Extracontractual and Bad Faith Claims Litigation Committee Article Archive

Archived Presentations & Papers:

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

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

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

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

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 Read more.

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

Posted 7/28/21
New Missouri Law Safeguards Insurers from Excessive Arbitration Awards and Findings
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
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 - Law 360

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 - Law 360

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

Posted 4/27/2021
7th Circ. Reverses Insurer's $2.8M Loss For Declining TM Defense - Law 360

Posted 4/22/2021
Recent Bad Faith Cases Regarding Reasonableness of Medical Treatment In two recent cases

Posted 4/20/2021
Georgia Supreme Court Upholds $2.7 Million Award Against Insurer for Failure to Settle - Law 360

Posted 4/13/2021
Insurer Hit with $1.9 Million (including $1 Million Punitive Damages) for Failure to Settle - Law 360

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 - Law 360

Posted 3/15/2021
Use and Abuse of Claims Experts in Bad Faith Litigation
ACCC Fellow and Board Officer Mike Huddleston’s 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 - Law 360

Posted 3/10/2021
Farmers Insurance Beats $9.9M Bad Faith Verdict On Appeal - Law 360

Posted 3/9/2021
Fifth Circuit Revises Stowers Opinion; but the Result Stays the Same

Posted 2/26/2021
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
Briefs | Court of appeals opinion Simulcast on 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 - Law 360

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 - Law 360 

Posted 2/19/2021
No Coverage; but Insurer Must Defend Bad Faith Claims over Defense At Trial - Law 360 

Posted 2/17/2021
Kroger Insurer's Trial Gamble Blamed For 'Runaway' Verdict - Law 360 

Posted 2/16/2021 
11th Circ. Doubts Fla. Law Firm's Right To $1M Damages - Law 360

Posted 2/6/2021
A Question of Timing: Policy-Limit Demands and Insurer Bad Faith in Florida
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
Texas Supreme Court YouTube recording of the argument is https://www.youtube.com/watch?v=XjN52ef0f_g.

From Law360: Theater Chain Sues Insurer $400 Million for Systematically and “Suggestively Steering” Claims to Lower Limit Coverages 12/23/2020

Missouri Insurance Bad Faith Claim Overrides New York Choice of Law Provision 12/21/2020

American Guarantee and Liability Ins. Co. v. ACE American Ins. Co., Cause No. 19-20779 on file in the Fifth Circuit Court of Appeals 12/21/2020  -  Casenote by Bob Allen 12/22/2020

Insurer Liable for Bad Faith—For Filing a Declaratory Judgment Action
By Randy Maniloff, White & Williams, LLP

Insurer Estopped from Denying Coverage for Legal Malpractice Action But Not Subsequent Disgorgement Action
Wiley Executive Summary Blog(Nov 11 2020)Errors & Omissions 
The U.S. District Court for the Eastern District of Pennsylvania, applying Pennsylvania law, has held that an insurer is estopped from denying coverage for a legal malpractice action after defending the action for over a year without a reservation of rights, despite knowledge of the facts upon which it ultimately relied to deny coverage.

11th Circuit's significant decision - Court certified bad faith issues to the Georgia Supreme Court 
Law 360 Article

No Coverage for TPA in Claim Arising from Extracontractual Exposure to Insurer
Wiley Executive Summary Blog Article

After Refusing $30K Settlement Offer, Bad Faith Suit May Cost GEICO $2.7M

Texas Supreme Court and the Fifth Circuit to Rule on the Texas Stowers Doctrine 
As the iconic Texas Stowers Doctrine (holding liability insurers liable for negligently failing to settle cases within their policy limits) approaches its 100th anniversary, the rumor is that Vince Morgan is planning a party at the Stowers Furniture warehouse with fireworks and a parade. Meanwhile, new situations arise that continue to test the boundaries of the established criteria for invoking the doctrine. Over the past two months, two cases—one federal and one state—have winnowed their way up the appellate ladder and were argued to their respective courts.

In this regard, here is the audio link to the 5th Circuit oral argument in American Guarantee v ACE American, an excess-primary Stowers case, which among other issues focuses on whether an in-trial settlement demand met the elements of the Stowers doctrine: http://www.ca5.uscourts.gov/OralArgRecordings/19/19-20779_8-10-2020.mp3.

Next is the link to the Texas Supreme Court’s zoom oral argument in In Re Farmers Texas, which analyzes whether the Stowers Doctrine is invoked in the context of an over-the-limits settlement, partially funded by the insured, which was allegedly required because the insurer’s allegedly negligently failed to accept an earlier demand within the policy limits. http://www.texasbarcle.com/CLE/SCPlayer5.asp?sCaseNo=19-0701&bLive=&k=&T=.

These cases were well argued and the panels were active. They are each about 45 minutes a piece, so they are perfect listening for a 20-minute commute (listen to half on the way there and the other half on the way back). The Texan Fellows are watching these cases closely. After a relative yawn on the 8-corner/extrinsic evidence duty to defend cases in last year’s Texas Supreme Court term, it will be very interesting to see how these decisions go. Stay tuned.

