Arkansas Insurance Bad Faith Demand Letter

ARKANSAS INSURANCE BAD FAITH DEMAND LETTER

STATUTORY DEMAND PURSUANT TO ARK. CODE ANN. § 23-79-208

PRIVILEGED AND CONFIDENTIAL
SETTLEMENT COMMUNICATION PURSUANT TO A.R.E. 408

DOCUMENT INFORMATION

ADDRESSEE INFORMATION

SENDER/CLAIMANT INFORMATION

CLAIM IDENTIFICATION

I. STATUTORY DEMAND NOTICE

THIS IS A FORMAL DEMAND FOR PAYMENT UNDER ARK. CODE ANN. § 23-79-208

This letter constitutes a formal statutory demand to [INSURANCE COMPANY] ("Insurer") on behalf of [INSURED/CLAIMANT NAME] ("Insured") pursuant to Arkansas Code Annotated § 23-79-208.

CRITICAL NOTICE: Under Arkansas law, if Insurer fails to pay the loss within the time specified in the policy after this demand, Insurer shall be liable to pay:

1. 12% DAMAGES upon the amount of the loss; PLUS
2. All reasonable attorney's fees for prosecution and collection

IMPORTANT – 20% RULE: To recover the 12% penalty and attorney's fees, the amount actually recovered must be within 20% of the amount demanded (or 30% for homeowner's policies). This demand is calculated in good faith based on documented losses.

II. SUMMARY OF DEMAND

TOTAL AMOUNT DEMANDED: $[________________________________]

This demand is calculated in good faith and represents documented losses.

STATUTORY DEADLINE: Payment must be received within the time specified in the policy.

Policy Payment Period: [____] days

Deadline Date: [__/__/____]

III. FACTUAL BACKGROUND

A. The Insurance Policy

Policy No. [________________________________] was issued [__/__/____], providing [________________________________] coverage with limits of $[________________________________].

Policy Payment Provision: The policy requires payment within [____] days after proof of loss.

B. The Loss Event

On [__/__/____], Insured suffered a covered loss:

[________________________________]
[________________________________]
[________________________________]

C. Notice, Proof of Loss, and Cooperation

☐ Notice provided on [__/__/____]
☐ Complete Proof of Loss submitted on [__/__/____]
☐ Full cooperation provided
☐ All documentation submitted
☐ Inspection on [__/__/____]

IV. CLAIM HISTORY

V. COVERAGE ANALYSIS

Insuring Agreement: [________________________________]

Conditions Satisfied: ☐ Notice ☐ Proof of loss ☐ Cooperation ☐ Documentation

Exclusion Cited: [________________________________]

Not Applicable Because: [________________________________]

Conclusion: The loss is covered. Payment is due.

VI. IDENTIFICATION OF BAD FAITH CONDUCT

A. Statutory Penalty Claim (Ark. Code Ann. § 23-79-208)

Under § 23-79-208, if Insurer fails to pay within the time specified in the policy after demand, Insurer is liable for:

• 12% damages on the loss amount
• Reasonable attorney's fees

Note: This applies even if Insurer denied in good faith – the issue is failure to pay a covered loss.

B. Common Law Bad Faith

Under Aetna Cas. & Sur. Co. v. Broadway Arms Corp., 281 Ark. 128 (1984), common law bad faith requires affirmative misconduct that is dishonest, malicious, or oppressive.

Evidence of affirmative misconduct:

☐ Dishonest conduct

• Conduct: [________________________________]

☐ Malicious conduct

• Conduct: [________________________________]

☐ Oppressive conduct

• Conduct: [________________________________]

Note: Simple delay or negligence does not support common law bad faith; must show intentional wrongdoing.

