Bad Faith Archives - The Insurance & Reinsurance Report

December 4, 2019 Bad Faith and Extra-Contractual Liability

Venue Matters: Evaluating the Applicable Standard for Bad Faith Claims in New York

The insurance market has a strong interest in minimizing extra-contractual claims against it. These issues are often decided summarily at the pre-answer motion to dismiss stage or after discovery on summary judgment. Notably, however, since 2018, New York courts have articulated varying standards in evaluating a policyholder’s claim for breach of the implied covenant of good faith seeking consequential damages against its insurer in the context of these motions.

Insurers have traditionally defended themselves against these extra-contractual claims by advancing two main arguments:

They are

November 13, 2019 General / Uncategorized

Consent Judgments are not Excess Judgments: The Eleventh Circuit Emphasizes the Excess Judgment Rule in Context of Bad Faith

As a general rule, Florida law imposes a duty of good faith on insurers to defend claims against insureds and to settle those claims where a reasonably prudent person, faced with the prospect of paying the total recovery, would do so. An insured may, rightly or wrongly, claim an insurer’s conduct in handling a claim falls short of that standard of care. But a claim for bad faith will not accrue until the alleged claims handling results in liability that exceeds the limits of the …

October 11, 2019 General / Uncategorized

Washington State Supreme Court Holds That Insurance Adjusters Cannot Be Liable for Bad Faith

In a highly anticipated decision, the Supreme Court of Washington closed the door on statutory bad faith claims against insurer-employed adjusters. The case is Moun Keodalah and Aung Keodala v. Allstate Insurance Company, Tracey Smith., and John Doe Smith, — P.3d – (2019, 2019 WL 4877438 (Wash. Oct. 3, 2019).

The case arose out of a 2007 accident, when an uninsured motorcyclist struck the plaintiff’s truck, killing the motorcyclist and injuring the plaintiff. The police investigated the collision and determined the motorcyclist had …

September 18, 2019 Uncategorized

Insurer Entitled to Reimbursement for Defense Costs Prohibited by Statute

In October 2017, the California Attorney General (AG) filed a complaint against Adir, doing business as department store chain Curacao, and its CEO under the state’s Unfair Competition Law (UCL) and False Advertising Law (FAL).[1]

Adir presented a claim based on the AG’s action under a directors and officers liability policy issued by Starr Indemnity and Liability Company. Starr initially denied coverage, but after receiving a letter from Adir, Starr agreed to provide a defense, subject to a reservation of rights. Starr later received …

May 21, 2019 Bad Faith and Extra-Contractual Liability

Absent Policyholder Demand To Settle, Seventh Circuit Affirms Dismissal of Bad Faith Action Against Insurer After Unexpected Excess Judgment

The Seventh Circuit, applying Illinois law, recently tackled the highly-charged issue of a bad faith claim against an insurer for failing to settle for the policy limit. In Surgery Center at 900 North Michigan Avenue, LLC v. American Physicians Assurance Corp., Inc., the Seventh Circuit closely scrutinized the facts and affirmed the trial court’s decision that the insurer did not act in bad faith.

The coverage dispute arose between the Surgery Center at 900 North Michigan Avenue, LLC (Surgery Center) and its insurer when …

January 8, 2019 Bad Faith and Extra-Contractual Liability

Dismiss or Abate? The Eleventh Circuit Dismisses Bad Faith Allegations in Breach of Insurance Contract Actions

The longstanding debate in Florida’s state courts as to whether bad faith allegations can remain in a pending breach of insurance contract case, or whether they must be dismissed pending the outcome of the coverage dispute, has now reached the federal courts.

In Aligned Bayshore Holdings, LLC v. Westchester Surplus Lines Ins. Co., 2018 WL 6448632, Case No. 18-21692-Civ-Scola (S.D. Fla. Dec. 10, 2018), the insured sustained losses due to Hurricane Irma and submitted a claim to its insurer, which did not promptly pay …

June 29, 2018 Bad Faith and Extra-Contractual Liability

New York Appellate Division Split on Claim Preclusion of Bad Faith Action

By decision dated June 8, 2018, the New York State Supreme Court, Appellate Division, Fourth Department, affirmed the trial court’s denial of an insurer’s motion to dismiss bad faith claims based on res judicata, in defiance of prior precedent from a separate Department of the Appellate Division.

Corle v. Allstate Ins. Co., N.Y.S.3d , 2018 WL 2751204 (4th Dept. 2018) arises out of an incident in which the plaintiff, Colin Corle (Corle) was shot by Jeoffrey lee Bauter Teeter (Teeter). Teeter’s homeowners’ insurer …

September 12, 2016 Bad Faith and Extra-Contractual Liability

Bad Faith Without Dishonest Motive, Self-Interest, or Ill-Will? Pennsylvania Supreme Court to Decide

The Pennsylvania Supreme Court has agreed to review an appellate court decision in Rancosky v. Washington National Insurance Company, a case dealing with whether a showing of “dishonest motive” or “ill-will” is necessary to prove that an insurance company acted in bad faith. The Pennsylvania Supreme Court’s forthcoming decision will be its first word on the definition of “bad faith” as used in the Pennsylvania bad faith statute.

In Rancosky, a husband and wife, both cancer patients, filed a lawsuit against Washington National …

July 1, 2015 Uncategorized

Bad Faith Decision Vacated as Insurer Not Responsible for Punitive Damages Where Insurance for Punitive Damages is Prohibited

In Jared Wolfe v. Allstate Property & Casualty Insurance Company, the insurer brought an appeal to the Third Circuit seeking to vacate a jury award against it for bad faith and breach of contract asserted by a plaintiff who was injured in a motor vehicle accident caused by the policyholder of the insurer. The Third Circuit agreed with the insurer and vacated the award, finding that the lower court made a mistake in allowing the plaintiff to introduce evidence of a punitive damages award …

May 28, 2015 Emerging Issues

Insurers’ Duty of Good Faith Continues After the Filing of a Lawsuit

In Am. Nat’l Prop. & Cas. Co. v. Stutte, 2015 U.S. Dist. LEXIS 55280 (E.D. Tenn. Apr. 28, 2015), a federal court in Tennessee recently ruled that a finding of bad faith can be based on decisions made by the insurer after a declaratory action has been filed.

The claim at issue in this litigation related to the loss of the insured’s home in a fire. The insured made a claim on their policy and the subsequent investigation into the circumstances of the fire …