What Compensation Can You Recover in a Bad Faith Insurance Lawsuit in Alabama?

An insurance company can say “no” to a claim. That doesn't automatically mean it acted in bad faith. But when an insurer refuses to pay a legitimate claim without a reasonable basis, delays payment without justification, or otherwise mishandles the claim, the situation can become much more serious. An Alabama bad faith insurance lawsuit may give you a way to seek compensation for the harm caused by the insurer's conduct.

The Insurance Benefits You Were Wrongfully Denied

A successful bad faith claim can involve more than the insurer's failure to pay. You may first be entitled to the insurance benefits required under the terms of your policy. Those benefits could include payment for covered property damage, medical or disability losses, uninsured or underinsured motorist claims, or other covered losses. Alabama law recognizes breach-of-contract and bad faith claims as distinct causes of action. As a result, a policyholder may seek the benefits owed under the insurance contract while also pursuing damages arising from the insurer's bad faith conduct. The policy's coverage limits still apply to the underlying insurance benefits.

Economic and Consequential Damages

Most people are familiar with economic and consequential damages. This is the financial loss the insured incurred as a direct result of the bad faith claim denial. However, these damages can extend far beyond the original unpaid claim. The exact amount will depend on the circumstances of the claim and supporting evidence. The insured should be prepared to provide evidence that connects their claimed financial losses to the insurer’s wrongful conduct. Potential economic damages could include:

• Additional out-of-pocket expenses
• Financial losses caused by delayed payment
• Lost income in appropriate circumstances
• Additional expenses resulting from being unable to access insurance benefits
• Other economic losses that can be tied to the insurer's conduct

Compensation for Mental Anguish and Emotional Distress

Alabama statutes include mental anguish as a possible claim in a bad faith claim. Depending on the circumstances, the insurance company’s wrongful actions can create more issues than just a financial one. The policyholder could experience high levels of stress, anxiety, emotional distress, or mental anguish.

However, these damages are not automatic and require evidence of emotional harm to support a claim. The emotional harm must be connected to the insurer’s bad-faith acts. The potentially recoverable amount depends on the severity and circumstances of the emotional harm matter.

Attorney Fees and Litigation-Related Costs

Generally, attorneys' fees are not recoverable in Alabama unless authorized by statute, contract, or an applicable exception. In bad faith insurance claim cases, attorney fees may be recoverable. Whether fees are recoverable depends on the specific facts and legal theory involved. For example, ordinary attorney fees are the money you pay a lawyer to handle the lawsuit. In some situations, the attorney's fees themselves may be considered a financial loss resulting from the defendant's wrongful conduct. In other words, the argument isn't simply, "I won, so make the insurer pay my lawyer." It's, "The insurer's wrongful conduct caused me to incur these legal expenses, so those expenses are part of my damages."

Punitive Damages in an Alabama Bad Faith Insurance Lawsuit

Unlike other types of damages, punitive damages are not meant to make the injured party whole. Instead, they are designed to punish the party who committed a wrongdoing. The goal is to deter similar wrongful conduct in the future. However, punitive damages aren’t available in every bad faith insurance claim case. Under Alabama Code § 6-11-20, there must be clear and convincing evidence that the defendant consciously or deliberately engaged in oppression, fraud, wantonness, or malice.

What Determines How Much a Bad Faith Case Is Worth?

The amount of damages for an insurance bad faith claim is calculated based on the insured individual’s losses. As each case is unique, an attorney can assist with calculating the damages for your case. There is no standard payout amount for a bad faith case in Alabama. Factors commonly considered include the amount of underlying insurance benefits, the insurer's financial loss, and the mental anguish experienced. The insurance company’s conduct is also considered. This could include how long the claim was delayed, what the insurance company knew when it made its decision, and whether the insurer had a legitimate reason for its position. If punitive damages are considered, the severity of the insurer’s misconduct is evaluated.

It’s important to note that a larger underlying insurance claim doesn’t automatically support a larger bad faith claim. The court considers evidence of the insurer’s misconduct and the insured’s losses resulting from that misconduct.

Talk to an Alabama Bad Faith Insurance Lawyer

When an insurance company acts in bad faith, the consequences can go well beyond an unpaid claim. Depending on the circumstances, an Alabama policyholder may be able to recover the benefits owed under the policy, additional financial losses, compensation for mental anguish, and potentially punitive damages. The amount and type of compensation available will depend on the evidence and the insurer's conduct. If you believe your insurer mishandled your claim or refused to pay without a reasonable basis, talking with an Alabama insurance attorney can help you understand your options and determine whether a bad faith insurance lawsuit may be appropriate.

Contact Jemison & Mendelsohn or call 334-213-2323 to discuss whether a bad faith insurance lawsuit may be right for you.