator has suggested that under California law, no economic loss would be needed if the object of the contract is the mental and emotional well-being of one of the contracting parties and that this condition might possibly exist with certain insurance policies.  

Extracontractual damages, such as emotional distress damages including things like depression, anxiety, insomnia, headaches, or the like, require a solid evidentiary base and here many plaintiffs fail. Jurisdictions vary regarding whether the emotional distress must arise from economic loss and how to determine if it is connected to an insurer's bad faith. Nonetheless, attempting to prove emotional distress arising from insurer misconduct invites a detailed inquiry into all the other possible sources of distress as well as into the policyholder's finances.  

Listen as this experienced panel discusses whether and how plaintiffs can recover emotional distress damages in insurance bad faith cases, and what to expect from defendants opposing such damages.  

I. Contractual damages

II. Statutory damages

III. Types of emotional distress damages

A. When and how to assert emotional distress damages

B. Standard for recovery of emotional distress in statutory bad faith actions

C. Proving emotional distress

D. Establishing a value for emotional distress damages

IV. Punitive damages for egregious insurer conduct

The panel will review these and other important issues:

• What are the differences in discovery between a bad faith action and the underlying insurance claim action?
• What experts are needed to prove emotional distress damages?
• Does emotional distress have to be directly related to or caused by an economic loss?