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Bad Faith Blog

We cover current issues, highlights and best practices exclusively on claims of bad faith and extra contractual damages.

Bad Faith Blog
October 22, 2019

Seventh Circuit finds a “mere possibility of liability” against an insured is insufficient for an insurer’s duty to settle to arise under Illinois law.

The Seventh Circuit Court of Appeals concluded the mere possibility of liability against an insured is insufficient for an insurer’s duty to settle to arise under Illinois law.

American Physicians Assurance Corporation, Inc. and American Physicians Capital, Inc. (“APA”) issued a medical malpractice insurance policy to Surgery Center at 900 North Michigan Avenue, LLC (“Surgery Center”) with a $1 million limit of liability. APA defended Surgery Center for medical malpractice claims brought against it by Gwendolyn Tate for complications resulting from a surgery performed by Dr. Harrith Hasson at the Surgery Center. Dr. Hasson was an outside physician with privileges at Surgery Center but not its employee.

Bad Faith Blog
September 4, 2019

Breach of Contract Claims Survived (Barely), But All Bad Faith Claims Dismissed

The Sapienza’s purchased a home in an historic district in Sioux Falls, South Dakota, tore it down, and built a new home which the historic preservation board approved. However, the new house upset the neighbors who sued for injunctive relief (to include having the house torn down) arguing that the new structure violated certain height and setback restrictions. Liberty Mutual defended the Sapienza’s under a reservation of rights. The trial court in the underlying case granted injunctive relief after finding that “compensation would not provide adequate relief,” a ruling affirmed by the Supreme Court of South Dakota. The Sapienza’s were given 30 days to demolish their home which they did at the cost of more than $60,000.00. They then sued Liberty Mutual for breach of contract, both for failing to provide an adequate defense and for refusing to indemnify them for their out of pocket “damages”. They also filed three counts described as “bad faith” claims. The U.S. District judge granted Liberty Mutual’ s motion to dismiss the three bad faith claims, but denied the motion to dismiss the breach of contract claims. The judge gave plaintiffs 14 days to file a motion for leave to amend their complaint if they had a factual basis for alleging a breach of the duty to defend and certified a question to the South Dakota Supreme Court to decide whether “the costs the Sapienzas incurred to comply with the injunction constitute covered ‘damages’ under the Policies.”