Insurance Bad Faith Demand Letter - Rhode Island

INSURANCE BAD FAITH DEMAND LETTER

State of Rhode Island

[LAW FIRM LETTERHEAD]

PRIVILEGED AND CONFIDENTIAL
SETTLEMENT COMMUNICATION — FOR RESOLUTION PURPOSES ONLY
PROTECTED UNDER R.I. R. EVID. 408 AND F.R.E. 408

VIA CERTIFIED MAIL, RETURN RECEIPT REQUESTED
AND VIA EMAIL TO: [________________________________]

Date: [__/__/____]

[INSURANCE COMPANY NAME]
[________________________________]
[________________________________]
[________________________________], [____] [________]

Attention: [________________________________], [________________________________]
Re: FORMAL BAD FAITH DEMAND — RHODE ISLAND
Re: R.I. Gen. Laws § 9-1-33 — Insurer's Bad Faith Refusal to Pay
Insured: [________________________________]
Claimant: [________________________________]
Policy Number: [________________________________]
Claim Number: [________________________________]
Date of Loss: [__/__/____]
Policy Limits: $[________________________________]
Amount Owed: $[________________________________]
Response Deadline: [__/__/____] at 5:00 p.m. ET

Dear [________________________________]:

I. INTRODUCTION AND NATURE OF DEMAND

This firm represents [________________________________] ("our client") in connection with the above-referenced insurance claim under the laws of Rhode Island. This letter constitutes a formal demand for payment of all policy benefits wrongfully withheld and serves as notice of [________________________________]'s ("the Company" or "[________________________________]") bad faith in handling our client's claim, actionable under R.I. Gen. Laws § 9-1-33.

Rhode Island recognized the first-party bad faith cause of action in Bibeault v. Hanover Ins. Co., 417 A.2d 313 (R.I. 1980), and codified it in R.I. Gen. Laws § 9-1-33 to redress the inherent imbalance in bargaining power between policyholders and insurers and to deter stonewalling tactics used to reduce or eliminate just liability. The Company's conduct in this matter is a textbook example of the conduct the General Assembly enacted § 9-1-33 to punish.

THIS IS A TIME-LIMITED DEMAND. The Company has until 5:00 p.m. ET on [__/__/____] to tender $[________________________________] — the full amount owed — and resolve all claims arising from this loss. Failure to respond with an acceptable offer will result in immediate litigation seeking:

• All policy benefits wrongfully withheld
• Consequential and emotional distress damages
• Punitive damages — available as a matter of right under Rhode Island law without proof of willful or wanton conduct beyond the bad faith itself
• Reasonable attorney's fees under § 9-1-33
• Prejudgment interest under R.I. Gen. Laws § 9-21-10

II. RHODE ISLAND BAD FAITH LAW — STATUTORY AND CASE LAW FRAMEWORK

A. The Governing Statute: R.I. Gen. Laws § 9-1-33

R.I. Gen. Laws § 9-1-33 provides:

An insured under any insurance policy may bring an action against the insurer when it is alleged the insurer wrongfully and in bad faith refused to pay or settle a claim made pursuant to the provisions of the policy, or otherwise wrongfully and in bad faith refused to timely perform its obligations under the contract of insurance. In any action brought pursuant to this section, an insured may also make claim for compensatory damages, punitive damages, and reasonable attorney fees.

This statute applies to all lines of insurance — auto, homeowner, commercial, life, disability, and any other policy issued in Rhode Island. It is the primary vehicle for first-party bad faith litigation in Rhode Island and is the basis for this demand.

Note: Rhode Island's Unfair Claims Settlement Practices Act, R.I. Gen. Laws § 27-9.1, does not create a private right of action for insureds. The sole vehicle for a private bad faith suit against an insurer is § 9-1-33. Violations of § 27-9.1-4 are, however, relevant as evidence of bad faith conduct, and can be reported to the Rhode Island DBR, Insurance Division.

