Bad Faith Blog

Brandi Burge’s mobile home and all of its contents were destroyed by fire in July 2013 while insured by Farmers Mutual of Tennessee. Farmers Mutual paid an advance in August 2013, but denied the claim without disclosing why. Suit was filed one year later. After 10 months of discovery Farmers Mutual declared (in discovery responses) the policy void ab initio because Plaintiffs failed to disclose “multiple mortgages on the property.” At a bench trial three years after the fire, the trial court entered judgment for Plaintiffs for damage to the mobile home, loss of personal property, additional living expenses, and a statutory bad faith penalty of 15 percent. On appeal the judgment was affirmed, but modified to increase the award on the mobile home and to add post-judgment interest.

Summary: The insureds filed suit against their insurer for breach of contract and bad faith after their insurer denied their claim for a stolen boat and trailer. On appeal, the court held the policy was void due to a material misrepresentation on the application. Because there was no policy in force, there was no claim for bad faith.

Summary: Metropolitan Property & Casualty Insurance Company (Metropolitan) denied Calvin’s residential fire loss claim contending the policy was void because of material misrepresentations on the application and in the claims process. Metropolitan also claimed that it was an arson fire for which Calvin was responsible. Calvin counterclaimed alleging breach of contract, slander, tort of outrage, and bad faith. The Court granted Metropolitan’s summary judgment finding Calvin had misrepresented his prior loss and also granted summary judgment on Calvin’s bad faith claim. The 8th Circuit concluded there were fact issues preventing summary judgment regarding the alleged material misrepresentations justifying voiding the policy. Calvin had also appealed the district court’s summary judgment in favor of Metropolitan on the breach of contract and bad faith claims. The breach of contract ruling was reversed regarding the insured’s “alleged misrepresentation in failing to report the prior fire loss.” However, the summary judgment on the bad faith claim was affirmed.

The Merseals had a fire loss and made a personal property claim for $150,000. A few years earlier they filed bankruptcy and prepared bankruptcy schedules valuing their personal property at $600. The jury’s verdict was for the Merseals awarding $134,000 on the policy, vexatious penalties of $13,586, and attorney’s fees of $67,000. Those rulings were affirmed on appeal.

Summary: Whether the insured, a mother of a 17 year old boy, intentionally failed to tell her umbrella insurer that her son was now a driver, or the insured failed to sign the application, there was no coverage under the personal umbrella policy and no reason to assess “bad faith” penalties.