For insurers, liability for bad faith failure to pay a claim hangs like a sword of Damocles. If a jury finds bad faith, the potential damages have no fixed upper limit. That’s one reason insurers have been happier to settle such claims rather than risk a high verdict or set a bad legal precedent for themselves, notes Robert I. Reardon Jr., a prominent New London, Conn., lawyer who has lectured on bad faith for the past 25 years.

The prospect of producing plaintiff-friendly case law may not be a big worry in the case of Nancy Hernandez v. Allstate Insurance Co., however, because the insurance company makes a vivid case it was “set up” for the bad faith claim by the plaintiffs lawyer’s tactics and timing.

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