B. Elements of Bad Faith: Bibeault / Skaling Standard

To prevail under § 9-1-33, our client must establish two elements:

1. Absence of a reasonable basis in fact or in law for the Company's denial, delay, or underpayment of the claim; and
2. The Company's knowledge of, or reckless disregard of, the lack of a reasonable basis for its conduct.

Bibeault v. Hanover Ins. Co., 417 A.2d 313 (R.I. 1980); Skaling v. Aetna Ins. Co., 799 A.2d 997 (R.I. 2002).

The standard is objective: an insurer must evaluate liability by "objective, measurable criteria" and must "attempt, in good faith, to resolve the claim so that its insured is relieved from the burden of instituting a suit to recover under the policy." Skaling, 799 A.2d at [____]. An insurer's good-faith mistake does not create liability — but deliberate stonewalling, willful disregard of clear evidence, or refusal to investigate adequately does. See Chartwell Law summary of Rhode Island bad faith law.

Fiduciary Duty: Rhode Island courts have recognized that an insurer owes a fiduciary-like duty to act in the best interests of its insured rather than to prioritize its own financial interests. See generally Skaling.

Investigation Duty: An insurer has an affirmative obligation to "assemble all the facts necessary for a fair and comprehensive investigation before it refuses to pay a claim." The insurer's conduct is judged by information available at the time of the denial — not by facts subsequently discovered in litigation. This principle prevents insurers from conducting incomplete investigations and then defending their denial based on facts they failed to investigate.

C. Punitive Damages: Available as a Matter of Right

Under Rhode Island bad faith law, punitive damages are available as a matter of right in successful § 9-1-33 claims. It is not necessary to plead or prove willful or wanton conduct by the insurer separately from the bad faith itself. Skaling v. Aetna Ins. Co., 799 A.2d 997 (R.I. 2002). This is a significant and insurer-hostile feature of Rhode Island law that distinguishes it from many other states. The prospect of a punitive damages award reflects the legislature's judgment that conduct meeting the § 9-1-33 standard is inherently deserving of punishment and deterrence.

Rhode Island imposes no statutory cap on punitive damages in bad faith cases. The amount is committed to the jury's discretion subject to constitutional due process limits.

D. Attorney's Fees

Unlike the American Rule that generally governs in Rhode Island litigation, reasonable attorney's fees are expressly recoverable under R.I. Gen. Laws § 9-1-33 as a statutory remedy in bad faith cases. An insured who prevails under § 9-1-33 is entitled to recover the full reasonable attorneys' fees incurred in prosecuting the bad faith claim, in addition to all other damages.

E. The Asermely Rule: Duty to Settle Within Policy Limits

Where a settlement demand within policy limits has been made and the potential for an excess verdict is reasonably foreseeable, the insurer is obligated to seriously consider the demand and attempt to settle to protect its insured. Asermely v. Allstate Ins. Co., 728 A.2d 461 (R.I. 1999). Failure to accept a reasonable within-limits demand when liability is clear exposes the insurer to liability for the full judgment, including any excess above policy limits.

F. Statute of Limitations

The bad faith conduct in this matter began on [__/__/____]. This demand is timely. Prejudgment interest under R.I. Gen. Laws § 9-21-10 accrues from the date of demand.

G. Regulatory Framework: R.I. Gen. Laws § 27-9.1-4 and 230-RICR-20-40-2

While § 27-9.1-4 does not create a private right of action, the Company's violations of the Act are admissible as evidence of bad faith under § 9-1-33. The Act requires insurers to:

• Acknowledge claims within 10 days of receipt
• Accept or deny coverage within 30 days of proof of loss
• Conduct a thorough and objective investigation before denying any claim
• Attempt in good faith to effectuate prompt, fair, equitable settlement when liability is reasonably clear
• Provide a written explanation citing specific policy provisions for any denial or inadequate offer
• Refrain from compelling litigation by offering substantially less than amounts owed

The Company has violated each of these obligations in this matter. Complaints will be filed with the Rhode Island DBR, Insurance Division, as detailed in Section X.

