District of Columbia Insurance Bad Faith Demand Letter

DISTRICT OF COLUMBIA INSURANCE BAD FAITH DEMAND LETTER

FORMAL DEMAND FOR PAYMENT AND NOTICE OF BREACH OF GOOD FAITH

PRIVILEGED AND CONFIDENTIAL
SETTLEMENT COMMUNICATION

DOCUMENT INFORMATION

ADDRESSEE INFORMATION

SENDER/CLAIMANT INFORMATION

CLAIM IDENTIFICATION

I. INTRODUCTION

This letter constitutes a formal demand to [INSURANCE COMPANY] ("Insurer") for immediate payment of all benefits owed under the above-referenced policy on behalf of [INSURED/CLAIMANT NAME] ("Insured").

Under District of Columbia law, every insurance contract contains an implied covenant of good faith and fair dealing. Choharis v. State Farm Fire & Cas. Co., 961 A.2d 1080, 1087 (D.C. 2008). An insurer breaches this covenant when it "evades the spirit of the contract, willfully renders imperfect performance, or interferes with performance."

IMPORTANT NOTE: While D.C. does not recognize an independent tort action for bad faith (Fireman's Fund Ins. Co. v. CTIA, 480 F. Supp. 2d 7 (D.D.C. 2007)), policyholders may sue for breach of the implied contractual covenant of good faith and fair dealing, and may recover attorney's fees where insurer's conduct is vexatious.

II. SUMMARY OF DEMAND

TOTAL AMOUNT DEMANDED: $[________________________________]

RESPONSE DEADLINE: [__/__/____] (30 days from receipt)

III. FACTUAL BACKGROUND

A. The Insurance Policy

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

B. The Loss Event

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

[________________________________]
[________________________________]
[________________________________]

C. Notice and Cooperation

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

IV. CLAIM HISTORY

V. COVERAGE ANALYSIS

Insuring Agreement: [________________________________]

Conditions Satisfied: ☐ Notice ☐ Proof of loss ☐ Cooperation

Exclusion Cited: [________________________________]

Not Applicable Because: [________________________________]

Conclusion: The loss is covered. Payment is owed.

VI. IDENTIFICATION OF BAD FAITH CONDUCT

A. Breach of Implied Covenant of Good Faith

Under Choharis v. State Farm Fire & Cas. Co., 961 A.2d 1080 (D.C. 2008):

"Under District of Columbia law, every contract contains within it an implied covenant of both parties to act in good faith and damages may be recovered for its breach as part of a contract action."

A party breaches when it "evades the spirit of the contract, willfully renders imperfect performance, or interferes with performance by the other party." Allworth v. Howard Univ., 890 A.2d 194, 201 (D.C. 2006).

Insurer's conduct demonstrates:

☐ Evasion of the spirit of the contract

• Conduct: [________________________________]

☐ Willful imperfect performance

• Conduct: [________________________________]

☐ Interference with Insured's ability to obtain benefits

• Conduct: [________________________________]

☐ Unreasonable delay without justification

• Conduct: [________________________________]

☐ Denial without proper investigation

• Conduct: [________________________________]

☐ Misrepresentation of policy terms

• Conduct: [________________________________]

B. Practices Listed in D.C. Code § 31-2231.17

Section 31-2231.17 is administratively enforced and applies when listed conduct is committed with such frequency as to indicate a general business practice. The following claim-handling facts may be relevant to a DISB complaint and to separately pleaded contract or consumer-protection claims, but they do not automatically establish a violation of § 31-2231.17:

☐ Failing to adopt reasonable investigation standards
☐ Refusing to pay without reasonable investigation
☐ Not attempting good faith settlement when liability is clear
☐ Misrepresenting policy provisions
☐ Refusing to pay for arbitrary or capricious reasons

VII. LEGAL FRAMEWORK – DC BAD FAITH LAW

A. Contract-Based Remedy Only

D.C. does not recognize an independent tort action for bad faith breach of insurance contract. Fireman's Fund Ins. Co. v. CTIA, 480 F. Supp. 2d 7, 9 (D.D.C. 2007).

However, policyholders may bring a breach of contract action based on the implied covenant of good faith and fair dealing.

B. Implied Covenant of Good Faith and Fair Dealing

Every contract in D.C. includes this implied covenant. Breach occurs when a party:

• Evades the spirit of the contract
• Willfully renders imperfect performance
• Interferes with the other party's performance

C. Attorney's Fees Exception

While D.C. generally follows the American Rule (parties bear own costs), an exception exists where defendant's conduct is vexatious – including where the insurer's refusal to pay benefits amounts to vexatious refusal.

D. Statute of Limitations

Three (3) years for bad faith claims.

E. Key DC Case Law

1. Choharis v. State Farm Fire & Cas. Co., 961 A.2d 1080 (D.C. 2008) – Implied covenant applies to insurance contracts.

2. Fireman's Fund Ins. Co. v. CTIA, 480 F. Supp. 2d 7 (D.D.C. 2007) – No tort action for bad faith in D.C.

3. Allworth v. Howard Univ., 890 A.2d 194 (D.C. 2006) – Definition of good faith breach.

4. Jefferson v. Collins, 905 F. Supp. 2d 269, 276 (D.D.C. 2012) – Implied-covenant pleading in a contract action.

VIII. DAMAGES

A. Contract Damages

B. Consequential Damages

C. Attorney's Fees (Vexatious Conduct)

If Insurer's conduct is vexatious:

D. Summary

IX. SETTLEMENT DEMAND

Insured demands payment of $[________________________________] within THIRTY (30) DAYS.

Payment Instructions

1. Made payable to: [________________________________]
2. Delivered to: [________________________________]
3. Received by: [__/__/____]

Consequences of Non-Payment

If not paid:

1. Insured will file suit in D.C. Superior Court

2. Insured will seek:
   - Contract damages
   - Consequential damages
   - Attorney's fees (vexatious conduct)
   - Pre- and post-judgment interest

X. PRESERVATION OF EVIDENCE

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

XI. DISB COMPLAINT

Insured reserves the right to file with:

DC Department of Insurance, Securities and Banking (DISB)
1050 First Street, NE, Suite 801
Washington, DC 20002
(202) 727-8000

XII. CONCLUSION

Insurer's conduct breaches the implied covenant of good faith. This demand provides opportunity to resolve before litigation.

SIGNATURE

Insured:

Signature: _______________________________________________

Print Name: [________________________________]

Date: [__/__/____]

Attorney:

Signature: _______________________________________________

Print Name: [________________________________]

DC Bar No.: [________________________________]

Date: [__/__/____]

EXHIBITS

☐ Exhibit A: Insurance Policy
☐ Exhibit B: Proof of Loss
☐ Exhibit C: Correspondence
☐ Exhibit D: Denial Letter

All rights under District of Columbia law are expressly reserved.