Extracontractual and Bad Faith Claims Litigation Committee

Mission Statement
The mission of the Extracontractual and Bad Faith Claims Litigation Committee is to provide the highest level of continuing education specific to the practice area, and promote professionalism and fellowship among both policyholder and insurer attorneys. 

2021-2022 Co-Chairs
Robert Allen
Kathy Maus


Selected Presentations & Papers:

Posted 1/19/2022

New Jersey Enacts a Bad Faith Statute for UM/UIM Claims

New Jersey has enacted an insurance bad faith statute that will penalize insurers for certain types of conduct in handling claims for uninsured and underinsured motorist coverage as the result of auto accidents. The new law allows prevailing insureds to recover extra-contractual damages, up to three times the policy limit, as well as attorney’s fees. Read more.


Posted 1/7/2022

Florida Court of Appeals (2-1) Reverses Bad Faith Summary Judgement for Insurer in a Hurricane Claim

On a set of undisputed facts, including the insurer immediately paying an appraisal award less than the amount the insured was claiming in coverage, the majority held that: "[t]ypically, the question of whether an insurer acted in good faith toward its insured in resolving a claim is an issue of fact for the jury … . Given the different inferences that each party argues must be drawn from the facts at hand, this case is no exception." Read More.


Posted 1/5/2022

Fourth Circuit Holds No Bad Faith For An Excess Carrier Denial Of Coverage Because The Insured Was Dissolved And Faced No Liability

Applying South Carolina law in a construction defect coverage case, the Fourth Circuit characterized the insured’s alleged damages alleged as a loss without injury because the insured would never be liable for the damages since its dissolution, and as such, the summary judgment to the insurer was proper. Read More


Posted 1/5/2022

Oklahoma Federal Court Rules That Plaintiff's Time Sensitive Demand Was Faulty Because It Did Not Allow the Insurer Adequate Time To  Conduct Its Investigation

The district court concluded that the insurer’s action did not equate to bad faith because the claimant’s offer deadline precluded a full investigation of the multiple claims against its insured. Therefore, the court held that the insurer’s actions were not tortious under Oklahoma law in that the insurer conducted a diligent investigation, earnest negotiation and competent defense of its insured in an attempt to avoid excess liability. Read More

Posted 1/3/2022

Texas Court of Appeals Allows a UIM Bad Faith Lawsuit to Proceed Even Though Insurer Timely Paid UIM Benefits After a UIM Trial

Here, the Austin Court of Appeals, relying on the original Arnold case, held that Allstate was not immune from a bad faith case even though it paid out its limits immediately after losing the UIM case. Also, the court ruled that the insured's mental anguish can constitute an independent injury. The opinion, however, specifically recognizes an insurer's bona fide dispute defense.

Allstate has filed a motion for rehearing. This is a case to watch because the result creates a conflict amongst different Texas Court of Appeals, which makes it more likely that the Texas Supreme Court will involve itself with the case.

Posted 12/28/21
West Virginia Supreme Court Holds that Personal Liability is Necessary for an Insured to Prove Extracontractual Damages 

An insured doctor sued his insurer who had previously settled a claim against him within his policy limits. The doctor, however, sought extracontractual damages for the insurer’s claims handling and its failure to settle the case sooner because the doctor had to report the claim to a national data bank, he endured bad publicity and a missed a lucrative employment opportunity, which he claimed could have been avoided if the insurer handled the claim differently. 

The West Virginia Supreme Court held that the insurer’s motion for summary judgment should have been granted. First, the insured was not exposed to any personal liability; so he could not show any damages for common law bad faith. As it relates to his statutory bad faith claim, the West Virginia Supreme Court held that the insured lacked standing because the purpose of the subject bad faith statutes is to protect claimants suing insureds and not insureds suing their own insurer. Read more.

 

Posted 12/22/21
Texas Federal Magistrate Judge Grants $500 an Hour for Attorneys Fees to Prevailing Plaintiff's Attorney in a Garden Variety Property Damage Bad Faith Case

Relying on her own expertise on attorneys fees and expert testimony regarding the plaintiff’s attorneys fees from another case, the Magistrate Judge finds $500 an hour (and $450 an hour for another attorney) reasonable and recommends awarding $115,000 in fees on a $17,000 claim. Read more.

Posted 12/1/21
Texas Supreme Court Hears Oral Argument on Insurers Duty to Policyholders in the Investigation of a Loss

The Texas Supreme Court is analyzing whether an insurer acted negligently when instructing a policyholder to have her husband take pictures of damage to a vehicle without specifying that he should first make sure the scene was safe, after which the man was fatally hit by another vehicle. Read more.  The oral argument can be accessed on the Texas Supreme Court’s YouTube page.