ACCC 2020 Annual Meeting Panel Paper: Duty to Defend Bad Faith Issues

August 2020 IADC newsletter article "Preparing for Possible Bad Faith Claims in COVID-19 Related First Party Property Lawsuits" by Karen K. Karabinos and Eric R. Mull

May 2020 IADC newsletter Alexander G. Henlin

COVID-19 DJ Alleges Bad Faith For Failure To Investigate Claim. Randy Maniloff

Right To Jury Trial re Reasonableness of Settlement. William T. Barker

Overview of Texas Bad Faith Law. Bob Allen

A Liability Insurer's Breach of the Duty to Defend and the often erroneous consequence of Extracontractual Liability. Douglas R. Richmond

Newly admitted fellow Terence Ridley recently secured a trial court ruling for the insurer, on remand from the Colorado Supreme Court, finding and concluding that a policyholder-appointed appraiser was improperly biased. The trial court vacated in toto a ~$3 million property-damage appraisal award, arising from a hail claim,  in favor of a Homeowner’s Association. After a two-day trial to the court, the judge ruled that the appraiser’s actions favored the policyholder and that the appraiser influenced the appraisal for the policyholder’s benefit.  Owners Ins. v. Dakota Station II Condo Ass’n, Inc. (Jefferson Cty. Dist. Ct. Colo. 2020).

Attached are the Colorado Supreme Court opinion and the Findings of Fact and Conclusions of Law on remand.

Excess vs. Primary Stowers Doctrine Bench Trial Reveals Inciteful Findings of Facts and Conclusions of Law

The Texas Stowers doctrine, which has been shaped in large part by ACCC Texas Fellows, gives rise to some of the more exciting insurance bad faith litigation in Texas. The prospect of opening up the policy limits for an insurer’s failure to accept a within limits settlement demand of a covered claim that an ordinarily prudent insurer would accept, considering the likelihood and degree of the insured’s potential exposure to an excess judgment, in many situations is the ultimate hammer in settlement negotiations.

The Stowers doctrine is particularly effective when dealing with one injury and one insured for a covered claim. Another recurring aspect of Stowers litigation is that it often arises in the context of an excess insurer suing a primary insurer. Both of these factors were involved in American Guarantee & Liability Ins. Co. v. Ace American Ins. Co., 2019 WL 4316531 (S.D. Tex. 2019).

The underlying tort litigation was a wrongful case brought by the mother, wife and two minor children of a man killed in a bike accident involving a truck owned by a large landscaping company.  The Plaintiffs were represented by a highly regarded and very successful Joe Jamail mentee; although defense counsel was very bullish about the insured’s lack of liability. The primary limits were $2 million. The excess insurer monitored the underlying tort litigation.

After a $39 million verdict against the insured, which was subsequently settled for $9.975 million with the excess carrier funding the amount over the $2 million primary limits, an excess vs primary insurer Stowers lawsuit was litigated in a Houston federal court.

What is very different than normal about American Guarantee v. Ace American, is that Houston Federal Judge Keith P. Ellison, after presiding over a week-long bench trial, issued 68 Paragraphs of Findings of Fact and 17 Paragraphs of Conclusions of Law in the attached Memorandum Order issued last month. He discussed the evidence involving whether the primary insurer was negligent in not accepting one of three settlement demands within the $2 million policy limits.

Significant to insurers facing demands under the Stowers doctrine is that Judge Ellison ruled that, even in the face of a hammer letter by the excess insurer, the primary insurer did not violate the Stowers doctrine for failing to accept the first policy limits demand made after a second failed mediation eleven days before the start of trial. Judge Ellison ruled that in light of the perceived liability defenses, an ordinarily prudent insurer could believe that the settlement value of the case was less than the $2 million policy limits, relying on what he found to be a reasonable report assessing a reasonable settlement range between $1.25 and $2 million.

However, there were adverse evidentiary rulings against the insured landscape company during trial, which changed Judge Ellison’s mind about two within policy limits demands made during trial, the last one expiring when the jury returned its verdict. As it relates to those demands, Judge Ellison ruled that the primary insurer violated the Stowers doctrine by not accepting either one of those demands, which will leave it responsible for the settlement payment made by the excess insurer.  

In many cases, the Stowers issue is decided by as few as one jury question. In American Guarantee & Liability Ins. Co. v. Ace American Ins. Co., however, Stowers liability was established by a very thorough analysis of the facts and then a highly detailed application of the law. Accordingly, unless it gets reversed or altered on appeal, this uncommon Memorandum Opinion will be helpful for those evaluating Stowers claims in the future.

Bad Faith Personal Liability of Claims Adjusters Arising Out of Claims-Handling Conduct, Bryan M. Weiss

State Farm Mutual Auto Assc. v. Cook
On September 18, 2019, the San Antonio Court of Appeals handed down an opinion that may open up the avenue for filing bad faith claims on uninsured/underinsured motorist claims in Texas. Here, the policyholder sought the entire UM limits of $100,000, while State Farm offered about $15,000. The UM case proceeded to trial and the insured obtained a verdict of over $100,000. State Farm quickly paid the $100,000 limits and then sought summary judgment on the plaintiffs bad faith claims. The trial court denied State Farm’s MSJ, however the court of appeals agreed to consider the trial court’s ruling in an interlocutory appeal. The San Antonio Court of Appeals affirmed the trial court’s denial of State Farm’s MSJ, holding that an UM carrier’s immediate payment of a adverse UM judgment does not insulate the carrier from bad faith lawsuits for the carrier’s handling of the bad faith claim.