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Nevada AG accuses AIG-subsidiary of bad faith, breach of contract

While we envision lawsuits alleging bad faith on the part of an insurance company as typically being filed by aggrieved individual or corporate policyholders, it's important to understand that they can be pursued on a much larger scale.

By way of example, consider recent events in the state of Nevada, where Attorney General Adam Laxalt announced last week that his office was filing a potentially multi-million dollar lawsuit against an insurer over its refusal to indemnify the state against losses sustained in a controversial class action lawsuit.

The class action lawsuit in question was filed back in 2013 by the County and City of San Francisco, and essentially accused Nevada of busing roughly two dozen psychiatric patients recently discharged from a Las Vegas area hospital to the Bay Area despite them having no support system there.

While the plaintiffs sought to secure $500,000 to cover the costs of caring for these psychiatric patients, they ultimately settled last year for $400,000 with Nevada admitting to no wrongdoing.

According to the complaint filed by the Nevada Attorney General's Office, The Insurance Company of the State of Pennsylvania, a subsidiary of insurance giant AIG, refused to defend or reimburse the state despite prior promises to do exactly that, and the fact that the state made timely premium payments totaling over $5.4 million for 13 years and never once submitted a claim.    

Indeed, the lawsuit, which alleges both bad faith and breach of contract, accuses the AIG subsidiary of wrongly invoking a policy exemption.  

"People know that some insurance companies do everything they can to avoid paying valid claims," said the Nevada AG Laxalt. "After years of receiving millions of dollars in policy premiums, AIG refuses to uphold its end of the bargain. Today, my Office brings this bad faith lawsuit not only on behalf of the State of Nevada, but also for every Nevadan who has ever been stiffed by an insurance company."

The lawsuit is not only seeking reimbursement for legal costs, but also punitive damages and attorney's fees.

Stay tuned for updates on this fascinating case …

If your insurer is failing to live up to its obligations as set forth in the terms of your policy, please consider speaking with an experienced legal professional to learn more about your options. 

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