Posted 11/30/21
Third Circuit Affirms District Court’s Finding That Insurer's Denial of Benefits Was Arbitrary and Capricious

An insurance company must pay benefits for a disabled claimant because its decision to twice bring in outside consultants, who said he could go back to work, was motivated by a conflict of interest and deviated from the insurer's usual claim-review process, a Third Circuit panel ruled. The court affirmed the district court’s finding that the insurer had competing interests in funding both long-term disability and life insurance benefits and determining the claimant’s eligibility for those benefits and that the insurer’s denial of coverage improperly contradicted its own staff's conclusion that the claimant's health conditions kept him from working.

Read more 

Posted 11/16/21
Insurer Sued for Bad Faith Application of a Social Engineering Sublimit on a Cybercrime Fraud Case in Minnesota Federal Court

The insurer contends that coverage is limited to the policy’s social engineering coverage with a lower sublimit than the computer fraud coverage. The insurer contends that because a company employee voluntarily changed banking information for the wire transfer, and that the company did not incur the loss via their own allegedly fraudulent emails on their own, the alleged fraud only amounts to social engineering fraud, which does not include computer fraud.

The insured claims that fraudulent emails that trigger a chain of events leading to the fraudulent transfer of funds is enough to constitute the use of a computer system to fraudulently cause a transfer of money and thus invoke the computer fraud coverage with a larger limit.  "The plain language of the Policy does not include an express provision that says 'Social Engineering does not include Computer Fraud.'"

Read more


Posted 11/10/21
Insurer loses motion to dismiss coverage and bad faith claims arising from furniture store's damages sustained by civil unrest.

This is one of many cases by businesses seeking insurance to cover losses sustained during protests across the country over the past few years. The insurer argued that the claim is not covered, for among other things, the insured’s failure to cooperate because it did not provide an inventory or submit to an examination under oath. The Illinois federal court, however, held that the insured adequately alleged that it suffered a loss covered by its insurance policy, that it made a claim and satisfied all conditions precedent and that the insurer wrongfully failed to pay the claim. The court further held that the insured’s complaint "adequately describes the actions and inaction by defendant claimed to form the basis for a claim for vexatious conduct," the judge said. Read more here.


Posted 10/27/21
Nevada Federal Court Throws Out Bad Faith Claims in Underinsurance Motorist Coverage Case

A Nevada federal court holds that it wasn't enough for the insured to allege the insurer had the necessary information to evaluate the insured's claim but didn't pay. There needs to be allegations that the insurer denied the claim "without any reasonable basis and with knowing and reckless disregard of any reasonable basis." Given the competing evaluations on the medical costs, the court held that there weren't any allegations to suggest the claim's denial was unreasonable because a disagreement isn't grounds for a bad faith claim. Read more 


Posted 10/18/21
New Mexico Med Center's COVID-19 Bad Faith Claim Against Insurer Can Proceed

An eye surgery center sufficiently argued that a CNA Financial Corp. unit acted in bad faith in refusing to cover losses caused by the COVID-19 pandemic, a New Mexico federal judge said, but she found the policyholder's other allegations need refining.

U.S. District Judge Kea W. Riggs ruled that the bad faith claim brought by Albuquerque Ambulatory Eye Surgery Center, or AAESC, could proceed even though it is unclear if its alleged losses are covered under a policy issued by CNA unit Transportation Insurance Co.

The eye center said the insurer acted in bad faith when denying its claim for losses without visiting the property or viewing publicly available information. The CNA unit also refused AAESC's request for reconsideration before taking the time to review additional documents it requested, the policyholder claimed. Read more here


Posted 10/4/21
11th Circuit Applying Florida Law Holds No Bad-Faith after the Insured Hit with a $5 million Judgment in a Car-Wreck Case

The 11th Circuit affirmed the Middle District of Florida Court’s ruling that insurer’s conduct in drafting a hold harmless agreement did not "rise to the level of bad faith," but the panel did suggest the insurer "might improve" its processing of claims.” "When viewed as a whole ... it is difficult to see how [the adjuster] put [the insurer's] interest before the insured's, [however], … "[t]hese facts at worst show ways in which [the insurer] might improve processing claims," but "its conduct falls short of demonstrating bad faith." Read more here.