C. Violations of Ark. Code Ann. § 23-66-206 (Unfair Claims Settlement Practices)

While no private right of action exists, violations support bad faith claims:

☐ Misrepresenting pertinent facts or policy provisions
☐ Failing to acknowledge claims promptly
☐ Failing to adopt reasonable investigation standards
☐ Refusing to pay without reasonable investigation
☐ Failing to affirm or deny coverage within reasonable time
☐ Not attempting good faith settlement when liability is clear

VII. LEGAL FRAMEWORK – ARKANSAS BAD FAITH LAW

A. Ark. Code Ann. § 23-79-208 – Statutory Penalty

The statute provides:

"In all cases in which loss occurs and the insurance company liable therefor shall fail to pay the losses within the time specified in the policy after demand is made, the person... shall be liable to pay the holder of the policy... twelve percent (12%) damages upon the amount of the loss, together with all reasonable attorney's fees."

Key Points:

• Applies even without proof of bad faith
• Insurer liable if it fails to pay covered loss after demand
• 20% threshold: Recovery must be within 20% of demand (30% for homeowner's)

B. Common Law Bad Faith Standard

Requires affirmative misconduct that is dishonest, malicious, or oppressive:

• Cannot be based on good faith denial
• Cannot be based on offers to compromise
• Cannot be based on negligence or honest errors

Switzer v. Shelter Mut. Ins. Co., 362 Ark. 419 (2005) – Confusion, delay, or bureaucratic red tape does not constitute bad faith.

C. Punitive Damages

Available if conduct is willful, wanton, or malicious.

D. Statute of Limitations

Five years for § 23-79-208 claims under Ark. Code Ann. § 23-79-202.

E. Key Arkansas Case Law

1. Aetna Cas. & Sur. Co. v. Broadway Arms Corp., 281 Ark. 128 (1984) – Affirmative misconduct standard.

2. Switzer v. Shelter Mut. Ins. Co., 362 Ark. 419 (2005) – Delay/red tape not bad faith.

3. Grubbs v. Credit General Ins. Co., 328 Ark. 142 (1997) – § 23-79-208 applicability.

4. Southern Farm Bureau Cas. Ins. Co. v. Daggett, 354 Ark. 112 (2003) – 20% threshold rule.

VIII. DAMAGES

A. Contract Damages

B. Statutory Penalty (§ 23-79-208)

C. Attorney's Fees

Under § 23-79-208, all reasonable attorney's fees are recoverable.

D. Punitive Damages (Common Law Bad Faith)

If willful, wanton, or malicious conduct is proven.

Punitive Damages: To be determined at trial

E. Summary

IX. SETTLEMENT DEMAND

THIS IS A FORMAL DEMAND UNDER ARK. CODE ANN. § 23-79-208

Insured demands payment of $[________________________________] within the time specified in the policy.

Payment must be received no later than: [__/__/____]

Payment Instructions

1. Made payable to: [________________________________]
2. Delivered to: [________________________________]

Consequences of Non-Payment

If not paid within policy timeframe:

1. Insured will file suit
2. Insured will seek:
   - Contract damages
   - 12% statutory penalty
   - All reasonable attorney's fees
   - Punitive damages (if applicable)
   - Pre- and post-judgment interest

X. PRESERVATION OF EVIDENCE

Preserve all documents and ESI including:
☐ Claim file ☐ Communications ☐ Adjuster notes ☐ Expert reports ☐ Reserves

XI. INSURANCE DEPARTMENT COMPLAINT

Insured reserves the right to file with:

Arkansas Insurance Department
1 Commerce Way, Suite 102
Little Rock, AR 72202
(501) 371-2600

XII. CONCLUSION

This statutory demand triggers Insurer's obligation to pay within the policy timeframe. Failure to do so will result in 12% penalty plus attorney's fees.

SIGNATURE

Insured:

Signature: _______________________________________________

Print Name: [________________________________]

Date: [__/__/____]

Attorney:

Signature: _______________________________________________

Print Name: [________________________________]

Arkansas Bar No.: [________________________________]

Date: [__/__/____]

SENT VIA CERTIFIED MAIL, RETURN RECEIPT REQUESTED

EXHIBITS

☐ Exhibit A: Insurance Policy (including payment timeframe provision)
☐ Exhibit B: Proof of Loss with supporting calculations
☐ Exhibit C: Correspondence
☐ Exhibit D: Denial Letter

All rights under Arkansas law are expressly reserved.