Most insurance companies conduct business in multiple states (and sometimes countries). As a result, most keep track of the general do's and don'ts of insurance law. However, over the years, I have noticed a few unique aspects of Arizona insurance law — aimed at protecting the insured — that sometimes take insurance companies by surprise.
Here are my top five principles of Arizona law that may assist an insured individual in navigating the insurance claims process:
- Continued obligation to pay defense costs - Most liability insurance policies state that the company's obligation to defend a lawsuit against its insured ends when the company pays its policy limits. The potential impact of this kind of provision allows the insurance company to pay all the policy limits to settle only a portion of a lawsuit and then leave the insured to defend himself against the rest of the claims or claimants. However, in Arizona, an insurance company must continue to pay defense costs until it obtains either a release of its insured individual's personal liability or a satisfaction of judgment on behalf of its insured.
- Consequence of failure to offer uninsured and underinsured motorist coverage — By Arizona statute, when an insurance company offers automobile liability coverage to its insured, it must also offer uninsured and underinsured motorist coverage at the same limits. These coverages provide compensation to an insured if he is injured in an accident by another driver who does not have any insurance or whose insurance is insufficient to cover the insured person's damages. What many insurance companies don't realize is that, if the company fails to offer these coverages, then it may have to pay the full amount of liability coverage to its insured in the event that the insured is injured in an uninsured or underinsured auto accident.
- Insurability of punitive damages — In a lawsuit, most damages are compensatory, meaning they are intended to compensate the plaintiff for damages he sustained. However, there are times when additional damages are available to a plaintiff —called punitive damages — which are intended to punish a defendant for extreme wrongdoing. In many states, if punitive damages are assessed against a defendant, then that defendant's insurance company is not required to pay those damages. However, in Arizona, unless the insurance policy expressly excludes coverage for punitive damages, the insurance company may have to pay the additional damages on behalf of its insured.
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