Posted 9/16/21 
The Texas Supreme Court Hears Oral Argument on Two 8-Corner/Extrinsic Evidence Cases

On September 14, 2021, the Texas Supreme Court heard arguments in Texas Political Subdivisions Prop./Cas. Self-Insurance Fund v. Pharr-San Juan-Alamo ISD, 2019 WL 4678433 (Tex. App.—Corpus Christi-Edinburgh 2019, pet. granted) and Bitco Gen. Ins. Co. v. Monroe Guar. Ins. Co., 846 Fed. Appx. 248 (5th Cir 2021, certified questions accepted) in which the Texas Supreme Court is being asked to permit the use of extrinsic evidence to defeat a duty to defend.

They are the first two arguments on the Texas Supreme Court’s YouTube page for September 14, 2021. The . Pharr-San Juan-Alamo ISD oral argument is from 05:00 – 050:00 and the Bitco oral argument is from 1:02:00 to 1:44:00. The Texas Supreme Court’s YouTube page for September 14, 2021 can be accessed here: Supreme Court of Texas - Oral Arguments 09.14.21 - YouTube


Posted 9/16/21
What 5th Circuit Ruling Means for Insurer’s Post-Appraisal Award Liability

The Fifth Circuit's recent decision in Randel v. Travelers, holding that an insurer's timely reappraisal payment did not extinguish its liability to its insured, highlights the importance of thoroughness and accuracy in initial loss inspections, says ​​​​​​​Karl Schulz at Cozen O'Connor.


Posted 7/28/21
New Missouri Law Safeguards Insurers from Excessive Arbitration Awards and Findings

Legislation provides clarity on the rights of claimants, tortfeasors and tortfeasor’s insurers. 

Reprinted with permission from the July 22, 2021, online edition of PropertyCasualty360.com © 2021 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-256-2472 or [email protected].


Posted 7/22/2021
New York Federal Court Holds No Bad-Faith for Denial of Coverage to a Manager in a D&O Case

Although the court found that the Manager was an insured under the D&O policy, the court ruled that the standard for a finding of bad faith under New York law was far higher than a simple breach of contract. The court also found that the Manager failed to show that the insurer exhibited "a gross disregard" for its policy obligations by initially denying him coverage. The court held that an insurer's refusal to defend must be based on more than a difference of opinion for a bad faith finding. Nationwide Unit Beats Bad-Faith Claim In D&O Coverage Fight - Law360


Posted 6/23/2021
No Bad Faith By Insurer In Crash Dispute, 4th Circuit Rules

The Fourth Circuit, applying North Carolina law, held that an insurer did not act in bad faith when it twice rejected settlement demands from two North Carolina residents seriously injured in an auto collision because insurer ultimately paid the policy limit.

The panel said the insurer was within its rights when it rejected the first settlement offer for imposing an unreasonable deadline and when it rejected the second offer for its requirement that it enter into litigation over bad-faith allegations. Read more at No Bad Faith By Insurer In Crash Dispute, 4th Circ. Rules - Law360.


Posted 6/14/2021
Attorney Client Privilege in First Party Litigation  
By William T. Barker

Excerpted from William T. Barker & Ronald D. Kent, New Appleman Insurance Law Bad Faith Litigation, Second Edition, ch. 16, with permission. Copyright 2021. Matthew Bender & Company, Inc., a LexisNexis company. All rights reserved.


Posted 6/3/2021
11th Circ. Hands Progressive A Win In Fla. Bad-Faith Dispute
The Eleventh Circuit held that Progressive did not act in bad faith when it failed to settle a claim with a driver who was injured in a deadly collision in Florida. Here, the Eleventh Circuit panel found that the insurer took care to meet the demands of the driver's settlement offer. Read more at: 11th Circ. Hands Progressive A Win In Fla. Bad-Faith Dispute - Law360


Posted 5/14/2021 
NY Bad Faith Bill Would Tip The Scales Against Insurers
By ACCC Fellow Dan Kohane, Lee Siegel and Diane Bucci: NY Bad Faith Bill Would Tip The Scales Against Insurers - Law360


Posted 4/27/2021
7th Circ. Reverses Insurer's $2.8M Loss For Declining TM Defense
The Seventh Circuit reversed a lower court's $2.8 million award to a marker company after a judge determined that its insurer acted vexatiously in declining to cover its defense in a trademark dispute, with the panel finding that the marker company can't pursue damages beyond its insurance contract holding that Section 155 of the Illinois Insurance Code does not apply. (Section 155 allows an insured to pursue its insurer for extracontractual damages if there's an open question about an insurer's liability, the amount owed under a policy or whether a claim settlement had been unreasonably delayed.) Read more at: https://www.law360.com/insurance/articles/1378955/7th-circ-nixes-insurer-s-2-8m-loss-for-declining-tm-defense?copied=1


Posted 4/22/2021
Recent Bad Faith Cases Regarding Reasonableness of Medical Treatment
In two recent cases, the courts showed substantial deference to patients’ treating physicians in determining the reasonableness of medical treatment. This deference appears to reflect a reluctance of courts to decide what healthcare is appropriate for a patient.


