Lowballed by Claims Software? A Dayton Court Says That Can Be Insurance Bad Faith (Crawford v. American Family)

Published December 3, 2024 · Ohio Appeals Courts

Insurance companies rarely value an injury claim by having an experienced person sit down and think about what happened to you. They use software. An adjuster types in your diagnosis, your treatment dates and your bills, and the program produces a range. If the information going in is wrong, the number coming out will be wrong too, and almost always in the insurer's favor.

On November 8, 2024, the Second District Court of Appeals in Dayton held that an adjuster's flawed inputs and one-sided calculations can be evidence of bad faith, and that a jury, not a judge, should decide whether the insurer owes punitive damages. The decision is Crawford v. Am. Family Ins. Co., 2024-Ohio-5345.

A modest crash, a long fight

Leslie Crawford was hurt in an August 2018 crash with a driver she alleged was uninsured. She had uninsured motorist coverage with her own insurer, American Family, with a $25,000 limit, plus $10,000 in medical payments (MedPay) coverage. When she and the company could not agree on her uninsured motorist claim, she sued in Montgomery County for the benefits and for bad faith.

The contract claim for benefits settled in 2022. The bad-faith claim did not. The trial court twice granted summary judgment to the insurer, ending the case without a trial, and twice the Second District reversed. In 2023, the court held that Ms. Crawford did not necessarily need a hired expert to prove bad faith, as I explained in our May 2023 post on the first Crawford decision. On remand, the trial court again ruled for the insurer, finding the case was simply a disagreement over value. Ms. Crawford appealed again.

What the adjuster did

The unanimous opinion, written by Judge Welbaum, walks through the claim file. Several facts stood out to the court:

Wrong numbers in the software. The adjuster set the claim's value using the company's injury reserve software. He entered "possible 16 to 18 weeks" of soft-tissue injury. But by his own testimony, Ms. Crawford's treatment ran from August 10, 2018, to February 26, 2019, more than 28 weeks. He could not recall why he used the lower figure. As the court put it, a shorter treatment period "would result in a lower reserve and calculation of damages."

Two different values for the same bill. The company's MedPay adjuster used American Family's medical-bill review software to value an emergency room bill at about $4,239 and paid it from the MedPay coverage. The uninsured motorist adjuster then valued the same bill at only $1,172, the lowest available figure, while taking credit against the UM claim for the full MedPay payment. Asked why he chose the lower number, he testified that he did it "because I was allowed to use it."

An evaluation that never moved. Ms. Crawford pointed to evidence that the adjuster waited about nine months to take her statement and did not change his evaluation afterward. The court added that her lawyer explained in detail, in a December 2019 letter, why the adjuster's method was inappropriate, and that the adjuster "ignored this."

The court's holding

Under Ohio law, an insurer breaches its duty of good faith when it refuses to pay a claim and the refusal is not based on circumstances that furnish reasonable justification. That standard comes from Zoppo v. Homestead Ins. Co., 71 Ohio St.3d 552 (1994), and it does not require proof that the insurer intended to cheat anyone.

The insurer argued that the dispute was "fairly debatable," just a difference of opinion about value. The Second District disagreed. It held that a rational juror could find there was no reasonable justification and a lack of good faith in parts of the claim handling. The policy allowed the insurer to offset MedPay payments, the court said, but it said nothing about disregarding the company's own software valuation, using the lowest possible number, and then offsetting the higher amount. The court described the adjuster's explanation as lacking "any sound reasoning" and called it arbitrary. On the treatment-length input, the court wrote that this "is not a disagreement over the value of the claim; it is an issue with the method of calculation used."

The court also pointed out why a small dollar difference does not excuse the practice. The adjuster had roughly 137 open injury claims. If the same approach were used across all of them, the underpayments would add up quickly, and in a case with larger coverage the discrepancy "could be quite large."

Punitive damages go to the jury too

Punitive damages against an insurer require actual malice, fraud or insult. Actual malice includes a conscious disregard for a person's rights that has a great probability of causing substantial harm, and it can be inferred from conduct. The court held that the adjuster did not need to have an "evil mind," and that whether his conduct showed conscious disregard for Ms. Crawford's rights is a question for trial, not summary judgment.

The case now returns to the Montgomery County Common Pleas Court. How it will be resolved is not yet known.

Why this matters to you

Most people never think of their own insurance company as an adversary until they file an uninsured or underinsured motorist claim. At that point, your insurer is standing in the shoes of the driver who hurt you, and it has every financial incentive to pay as little as possible. But it also owes you a duty of good faith that the other driver's insurer does not.

Crawford shows what that duty means in practice:

• The inputs matter. If your adjuster's valuation is based on the wrong treatment dates, the wrong diagnosis, or an incomplete set of records, that is not a mere difference of opinion.
• Inconsistency matters. An insurer that values the same medical bill one way when it pays and another way when it credits itself is open to a bad-faith claim.
• The claims file is evidence. In 2023, the Ohio Supreme Court reaffirmed that bad faith is a tort and that insureds can reach the claims file, as I discussed in our December 2023 post. Files like Ms. Crawford's are where these problems are found.

Our guide chapters on dealing with insurance adjusters and using your own insurance explain how MedPay and UM/UIM claims work, and our uninsured and underinsured motorist claims page explains how we handle disputes with your own carrier.

What this means for you

If your own insurer's offer on a UM or UIM claim seems disconnected from your actual treatment, ask how it was calculated, keep every letter and email, and do not accept the number as final. Write down your treatment dates and keep your medical bills organized so mistakes can be spotted. And talk to a lawyer before you sign a release, because a release may give up the bad-faith claim along with the benefits claim.