Insurance companies are regulated by statutory law and case law developed over years of interpretation by the courts. We need to realize that insurance policies are not meant to cover all that you own, or every situation. However, it often appears that these companies look through the reams of paper to find a reason for no coverage rather than taking the policy in its entirety to find coverage. Your insurance company is bound to the policy terms just as you are. Any ambiguity in policy language is to be interpreted in favor of the insured according to Oklahoma law. When the company fails to follow these simple precepts, it is called bad faith.
Bad faith can occur in virtually any kind of insurance claim. The conduct can be from acts or inactions such as: failing to investigate a claim fully, delaying payment of a claim, wrongfully denying payment, requiring an insured to institute litigation to get paid, paying less than the full value of a claim, or simply failing to communicate for periods of time. The case of Christian v. American Home Assurance Company, in 1978, first adopted the concept of bad faith being a separate cause of action.
The underlying claim is a breach of contract. In other words, the insurance company did not live up to its end of the bargain. You paid for coverage, and they failed to cover the loss. These damages are easily calculable. For instance, your roof costs $30,000 to replace and the insurance did not pay for it. The damages for breach of contract would be the $30,000. The ultimate hammer to hold an insurance company accountable is the concept of bad faith damages
Insurance companies are often multi-million dollar entities, and sometimes billion dollars. The law, until recently, allowed uncapped damages on bad faith damages as a method to punish an insurance company for its wrong-doing. This is what is commonly referred to as punitive damages. Whereas $1,000 would punish most of us, sometimes, $1,000,000 is not punishment enough to an insurance carrier to deter the same action in the future. Tort reform has recently placed caps on some of these damages and will be determined in the future.
Evaluating a Claim
Your claim, as every claim, we be evaluated on its own merits. However, you will need to prove that the insurance carrier recklessly disregarded its obligation to treat you fairly, or it intentionally disregarded its obligation to treat you with good faith. If you are able to do this, you will be able to recover the damages for your original loss, plus punitive damages.