Bad Faith Blog

Summary: Lamar Ragland sued State Farm Mutual Automobile Insurance Company (State Farm) for State Farm’s alleged bad faith in failing to pay an underinsured motorist (UIM) claim. Ragland was injured in an automobile accident by an underinsured motorist in January 2012 and claimed that he was entitled to UIM benefits from State Farm for the same amount he could collect from the motorist. Two separate complaints were filed and then consolidated. The circuit court dismissed the bad faith claim. Ragland appealed. The Supreme Court of Alabama remanded to the circuit court which ruled the bad faith claim was final and appealable pursuant to Rule 54(b). State Farm moved to dismiss, claiming the circuit court had exceeded its discretion. The Supreme Court agreed and dismissed Ragland’s appeal as taken from a nonfinal judgment.

Summary: Stonebridge Life provided hospital indemnity coverage to Nickerson who was hospitalized for 109 days after a severe leg fracture. The trial court directed a verdict for Nickerson on the breach of contract claim, entered judgment on the jury verdict for breach of the implied covenant of good faith and fair dealing, and imposed a $19,000,000 punitive damages award. The parties stipulated to attorneys’ fees (Brandt fees) of $12,500 to be imposed by the trial court post-verdict. The trial court reduced the punitive damages award to $350,000, 10 times the compensatory damages, but did not include the Brandt fees in that calculation. The California Supreme Court reversed and found the Brandt fees were incurred to recover the insurance benefits so were properly a component of compensatory damages. Accordingly, they were properly included when calculating the ratio of punitive to compensatory damages to determine whether the punitive damages award satisfied due process.

Summary: State Farm rejected an injured car driver’s $35,000 offer to settle against State Farm’s insured who admitted negligence. The trial resulted in a judgment for nearly $225,000, well above the $100,000 per person limit. The Delaware trial court dismissed the resulting bad faith claim on statute of limitations grounds, relying on an earlier unpublished superior court opinion. In a case of first impression, the Supreme Court of Delaware abrogated the unpublished decision and held that the bad faith action accrued when the excess judgment against the insured became final and unappealable.