Posted 4/20/2021
Georgia Supreme Court Upholds $2.7 Million Award Against Insurer for Failure to Settle: Ga. Justices Say Geico Liable For $2.7M For Failure To Settle - Law360


Posted 4/13/2021
Insurer Hit with $1.9 Million (including $1 Million Punitive Damages) for Failure to Settle
On a $1 million policy, the case against the insured went to trial and resulted in damages of $765,000 in actual damages and $765,000 in excluded punitive damages. When the insurer refused to pay any of the punitive damages, the insured sued for bad faith. As noted on February 22, 2021, the court ruled that the punitive damages were not covered, however, the court allowed the insured’s bad faith failure to settle case to proceed. The jury in the bad faith case, found bad faith on the insurer. Jury Awards $1.9M In Construction Insurance Coverage Suit - Law360


Posted 4/13/2021
 
Insurer Seeks Interlocutory Appeal to the 7th Circ. To Review Punitive Damages Recovery in Bad Faith Case over the Defense of the Insured
Days after an Illinois federal judge held that United Fire & Casualty Insurance Co. must go to trial over claims it defended a builder in bad faith, the insurer asked the Seventh Circuit to weigh in on whether punitive damages in an underlying suit can be recovered in a breach of fiduciary duty suit against it. https://www.law360.com/appellate/articles/1357029


Posted 3/15/2021
Use and Abuse of Claims Experts in Bad Faith Litigation
ACCC Fellow and Board Officer Mike Huddleston’s recent article in ABA TIPS “The Brief” Winter 2021


Posted 3/10/2021
11th Circ. Won't Revive Rental Co.'s $5M Failure-To-Settle Suit
The Eleventh Circuit refused to resurrect a defunct party rental company's negligence suit against Atlantic Specialty Insurance Co. for not settling a man's suit over brain injuries from playing "bubble soccer" at a Georgia high school within the policy limits before a $5 million verdict was reached. https://www.law360.com/appellate/articles/1362905


Posted 3/10/2021
Farmers Insurance Beats $9.9M Bad Faith Verdict On Appeal
A California appeals court in a published decision Monday overturned a $9.9 million bad faith verdict against Farmers Insurance Exchange over the insurer's failure to settle a car crash claim, ruling that bad faith claims need to demonstrate a finding that an insurer acted unreasonably. https://www.law360.com/appellate/articles/1362768


Posted 3/9/2021
Fifth Circuit Revises Stowers Opinion; but the Result Stays the Same
On December 21, 2020, the Fifth Circuit issued its long-awaited opinion in American Guarantee & Liability Co. v ACE American Ins. Co. in which it analyzed whether three separate settlement demands, made shortly before and during a trial, satisfied the Texas Stowers doctrine. On March 4, 2021, the Fifth Circuit withdrew its initial December 21, 2020 opinion and issued a new opinion, which reached the same result, but clarified its reasoning in connection with one of the arguments made by the primary insurer.


Posted 2/26/2021
Upcoming Oral Argument of Note: Texas Supreme Court to Rule on whether a Claims Handler can be Deposed in an Uninsured/Underinsured Motorist Coverage Cases prior to the Legal Determination of the Tortfeasor’s Liability
On March 24, 2021, the Texas Supreme Court will hear oral arguments in the fourth UM/UIM case of the term (the first three have been argued; but not yet decided) in In Re USAA General Indemnity Co.

The principal issues are: (1) whether the trial court abused its discretion by compelling deposition of USAA corporate representatives before the injured driver got a judicial determination of preconditions establishing the insurer’s liability and, if not, (2) whether the requested deposition topics are overly broad.

Briefs
Court of appeals opinion

The oral argument will be simulcasted on the Texas Supreme Court’s Youtube page: Supreme Court of Texas - YouTube.


