Insurance Bad Faith Lawyers in Montgomery, Alabama

What to do first when your claim is denied

Get the denial in writing and ask the adjuster to identify the exact policy language relied on. Ask for a complete copy of the policy. Keep the date of every call and the adjuster's name. Do not let a deadline run during an internal appeal, because an insurers own review process does not extend anything. And be careful what you say about fault, particularly on a recorded statement.

How Alabama's bad faith tort actually works

In National Security Fire & Casualty Co. v. Bowen, 417 So. 2d 179 (Ala. 1982), the Court set out what the insured must prove: an insurance contract and a breach of it; an intentional refusal to pay; the absence of any reasonably legitimate or arguable reason for the refusal; and the insurer's actual knowledge that no such reason existed. Where the theory is that the company never looked, a fifth element applies: its intentional failure to determine whether any legitimate or arguable reason existed.

The Court then compressed it. A plaintiff "must go beyond a mere showing of nonpayment and prove a bad faith nonpayment, a nonpayment without any reasonable ground for dispute." Simply put, you have to show the company had no legal or factual defense to the claim.

The directed verdict on the contract claim

This is the test it all turns on, from National Savings Life Insurance Co. v. Dutton, 419 So. 2d 1357 (Ala. 1982). "In the normal case," the Court held, the proof offered "must show that the plaintiff is entitled to a directed verdict on the contract claim and, thus, entitled to recover on the contract claim as a matter of law."

Winning the contract case is not enough. You have to be entitled to win it as a matter of law before the bad-faith count reaches a jury. Dutton states the other half out loud: ordinarily, if the evidence from either side creates a fact issue about the validity of the claim, and therefore about the legitimacy of the denial, the tort claim must fail.

It is important to note that the Court chose its qualifiers deliberately. Justice Jones wrote separately in Dutton solely to point out that "In the normal case" and "Ordinarily" are "significant qualifications." Exceptions exist. They are rare.

The debatable reason: why most denials are not bad faith

Having no lawful basis means the insurer lacks a legitimate or arguable reason to refuse. When a claim is fairly debatable, the insurer is entitled to debate it, whether the debate concerns a matter of fact or a matter of law. Gulf Atlantic Life Insurance Co. v. Barnes, 405 So. 2d 916 (Ala. 1981).

An insurer can be wrong and still not be liable in tort. If a lawful basis for the denial actually existed, it cannot be held liable for bad faith as a matter of law. What the tort reaches is narrower than unfairness: it "imports a dishonest purpose and means a breach of known duty ... through some motive of self-interest or ill will." Barnes, id. Not bad judgment. Not negligence.

When the company never really looked

The second route — what Alabama courts came to call the "abnormal" case — reaches an insurer that intentionally or recklessly failed to investigate a claim, or to subject it to any real evaluation. State Farm Fire & Cas. Co. v. Slade, 747 So. 2d 293 (Ala. 1999), treated the category as a limited one.

While that sounds like a way around the directed-verdict problem, the Supreme Court of Alabama closed most of the gap in State Farm Fire & Casualty Co. v. Brechbill, 144 So. 3d 248 (Ala. 2013). Framed as a refusal to pay or to investigate, the claim still requires proof that no legitimate reason for the denial existed, and it cannot survive where the insurer had a reasonably legitimate or arguable reason at the time the claim was denied. Perfection, the Court added, is not the standard.

A sloppy investigation, standing alone, is not a case. One that produced no reason at all may be.

Whose insurance company is it?

The Chavers tort is a first-party claim. It belongs to the policyholder, on their own policy. If you were hurt by a stranger and it is his insurance company treating you badly, you are not a party to his contract, and this tort is generally not your remedy against that carrier.

An older rule runs the other direction. A liability insurer holds the exclusive right to settle the claim against its own insured, and the law raises a duty to use ordinary diligence in exercising it. Waters v. American Cas. Co. of Reading, Pa., 261 Ala. 252, 73 So. 2d 524 (1954). Where it negligently or in bad faith refuses a settlement inside the limits and the judgment then exceeds them, it may answer to its insured for the full amount. An honest-judgment refusal after an adequate investigation is not actionable, though, and an excess verdict alone proves nothing. State Farm Mut. Auto. Ins. Co. v. Hollis, 554 So. 2d 387 (Ala. 1989).

Bad faith and uninsured motorist claims

This is the call our firm takes most often: someone hurt by an uninsured or underinsured driver turns to their own policy under Ala. Code § 32-7-23, and the carrier will not pay.

Alabama adds a step that surprises people. Those benefits are owed to an insured who is "legally entitled to recover" from the uninsured driver, which the Court reads to require proof of that driver's fault and of the extent of the damages. Until then, "there can be no breach of an uninsured motorist contract, and therefore no bad faith." Quick v. State Farm Mut. Auto. Ins. Co., 429 So. 2d 1033 (Ala. 1983), applied in LeFevre v. Westberry, 590 So. 2d 154 (Ala. 1991).

