Extracontractual and Bad Faith Claims Litigation CommitteeMission Statement 2023-2024 Co-Chairs Selected Presentations & Papers: Yacht Co. Sues for Bad-Faith Suit After $2.5M Win Affirmed on Appeal After an Eleventh Circuit win, the owner of a yacht that was totaled during 2017's Hurricane Irma is suing its insurer for bad faith for failing to promptly cover more than $2 million in coverage for the loss. Read more.
Record Indiana Bad Faith Verdict Upheld The U.S. District Court for the Northern District of Indiana upheld a jury verdict that awarded punitive damages against the defendant insurers, finding that an award of damages for breach of contract also constituted an award of compensatory damages for bad faith, making punitive damages recoverable under the law. Read more. Posted 6/26/2023 Fifth Circuit Holds That Amount of Excess Judgement and NOT the Policy Limits Determines the $75,000 Threshold for Diversity Jurisdiction In a Declaratory Judgment action brought by an insurer to seek a declaration that an excess judgment obtained by default is not covered under the policy due to the insureds failure to cooperate (which led to the default judgment), the Claimant argued that the policy’s $50,000 limit should determine the amount in controversy. Since that amount does not meet the $75,000 minimum threshold for federal court diversity jurisdiction, the Claimant argued that the district court lacked jurisdiction to declare that the claim was not covered. The Fifth Circuit Court of Appeals affirmed the district court’s ruling. Read more.
Texas Federal Court Refuses to Bifurcate Punitive Damages Phase in Bad Faith Lawsuit
Michigan Contemplates New Bad Faith Legislation
The American Law Institute Embraces First Party Bad Faith Past President Mike Aylward analyzes the evolution and content of the current draft of Section 20 A of the impending Restatement Third of Torts. Section 20 A is titled “Bad-Faith Performance of First-Party Insurance Contract.” Read more. As the insurance industry liaison, Fellow and Regent Laura Foggan comments on Council Draft No. 4; Sect. 20A. of ALI Rest. of the Law Third Torts.
Current Draft of ALI § 20 A. Bad-Faith Performance of First-Party Insurance Contract In March 2023, the ALI released revisions to Chapter 20. Attached is the latest draft on the chapter on First-Party Insurance Bad Faith in the upcoming Restatement (Third) of Torts. Read more.
Pennsylvania Federal Court Finds No Bad Faith In Fire Claim Holding No Material Fact Issues The Court stated that “in order for a fact to affect the outcome of [the insured’s] bad faith claim, it would have to lead a reasonable jury to conclude that [the insurer] did not have a reasonable basis for denying benefits under the Policy and that it knew or recklessly disregarded its lack of reasonable basis in denying the claim.” Read more.
A Look At Florida's Aggressively Pro-Insurer Tort Reform
STOWERS: Court Rejects Primary Insurer's Unclean Hands Defense to Umbrella Carrier's Stowers Claim Texas District Court holds that the primary carrier could not assert the defense of unclean hands against the excess insurer in response to the excess carrier's equitable subrogation claim arising out of a judgment in excess of the primary policy limits because the jury found that the primary carrier had breached its stowers duty in May 2009 and again in September 2009, and therefore on those dates it became liable for all damages arising out of the negligent refusal to settle, so no action by the excess insurer was responsible for the loss since the excess carrier did not receive notice of the claim until 2010. Read more.
11th Circuit Reverses a Bad Faith Judgment in Favor of the Insurer The 11th Circuit applying Florida law reversed a trial court’s ruling in favor of an insurer because the insurer waited over one month to tender its $10,000 policy limits when it had sufficient information to determine that it was required to tender its policy limits and because it failed to provide information to the claimant’s attorney that may have facilitated settlement of the case. Accordingly, the court found a fact question on conduct could be seen by the factfinder as causing or contributing to a $5 million excess judgment against the insured. Read more.
Key issues for policyholders under Florida’s new tort reform bill. The Policyholder Perspective
FIFTH CIRCUIT REVERSES EXLCUSION OF INSURED’S EXPERT BASED ON DISTRICT COURT’S FAILURE TO EXPLAIN BASIS FOR EXCLUSION. The district court’s order lacks any analysis of either the importance to the case of the new data in the expert’s Second Report or the potential prejudice to Lloyd’s of allowing the late disclosures, beyond the court’s bald statement that the “delay to seemingly surprise [Lloyd’s] . . . [was] not harmless.” And the district court did not address the possibility of a continuance to cure any prejudice. Because the district court failed adequately to explain its reasoning, “the order must be vacated and remanded to allow the district court to explain its decision after considering the proper factors.” Read more. Posted 3/20/2023 Florida Cuts P&C Claims Deadlines by Half Dramatic changes to claims administration for Florida property and casualty insurance carriers took effect on March 1, 2023, cutting claim response times in half for both personal and commercial lines. Gov. Ron DeSantis signed Senate bill 2-A (SB 2-A) into law on December 16, 2022, which arose from the Florida legislature's second special legislative session of 2022, addressing the deterioration of the state's P&C insurance marketplace. The bill enacts many significant revisions to claim-governing sections 627.70131 and 627.70132 of the Florida Statutes. Read more.
11th Circ. Orders USAA's $5M Bad-Faith Fight To Trial A USAA unit must face claims that its alleged bad-faith conduct caused its policyholder to suffer a $5 million excess judgment in a trial over a serious car accident, the Eleventh Circuit said Tuesday, reversing and remanding the insurer's early win against the injured driver. Read more.
New Jersey Federal Court Allows Bad Faith Failure to Settle Suit to Proceed Based on Claims Committee Conduct The court’s decision, that bad faith could possibly be established [insurer’s MSJ was denied], was tied to two key issues – (1) the insurer not accepting its adjuster’s recommendation to settle and (2) the court taking issue with how the insurer’s claims committee went about its business of analyzing whether the claim should be settled. Read more. BrightView Enterprises Solutions v. Farm Family Cas. Ins. Co., No. 20-cv-7915 (D.N.J. Feb. 7, 2023)
Insured’s Failure to Obtain Consent to Settlement Deemed Prejudicial The Western District of Pennsylvania granted an insurer’s motion to dismiss breach of contract and bad faith claims with prejudice after finding that an insured had no basis to sue its insurer for reimbursement of a settlement payment when the insured did not seek the insurer’s consent before entering into the settlement, pursuant to the terms of a business insurance policy. See RealogicHR, LLC v. Continental Cas. Co., 2022 WL 17904245 (W.D. Pa. Dec. 23, 2022).
Texas Court of Appeals Affirms Summary Judgment For Insurer After Homeowners Refuse to Cooperate in Appraisal Process and EUO Posted 1/30/2023 Western District of PA Finds No Bad Faith for Policy Interpretation Based on Unsettled Law The Western District of Pennsylvania recently granted an insurer’s motion for summary judgment and denied an insured’s motion for summary judgment after finding that the insurer did not act in bad faith when it requested that its insured submit to an IME at a time when the validity of the IME clause in the Policy was unsettled and the subject of debate in Pennsylvania. See Loughery v. Mid-Century Ins. Co., 2022 WL 17821613 (W.D. Pa. Dec. 20, 2022). Read more. Posted 1/12/2023 Missouri Supreme Court Reverses $5.2 Million Extracontractual Judgment Against Auto Insurer The Missouri Supreme Court vacated a $5.2 million judgment over a woman's claim that she contracted HPV during sexual encounters in a Geico policyholder's car, finding that the insurer wasn't given the opportunity to intervene in the lawsuit before judgment was entered. Read More.
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