III. POLICY INFORMATION AND COVERAGE

A. Policy Details

B. Coverage Analysis

The policy provides coverage for [________________________________]. The loss at issue clearly falls within the insuring agreement because:

☐ The cause of loss is a covered peril under the policy
☐ The loss occurred during the policy period
☐ The claimant is a covered person / insured under the policy definitions
☐ All policy conditions have been satisfied (notice, cooperation, proof of loss)
☐ No applicable exclusion bars coverage
☐ The Company itself acknowledged coverage by [________________________________]

Despite these clear indicia of coverage, the Company has [________________________________].

Having accepted the duty to investigate (or having already acknowledged coverage), the Company is bound under Rhode Island law to:

• Conduct a thorough, fair, and objective investigation
• Evaluate the claim by objective, measurable criteria
• Promptly pay all amounts owed under the policy
• Communicate honestly and transparently with the insured
• Avoid compelling litigation by offering substantially less than owed

IV. FACTUAL BACKGROUND AND CLAIM HISTORY

A. The Underlying Loss

On [__/__/____], [________________________________].

[Detailed description of the loss event, how it occurred, what property or interests are damaged, and why coverage is clearly owed:]

[________________________________]

[________________________________]

[________________________________]

B. Chronological Timeline of Bad Faith Conduct

V. SPECIFIC BAD FAITH CONDUCT

The Company's handling of this claim violates both the express policy terms and the covenant of good faith and fair dealing recognized under R.I. Gen. Laws § 9-1-33 in the following specific respects:

A. Unreasonable Delay

The Company has unreasonably delayed the investigation, evaluation, and payment of this claim in violation of § 27-9.1-4 and R.I. Gen. Laws § 9-1-33:

☐ Failed to acknowledge claim within 10 days of receipt (acknowledged on [__/__/____], [____] days late)
☐ Failed to accept or deny coverage within 30 days of proof of loss (decision issued [__/__/____], [____] days late)
☐ Failed to issue payment within a reasonable time after liability was established
☐ Caused our client to bear [________________________________] as a direct result of the delay
☐ [________________________________]

Impact of Delay on Client:

[________________________________]

B. Inadequate Investigation

The Company failed to conduct the thorough, fair, and objective investigation required under Bibeault / Skaling and § 27-9.1-4 before denying or undervaluing the claim:

☐ Failed to interview all relevant witnesses, including [________________________________]
☐ Failed to retain a qualified expert to evaluate [________________________________]
☐ Ignored / failed to consider the following evidence submitted by our client: [________________________________]
☐ Selectively reviewed only evidence supporting denial while ignoring contrary evidence
☐ Relied on a biased expert / inspector retained solely to justify a predetermined outcome: [________________________________]
☐ Failed to request information needed for a complete investigation within a reasonable time
☐ Closed / denied the claim before investigation was complete
☐ [________________________________]

The Company reached its denial decision without having assembled the facts necessary for a fair and comprehensive investigation. Bibeault, 417 A.2d at 313.

C. Unreasonable Denial or Underpayment

The Company's denial of or failure to pay the full claim is without reasonable basis:

The discrepancy between the Company's position and the documented value of this claim is not the product of honest disagreement over complex facts. It reflects:

[________________________________]

[________________________________]

D. Misrepresentation of Policy Provisions

The Company has misrepresented the following policy terms or applicable law to our client:

☐ Mischaracterized the coverage trigger for [________________________________]
☐ Cited an exclusion that does not apply because [________________________________]
☐ Incorrectly stated that [________________________________] is not a covered loss under Rhode Island law
☐ Failed to disclose applicable coverage provisions favorable to the insured
☐ [________________________________]

