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Lawsuit dismissed after credit union and insurer settle

Businesses and individuals in San Antonio rely heavily on their insurers to offer them coverage when unanticipated problems arise. That coverage is not in place to allow them to profit in any way, but to rather recover from whatever financial losses they sustain. While most people understand that insurance companies do not stay in business by paying out on every claim that crosses their collective desks, the expectation is still there that, absent any questionable circumstances, such providers will honor the stipulations of their contracts. When that does not happen, subscribers may be justified in alleging that their insurers are operating in bad faith. 

Such is the claim being made by a credit union in Alabama after its insurer failed to offer fidelity bond coverage as promised. The credit union lost over $7 million in bad loans made to a local businessman who has since been indicted and pled guilty to several fraud charges. Its current leadership claims those losses were due to poor lending practices allowed by its previous management team. The coverage it had secured through the insurance company was for compensation for losses due to the fraudulent actions of employees. However, its initial claims were denied, prompting the credit union to sue the insurer for bad faith refusal to pay and breach of contract. The sides recently reached a settlement, ending the suit. 

In this particular case, the credit union was motivated to seek compensation on behalf of its members (whose money funds the credit union). This demonstrates the down-the-line impact that claim refusals can have. Those who believe that their denials were based on bad faith may want to secure the services of an attorney to initiate action. 

Source: Tuscaloosa News "Alabama One Credit Union, insurers reach settlement" Taylor, Stephanie, Jan 11, 2018

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