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Never underestimate the importance of a claims file.
August 2015  |  Bad Faith Update  |  Vol. 1 Iss. 10

The Essential Claims File

In every case the facts and circumstances which constitute bad faith will vary but the primary source for these facts and circumstances remains constant. The need for a thorough review of the claims file at an early stage cannot be overstated. Fortunately for Missouri insureds, both the federal and state courts of Missouri, as well as those around the country, recognize the insured’s right to access their claims file even in the face of privilege and work product objections asserted by a carrier.
 
Insured’s Right to Their File
While Missouri courts have long recognized the insurer/insured relationship and the privileges that result therefrom, it was not until Grewell v. State Farm Mut. Auto. Ins. Co., Inc., 102 S.W.3d 33 (Mo. banc 2003) that insureds were decisively granted access to their claims files. Specifically, the Supreme Court determined in Grewell that given the similarity between the insurer/insured and the attorney/client relationship, an insured was entitled to “free and open access” to their file much the same as a client would be in an attorney/client relationship.
 
Despite Grewell’s clear language, carriers have attempted to cloud the waters of discovery by asserting work product and attorney/client privileges to prevent the disclosure of certain documents illuminating claims handling conduct. Courts have taken varying approaches to handling such claims from the carriers. 
 
When dealing with work product objections, courts including the Western District of Missouri in McConnell v. Farmers Ins. Co. have determined that work-product protections do not apply until an adversarial relationship exists by the carrier denying a claim. Additionally, the McConnell Court determined that even if work-product protections attached to the claims file before the denial of the claim, the insured could not obtain the substantial equivalent of the information contained in the claims file from another source and thus would be entitled to his or her complete file.
 
Finally, in handling attorney/client objections from the carrier, courts have been reluctant to recognize carrier’s privilege assertions. From New York to Idaho to Washington, courts have shied away from affording protection to documents prepared by counsel hired by the carrier to investigate the claim. In addition, according to some jurisdictions, coverage opinions may fall into the category of documents not protected by any privilege as these opinions are part of the carrier’s ordinary course of determining whether to pay or deny a claim. Thus, the recent trend in bad faith discovery around the country seems to be in line with Grewell’s proclamation that an insured is entitled to his or her entire claims file.
 
Importance of the Claims File
As discussed in McConnell, insureds have limited other means of discovering a carrier’s mindset or thought processes when denying a claim. This judicial recognition demonstrates the importance of an insured acting swiftly to obtain his or her claims file. Moving quickly to gain access to the claims file and procuring independent counsel to review the claims file puts the insured on equal footing with the carrier.
 
Early access to the claims file and review by an insured’s personal counsel allows the insured to determine if any potential bad faith exposure exists as a result of the carrier’s claims handling conduct. Such an early determination puts the insured in the driver’s seat for the entirety of the litigation for several different reasons. 
 
First, bad faith conduct (or almost as important, the absence of good faith claims handling) may be clearly documented in the claims file. This can often lead to a resolution of both the bad faith claim and the underlying matter. Additionally, even if the carrier is unwilling to settle with the claimant, the insured, armed with evidence of the carrier’s bad faith, may be justified in negotiating a §537.065 agreement or its equivalent with the claimant, ultimately shielding the insured’s assets from execution. Simply put, quickly obtaining the insured’s claims file has the potential to transform a devastating liability into an extraordinary asset.
 
Have Questions About a Claims File in a Bad Faith Case?

Kirk Presley can help.

Email him or call him at (816) 931-4611 to learn more.

Contact Us: (816) 931-4611


Kirk Presley

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Kirk's practice focuses on significant plaintiff’s personal injury and wrongful death claims in the areas of products and premises liability, general aviation, and insurance bad faith litigation.
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