E. Failure to Communicate and Compulsion of Litigation

☐ Failed to return calls or respond to correspondence from our client for [____] days
☐ Failed to provide a written explanation citing specific policy provisions for the denial
☐ Made a low offer of $[________________________________] when the documented value is $[________________________________], compelling our client to litigate to recover the amount owed
☐ Failed to provide claim forms within 10 days of request as required by § 27-9.1-4
☐ [________________________________]

F. Conflict of Interest (if applicable)

☐ Applicable: The Company appointed defense counsel with a conflict of interest because [________________________________]. Under Employers Fire Ins. Co. v. Beals, 240 A.2d 397 (R.I. 1968), our client has the right to refuse appointed counsel and select independent counsel at the Company's expense.

VI. STATUTORY VIOLATIONS: R.I. GEN. LAWS § 27-9.1-4

While § 27-9.1-4 does not create a private right of action, the Company has violated the following specific provisions, which constitute evidence of bad faith under § 9-1-33 and grounds for regulatory complaint:

☐ § 27-9.1-4(a)(1): Misrepresenting pertinent facts or insurance policy provisions relating to coverages at issue
☐ § 27-9.1-4(a)(2): Failing to acknowledge and act reasonably promptly upon communications with respect to claims arising under its policies (acknowledgment owed within 10 days)
☐ § 27-9.1-4(a)(3): Failing to adopt and implement reasonable standards for the prompt investigation of claims
☐ § 27-9.1-4(a)(4): Refusing to pay claims without conducting a reasonable investigation based upon available information
☐ § 27-9.1-4(a)(5): Not attempting in good faith to effectuate prompt, fair, and equitable settlements of claims in which liability has become reasonably clear
☐ § 27-9.1-4(a)(6): Compelling insureds to institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in actions brought by such insureds
☐ § 27-9.1-4(a)(7): Attempting to settle a claim for less than the amount to which a reasonable person would have believed they were entitled
☐ § 27-9.1-4(a)(8): Failing to promptly provide a reasonable explanation, based on the policy and applicable law, of the basis in the policy for the denial of a claim or for an inadequate settlement offer
☐ § 27-9.1-4(a)(9): Failing to provide claim forms within 10 days of a written request therefor
☐ [________________________________]

The Company's conduct constitutes a pattern of violations, not isolated missteps, evidencing a systematic approach to underpaying and delaying this claim.

VII. DAMAGES

A. Contract / Policy Benefits Wrongfully Withheld

B. Consequential Damages

Under Rhode Island law, consequential damages flowing from the bad faith denial are recoverable under § 9-1-33 as compensatory damages beyond the policy benefits themselves:

C. Emotional Distress Damages

Under R.I. Gen. Laws § 9-1-33 and Rhode Island case law, an insured who has suffered emotional distress as a result of the insurer's bad faith handling of a legitimate claim may recover emotional distress damages as a component of compensatory damages. Our client has suffered:

[Describe emotional distress, including anxiety, sleeplessness, financial stress, health impacts, family disruption, and any medical treatment sought:]

[________________________________]

[________________________________]

Estimated Emotional Distress Damages: $[________________________________]

D. Punitive Damages

Under R.I. Gen. Laws § 9-1-33 as interpreted by Skaling v. Aetna Ins. Co., 799 A.2d 997 (R.I. 2002), punitive damages are available as a matter of right upon proof of bad faith, without any separate showing of willful or wanton conduct. The amount is for the jury. Rhode Island imposes no statutory cap.

The Company's conduct warrants substantial punitive damages because:

☐ The denial / underpayment was deliberate, not the product of honest mistake
☐ The Company stonewalled a valid claim to coerce a reduced settlement
☐ The Company has a documented history of similar bad faith conduct in other claims
☐ The Company's conduct was designed to pressure a vulnerable insured
☐ The Company ignored clear evidence and expert opinions supporting the claim
☐ [________________________________]

Estimated Punitive Damages: $[________________________________] (subject to jury determination)

E. Attorney's Fees

Under R.I. Gen. Laws § 9-1-33, our client is entitled to recover reasonable attorney's fees incurred in prosecuting this bad faith claim. This is a statutory exception to Rhode Island's general American Rule.

