Undoubtedly, most claims executives will readily tell you thatthey have a strong claims management program, which is acrucial component of any claims department. They will point topolicies, procedures, guidelines, and claims audits. They would also point to stringent litigationand billing guidelines for attorneys. But do theyfully consider the intersection between their claimsmanagement program and bad faith? I'm not so sure, given my recentexperience.

In one case, the manager responsible for claims and litigationmanagement relied solely upon the adjuster's summary of theinvestigation in supporting a denial for a claim worthwell over $1 million. Had that manager only brieflyreviewed the file, he would have seen that the adjuster's“investigation” was woefully inadequate and violated not onlyclaims best practices, but also the company's own claimsprocedures.

In another, the claims manager failed to take an active role inmanaging an uninsured motorist claim until over 18 months after ademand for the policy limits had been made. However, by then, thebad faith had been committed, and the damage was done. In bothcases, the policyholders have filed suit against the insurer forbreach of contract and bad faith. Both suits could have beenavoided through active claims management.