Bad Faith Blog

LMA North America, Inc. (LMA) sued National Union for breach of contract and bad faith after defendant refused to either contribute $3.75 million towards the settlement of counter-claims asserted by LMA’S competitor, Ambu, or take over the defense of the trade disparagement and false advertising claims. After settling the underlying claims above the $1M primary coverage, LMA asked National Union to pay the balance of the settlement or assume the defense. After the settlement was finalized, National Union agreed to assume the defense. LMA claimed in the coverage and bad faith case that National Union acted in bad faith. The district court denied National Union’s motion for summary judgment and entered judgment for LMA on the jury’s verdict in favor of LMA on the breach of contract and bad faith claims while rejecting the punitive damages claim. The Ninth Circuit affirmed the contract and bad faith judgments.

Summary: An employer’s excess insurer brought an action for bad faith against the primary insurer, which had defended the employer against a worker’s personal injury action that resulted in a settlement in excess of the primary insurer’s limits. The excess insurer alleged the primary insurer should have settled the case within the primary carrier’s policy’s limits. The trial court dismissed the claim finding it was not actionable when there was no excess judgment entered against the insured. The Court of Appeals reversed and remanded.

Summary: This case is a dispute between an excess and primary insurer, both of whom insured a trucking company whose tractor trailer was involved in a fatal traffic accident. The parties injured in the accident sued the trucking company and obtained a jury verdict, which exposed the excess carrier to a $17 million liability. The excess carrier sued the primary carrier alleging bad faith for failing to settle the underlying claim within the policy limits. The district court granted primary insurer’s Motion for Summary Judgment and the Eighth Circuit affirmed.

Summary: Applying Florida law, the Federal District Court found the insurer did not act in bad faith or delay tender of the policy limits when it conducted a reasonable investigation into plaintiff’s injuries. Instead, the District Court found it was plaintiff who caused the delay by failing to comply with the insurer’s reasonable requests for medical records.