Estimated Attorney's Fees to Date: $[________________________________]
Projected Attorney's Fees Through Trial: $[________________________________]

F. Prejudgment Interest

Under R.I. Gen. Laws § 9-21-10, prejudgment interest accrues at the statutory rate from the date of this demand. Interest continues to accumulate until judgment is paid.

Interest Rate: Rhode Island statutory rate
Accrual Date: [__/__/____] (date of this demand)

G. Total Demand Summary

Note: Punitive damages will be presented to the jury. They are not limited or capped under Rhode Island law.

VIII. FORMAL DEMAND AND SETTLEMENT TERMS

A. Monetary Demand

We hereby demand that [________________________________] pay the total sum of $[________________________________] within the deadline stated below, allocated as follows:

This demand does not include punitive damages, which our client reserves the right to seek in full at trial.

B. Additional Settlement Terms

In addition to monetary payment:

☐ Full and complete release of all claims by the Company against our client arising from this matter
☐ Written confirmation that the claim is resolved and no adverse action will be taken against the policy
☐ Deletion / correction of any incorrect adverse claims history reported to CLUE, ISO ClaimSearch, or other industry databases
☐ Confidentiality agreement as to settlement terms (optional — negotiable)
☐ [________________________________]

IX. TIME-LIMITED NATURE OF THIS DEMAND

THIS DEMAND EXPIRES AT 5:00 P.M. EASTERN TIME ON [__/__/____].

This deadline is firm. We may consider a written request for a brief extension submitted to the undersigned prior to the deadline date, accompanied by a credible explanation and evidence of good faith, but we are under no obligation to grant one.

Consequences of Non-Response or Inadequate Response

If [________________________________] fails to tender the full amount demanded by the deadline:

1. Litigation will be filed immediately in Rhode Island Superior Court (Providence/Bristol County or applicable county) seeking all available remedies under R.I. Gen. Laws § 9-1-33, including:
   - All policy benefits wrongfully withheld
   - Consequential damages, including all financial losses caused by the delay/denial
   - Emotional distress damages
   - Punitive damages — as a matter of right, in an amount the jury deems appropriate, with no statutory cap
   - Reasonable attorney's fees under § 9-1-33
   - Prejudgment interest under R.I. Gen. Laws § 9-21-10

2. This demand will be withdrawn and not re-offered at trial

3. Regulatory complaints will be filed with:
   - Rhode Island Department of Business Regulation, Insurance Division
   1511 Pontiac Avenue, Cranston, RI 02920
   Telephone: (401) 462-9520 | Fax: (401) 462-9602 | Email: [email protected]

• National Association of Insurance Commissioners (NAIC)
• [________________________________] (other applicable regulator)

X. DOCUMENT PRESERVATION NOTICE

This letter constitutes formal notice that all documents and electronically stored information ("ESI") relating to this claim must be immediately preserved. Preservation obligations arise upon receipt of this letter (and may have arisen earlier). Failure to preserve may result in spoliation sanctions, adverse inference instructions, and other remedies.

The following must be preserved without alteration, deletion, or destruction:

☐ Complete claim file in all versions, including all drafts and superseded versions
☐ All adjuster notes, diaries, activity logs, and diary entries (paper and electronic)
☐ All internal communications referencing this claim (email, text, instant message, voicemail, Teams/Slack)
☐ All communications with the insured, claimant, counsel, or third parties
☐ All photographs, videos, and inspection reports
☐ All estimates, appraisals, and supporting worksheets
☐ All expert, engineering, causation, or medical reports (including unfavorable reports)
☐ All claim-handling guidelines, best practices manuals, and training materials applicable to this claim type
☐ All quality assurance or audit materials touching this claim
☐ Reserve documentation and all reserve changes with justification memoranda
☐ Supervisor approvals and escalation records
☐ Underwriting file for this policy
☐ Any coverage opinion letters or coverage counsel memoranda
☐ Litigation hold notices previously issued by the Company regarding this matter

