You’d think that with the number of lawsuits that ended with a plaintiff winning over an insurance company after it was made obvious the company engaged in bad faith tactics, others would learn the lesson and start dealing fairly with their policy holders, but sadly, this is not the case.

We’ve got into a few high profile bad faith cases before with fairly large insurance companies, and despite their money and their tactics, they usually tend to lose the battle if the court is given a reasonably concise testimony.

Unfortunately, some other insurance companies have not used these as examples in avoiding certain tactic in dealing with their clients.

The Property Insurance Coverage Blog points to a recent case in Tennessee that ended up at the Court of Appeals.

Christina Phillips gives us the gist of what happened explaining:

…insurer repeatedly failed to explain to the insured what the basis for the denial of the claim was until the insurer answered certain requests during litigation.

After the insurer – Farmers Mutual of Tennessee – denied the claim for their client several times, the client pushed back, trying to find out why Farmers Mutual had denied them. This got to the point, that the policy holder ended up having to sue to get the information out of Farmers Mutual.

In response, Farmers Mutual finally revealed the reason.

What was it?

Apparently, the policy holder had two mortgages taken out on the property when they submitted their original insurance application. Farmers Mutual was trying to say that this was a “material misrepresentation”, however, the court found that Farmers Mutual had not looked very closely at the policy holder’s application.

As it turns out, the policy holder did in fact only have on mortgage taken out on the property as they listed one lien holder on the original application.

The court did not miss this glaring detail in their summary and ended up adding a bad faith penalty of 15% against Farmers Mutual.

It’s good to see an insurance company not get away with such sloppy tactics in denying claims to their clients. Hopefully others will learn from this.