Posted 2/23/2021 
Insurer Sued for Fraud for Repeatedly Using the Same Allegedly Unqualified Experts Seeks Dismissal
Allstate Fire and Casualty Insurance Co. says a Texas personal injury law firm has no evidence to back up its proposed fraud and conspiracy class action that claims Allstate "knowingly" made false representations about three allegedly unqualified expert witnesses the insurer routinely uses. https://www.law360.com/insurance/articles/1357415


Posted 2/19/2021
Upon Certified Question, Arizona Supreme Court Holds that Insurer’s Alleged Unreasonably Withheld Consent for a Settlement Must be Analyzed from Insurer's Perspective
Arizona's high court gave the Ninth Circuit a roadmap Wednesday to decide whether an AIG insurer was justified in refusing to fund the University of Phoenix's settlement for over $13 million in a proposed securities class action, saying the appeals court must evaluate whether the refusal was reasonable from the insurer's perspective. https://www.law360.com/appellate/articles/1356007


Posted 2/19/2021
No Coverage; but Insurer Must Defend Bad Faith Claims over Defense At Trial

An Illinois federal judge has partly cleared United Fire & Casualty Insurance Co. from covering $1.7 million in trial losses a construction company incurred over a drainage project, but said it must go to trial to contest claims it defended the builder in bad faith. https://www.law360.com/appellate/articles/1355453


Posted 2/17/2021
Kroger Insurer's Trial Gamble Blamed For 'Runaway' Verdict

An insurance company forced to settle a personal injury suit against The Kroger Co. after a $61.4 million verdict has sued an excess insurance carrier in Georgia state court, seeking a declaration that it negligently failed to settle the case within its policy limits and instead gambled on a trial that led to a "runaway jury verdict." https://www.law360.com/foodbeverage/articles/1355409


Posted 2/16/2021

11th Circ. Doubts Fla. Law Firm's Right To $1M Damages
From Law360: Eleventh Circuit judges cast doubt Friday on the ability of a Florida law firm and two of its shareholders to recover more than $1 million in extra-contractual damages from their insurer over its refusal to defend them in a $14 million suit regarding a loan transaction.


Posted 2/6/2021
A Question of Timing: Policy-Limit Demands and Insurer Bad Faith in Florida
February 5, 2021 From The Segal McCambridge Insurance Coverage and Bad Faith Practice Group, co-chaired by Douglas McIntosh.


Posted 1/7/2021
Texas Supreme Court to Decide Whether a Declaratory Judgment Action is the Proper Way to Assert an Underinsured Motorist Claim
Bob Allen, The Allen Law Group, [email protected]

Also see Law360 Article: Allstate Asks Texas Justices To Ax Fee Award In Crash Suit

Ever since the landmark Texas Supreme Court decision in Brainard v. Trinity Universal Ins. Co., 216 S.W. 3d 309 (Tex. 2006), Texas courts and practitioners have struggled with the proper way for insureds to assert a claim for underinsured motorist coverage. In current practice, claims for breach of contract and insurance code violations in connection with underinsurance motorist claims are commonly dismissed or abated. In the past few years, Texas courts started to entertain claims for underinsured motorist coverage against insurers as declaratory judgment actions.

Earlier this morning, the Texas Supreme Court heard oral arguments in Allstate v. Ins. Co. v. Irwin, 606 S.W. 3d 774 (Tex. App.—San Antonio 2019, pet. granted), in which Allstate takes the position that while policyholders can bring an action against their underinsurance insurers to determine the negligence of an alleged tortfeasor and the insured’s damages, it should not be under the rubric of a Declaratory Judgment action. The link to the Texas Supreme Court’s Youtube recording of the argument is https://www.youtube.com/watch?v=XjN52ef0f_g.

Although the argument was fascinating in its exploration of esoteric concepts of subject matter jurisdiction, case and controversy and standing, the bottom line is that policyholders desire to use, and Allstate opposes the use of, a declaratory judgment action to resolve underinsurance motorist cases because of the discretion bestowed on judges to award attorneys fees under Tex. Civ. Prac. & Rem. Code §37.009.


Interestingly, Allstate did not take the position that insureds cannot sue to seek underinsurance motorist coverage benefits. Rather, Allstate argued that the cause of action is pursuant to the contract; but it is not a breach of contract action or declaratory judgment action (either of which allows for the awarding of attorneys fees to the insured).

The take-away from the oral argument is that the Texas Supreme Court will announce the procedure on how insureds access their underinsured motorist coverage after they settle with the tortfeasor. There does not seem to be any dispute that insureds have the right to pursue such coverage in a lawsuit. Instead, the dispute is over whether the appropriate cause of action to access underinsured motorist coverage will support an award of attorneys fees to the insured.

For later articles, please visit the Extracontractual and Bad Faith Committee Article Archive page.


Past Co-Chairs

2020-2021
Robert Allen
Heather Sanderson

2019-2020
David Anderson
Robert Allen


2018-2019
David Anderson
Joyce Wang

2017-2018
Jason Mazer
Joyce Wang

2016-2017
Jason Mazer
Joyce Wang

2015-2016
Jason Mazer
Diane Polscer

2014-2015
Jason Mazer
Diane Polscer