LeFevre's facts are ordinary, which is why it bites. The injuries looked modest, worsened over roughly fifteen (15) months, and the carrier then tendered its full limits. The Court held it could not be liable for failing "to anticipate what even the physicians did not predict." Our page on car accident claims covers how § 32-7-23 coverage works.

Alabama's contributory negligence rule

Alabama is one of only four (4) states — with Maryland, North Carolina and Virginia — plus the District of Columbia that still applies contributory negligence. A plaintiff carrying even a small share of the fault recovers nothing on a negligence claim. Not a reduced amount. Nothing. Golden v. McCurry, 392 So. 2d 815 (Ala. 1980).

Why does a fault rule belong on a page about insurance? Because of where the two rules meet. Since uninsured motorist benefits depend on being legally entitled to recover from the other driver, every contributory-negligence argument available to that driver is also available to your own carrier — and a live dispute about fault is exactly the kind of fact issue Dutton says defeats a bad-faith claim.

There is a limit. Contributory negligence is not a defense to wantonness, the conscious doing of an act while aware injury will likely follow. Bohannon v. Driskell, 519 So. 2d 1314 (Ala. 1988).

Deadlines: two years, or six

The tort is governed by Ala. Code § 6-2-38(l): actions for injury to the person or rights of another not arising from contract must be brought within two (2) years. The claim on the policy is an action upon a simple contract, and Ala. Code § 6-2-34(9) gives it six (6) years — the period applied to an underinsured motorist claim in Ex parte Nationwide Ins. Co., 991 So. 2d 1287 (Ala. 2008). Accordingly, a contract claim can outlast the tort claim by years, though policies also carry their own suit-limitation provisions.

What affects a bad faith case's value

Alabama does not permit punitive damages in a tort action unless it is proven by clear and convincing evidence that the defendant consciously or deliberately engaged in oppression, fraud, wantonness or malice. Ala. Code § 6-11-20. Alabama also caps them by statute in most civil actions. Ala. Code § 6-11-21. What a case may be worth depends on its facts.

In Montgomery specifically

A case filed in state court here goes to the Circuit Court for the Fifteenth Judicial Circuit. Insurers, though, are usually foreign corporations, so removal is the ordinary posture: where the parties are citizens of different states and more than $75,000 is at stake, the company can move the case to the Middle District of Alabama, Northern Division. 28 U.S.C. § 1332. That means different procedure and a far wider jury pool. Plan for it early.

Frequently asked questions

Is a denied insurance claim automatically bad faith?

No. Alabama lets an insurer debate a fairly debatable claim, whether the debate concerns fact or law. Gulf Atlantic Life Ins. Co. v. Barnes, 405 So. 2d 916 (Ala. 1981). Many denials are contract disputes, not bad faith.

What is the "directed verdict on the contract claim" test?

In the normal case, the insured's proof must show entitlement to a directed verdict on the contract claim — to recover under the policy as a matter of law — before the bad-faith count reaches a jury. National Savings Life Ins. Co. v. Dutton, 419 So. 2d 1357 (Ala. 1982).

Can I sue the other driver's insurance company for bad faith?

Generally no. Alabama's tort is a first-party claim on your own policy; a stranger's carrier owes its duty of good faith to its own insured.

What if the insurance company never investigated my claim?

That is the failure-to-investigate theory, which still requires proof that no legitimate or arguable reason existed when the claim was denied. State Farm Fire & Cas. Co. v. Brechbill, 144 So. 3d 248 (Ala. 2013).

How long do I have to sue an insurance company in Alabama?

The tort carries two (2) years, Ala. Code § 6-2-38(l); the contract claim on the policy carries six (6) years, Ala. Code § 6-2-34(9). A policy may set a shorter deadline.

Can my own uninsured motorist carrier be liable for bad faith?

It can be, but not before the insured proves the other driver's fault and the extent of the damages. Until then there is no breach and no bad faith. Quick v. State Farm Mut. Auto. Ins. Co., 429 So. 2d 1033 (Ala. 1983).

Are punitive damages available in a bad faith case?

They may be, on clear and convincing evidence of oppression, fraud, wantonness or malice. Ala. Code § 6-11-20. Alabama also caps them by statute in most civil actions. Ala. Code § 6-11-21.

What does it cost to have a denied claim reviewed?

Nothing. We handle these cases on a contingency fee, and there is never a fee for legal services unless we collect for you.

Talk to a Montgomery insurance bad faith lawyer

Barfoot & Schoettker is a small Montgomery firm whose practice focuses on personal injury. We handle first-party insurance disputes across central Alabama.

If your claim has been denied, or an adjuster has stopped returning calls, contact us for a free case evaluation at (334) 834-3444. There is never a fee for legal services, unless we collect for you. Bring the denial letter and the policy. The first question in these cases is always whether the company had a reason.