Bad faith is the unreasonable failure of an insurance company to honor the terms of an insurance policy and deal with a policyholder in good faith. Insurance companies who are found to have acted in bad faith can be liable for punitive damages in addition to contract damages. Some states have bad faith statutes called "Unfair Insurance Claims Practices Acts."
Client Sues ACE Over Workers’ Comp Payout Dispute
August 3rd, 2015 - A manufacturer is taking ACE American Insurance Co. to court over its position that the insurer is improperly accounting for funds received as part of a workers’ compensation claim.
The complaint against ACE arises from the March 14th, 2011 workplace injury of a Standex International Corp. employee referred to as John Doe.
Once the worker was hurt, Salem, N.H.-based Standex invoked its workers’ compensation and employers liability policy it had purchased from the ACE Group unit.
By early this year, claims paid to the Massachusetts-based worker totaled $443,000. At that time, Standex said $253,500 had been recouped by way of lien rights on a third party.
While the policy calls for ACE to handle all claims, an endorsement to the contract requires Standex to reimburse the insurer the first $500,000 of any claim.
In effect, then, Standex said that ACE took the position that a lien recovery would benefit the manufacturer only to the extent that lien funds remained after ACE had reimbursed itself for amounts paid in excess of the deductible.
However, said Standex, language in the deductible endorsement favors Standex, since it provides that the deductible is satisfied once ACE has made claim payments in the amount of the deductible.
“There is no policy provision stating that, for purposes of the deductible, lien recoveries are to be applied first and foremost to reduce the loss exposure of ACE at the potential expense of Standex,” stated the lawsuit.
The case remains open, and Standex said that it anticipates that the total payout will be such that the way the lien recovery is allocated will significantly affect the amount it pays under the endorsement.
ACE has asserted its priority position without citing any language in the policy that allows that, said Standex, and it has asked a New Hampshire state court to order that the policyholder has priority.
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