XI. CONCLUSION

Rhode Island enacted R.I. Gen. Laws § 9-1-33 to protect policyholders from carriers who use their superior resources and information to delay, deny, and underpay valid claims. The statute's punitive damages remedy — available as a matter of right — reflects the legislature's recognition that bad faith conduct must be deterred through meaningful financial consequences.

[________________________________] sold our client a policy promising indemnification against covered losses. The loss has occurred. The coverage is undeniable. The Company's refusal to honor its obligations is without reasonable basis in fact or law. Every day this claim goes unpaid is another day the Company accumulates exposure under § 9-1-33.

We strongly urge [________________________________] to accept this demand. This is the only opportunity to resolve this matter short of litigation.

Please direct all communications regarding this matter to the undersigned only.

Respectfully submitted,

[________________________________]

By: ___________________________________
[________________________________]
Rhode Island Bar No. [________]
[________________________________]
[________________________________], RI [________]
Tel: [________________________________]
Fax: [________________________________]
Email: [________________________________]

Counsel for [________________________________]

ENCLOSURES:

• Policy declarations page and all endorsements
• Relevant policy provisions (insuring agreement, exclusions, conditions)
• Chronological claim correspondence file
• Proof of loss documentation
• Damage / liability documentation (estimates, reports, records)
• Independent expert report(s) (if applicable)
• Evidence of consequential damages (financial records, receipts)
• Evidence of emotional distress (medical records if available)
• Photographs and/or videos

CC:

• [________________________________] (Client)
• Rhode Island DBR, Insurance Division (if regulatory complaint filed concurrently)

RHODE ISLAND BAD FAITH INSURANCE LAW QUICK REFERENCE

SOURCES AND REFERENCES

• R.I. Gen. Laws § 9-1-33 (Bad faith refusal to pay): https://law.justia.com/codes/rhode-island/title-9/chapter-9-1/section-9-1-33/
• R.I. Gen. Laws § 27-9.1-4 (Unfair Claims Settlement Practices): https://law.justia.com/codes/rhode-island/title-27/chapter-27-9-1/section-27-9-1-4/
• R.I. Gen. Laws § 9-20-4 (Pure comparative negligence): https://law.justia.com/codes/rhode-island/2022/title-9/chapter-9-20/section-9-20-4/
• 230-RICR-20-40-2 (Unfair P/C Claims Settlement Practices): https://rules.sos.ri.gov/regulations/part/230-20-40-2
• Bibeault v. Hanover Ins. Co., 417 A.2d 313 (R.I. 1980) (first-party bad faith; elements)
• Skaling v. Aetna Ins. Co., 799 A.2d 997 (R.I. 2002) (punitive damages as matter of right; objective standard; settlement obligation)
• Asermely v. Allstate Ins. Co., 728 A.2d 461 (R.I. 1999) (duty to settle within policy limits)
• Bartlett v. John Hancock Mut. Life Ins. Co., 538 A.2d 997 (R.I. 1988) (bad faith in life insurance context)
• Employers Fire Ins. Co. v. Beals, 240 A.2d 397 (R.I. 1968) (conflict of interest; independent counsel)
• Chartwell Law — Rhode Island Bad Faith Summary: https://www.chartwelllaw.com/bad-faith-claims-map/rhode-island
• R. Connor Law — Rhode Island Coverage: http://www.rconnorlaw.com/coverage/rhode-island/
• RI DBR Insurance Division: https://dbr.ri.gov/insurance-overview
• United Policyholders — RI Insurance Consumer Rights: https://uphelp.org/claim-guidance-publications/insurance-consumer-rights-in-the-state-of-rhode-island-2022/