Delaware Insurance Bad Faith Demand Letter

DELAWARE INSURANCE BAD FAITH DEMAND LETTER

FORMAL DEMAND FOR PAYMENT AND NOTICE OF BAD FAITH CLAIM

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

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 Delaware law, an insurer acts in bad faith when it fails to investigate or process a claim, or delays payment without reasonable justification. Tackett v. State Farm Fire & Cas. Ins. Co., 653 A.2d 254 (Del. 1995).

Continued refusal to pay will result in litigation seeking:

• All policy benefits
• Consequential damages
• Punitive damages for egregious conduct
• Pre- and post-judgment interest
• Attorney's fees (for property insurance claims)

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. Insurer lacks reasonable justification for denial.

VI. IDENTIFICATION OF BAD FAITH CONDUCT

A. Breach of Implied Covenant of Good Faith

Under Tackett v. State Farm Fire & Cas. Ins. Co., 653 A.2d 254 (Del. 1995):

"Where an insurer fails to investigate or process a claim or delays payment in bad faith, it is in breach of the implied obligations of good faith and fair dealing."

Insurer's conduct demonstrates:

☐ Denial without reasonable justification

• Conduct: [________________________________]

☐ Unreasonable delay in investigation

• Conduct: [________________________________]

☐ Failure to properly investigate

• Conduct: [________________________________]

☐ Misrepresentation of policy provisions

• Conduct: [________________________________]

☐ Lowball offer not supported by evidence

• Conduct: [________________________________]

B. Violations of 18 Del. C. § 2304 (Unfair Claims Settlement Practices)

☐ 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 – DELAWARE BAD FAITH LAW

A. Bad Faith Sounds in Contract

Under Tackett, Delaware bad faith claims sound in contract, not tort, arising from the implied covenant of good faith and fair dealing. However, punitive damages remain available for egregious conduct.

B. Elements of Bad Faith

A first-party bad faith claim requires:

1. Insurer failed to investigate, process, or pay a claim
2. Without reasonable justification
3. In breach of the implied covenant of good faith

C. Punitive Damages Standard

Punitive damages available if insurer's breach is "particularly egregious" – showing "evil motive" or "reckless indifference to the rights of others." Tackett, 653 A.2d at 265.

D. Emotional Distress Limitation

Generally, emotional distress damages not recoverable unless accompanied by physical injury. Tackett, 653 A.2d at 265.

E. Attorney's Fees

For property insurance claims, attorney's fees may be recoverable if insured prevails.

F. Key Delaware Case Law

1. Tackett v. State Farm Fire & Cas. Ins. Co., 653 A.2d 254 (Del. 1995) – Seminal case establishing Delaware bad faith law.

2. Dunlap v. State Farm Fire & Cas. Co., 878 A.2d 434 (Del. 2005) – Applied Tackett framework.

3. Pierce v. Int'l Ins. Co. of Illinois, 671 A.2d 1361 (Del. 1996) – Duty of good faith.

VIII. DAMAGES

A. Contract Damages

B. Consequential Damages

C. Punitive Damages

Insurer's conduct demonstrates evil motive or reckless indifference:
[________________________________]

Punitive Damages: To be determined at trial

D. Attorney's Fees (Property Insurance)

☐ This is a property insurance claim; fees recoverable if Insured prevails

E. 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 [________________________________] Superior Court
2. Insured will seek contract damages, consequential damages, punitive damages, and attorney's fees

X. PRESERVATION OF EVIDENCE

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

XI. DEPARTMENT OF INSURANCE COMPLAINT

Insured reserves the right to file with:

Delaware Department of Insurance
1351 W. North Street, Suite 101
Dover, DE 19904
(302) 674-7300

XII. CONCLUSION

Insurer lacks reasonable justification for denial. This demand provides opportunity to resolve before litigation seeking punitive damages.

SIGNATURE

Insured:

Signature: _______________________________________________

Print Name: [________________________________]

Date: [__/__/____]

Attorney:

Signature: _______________________________________________

Print Name: [________________________________]

Delaware Bar ID: [________________________________]

Date: [__/__/____]

EXHIBITS

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

All rights under Delaware law are expressly reserved.