Bad Faith Blog

The insured, an oil distribution company, brought an unfair trade practices action against its insurer following denial of coverage on an environmental remediation claim. The insurer brought a cross-claim for breach of contract and negligent misrepresentation due to the lack of reporting a prior claim on the insured’s application.

Doe Run is a mining and smelting company incorporated in Missouri in the late 1800’s and since then has mined and processed lead from nearly 1,000 acres of land located in St. Francois County, Missouri. In time the waste products from Doe Run’s lead mining and processing procedures created environmental waste which contaminated the surrounding area. Consequently, the U.S. EPA required remediation of those waste sites. Lloyd’s had sold seven excess insurance policies between 1952-1961, under which Doe Run sought coverage. After a jury trial resulted in a verdict of more than $62,000,000, the trial judge reduced the verdict to $5.145 million. On appeal the Eastern District of Missouri reversed, reinstated the jury verdict, and found that there was substantial evidence for the jury to find that Lloyd’s had acted “recalcitrantly and vexatiously” in its handling of Doe Run’s claim.

Summary: American Family insured the Dunns who had sewer and water backup flooding in their basement. That flooding led to a mold build up and them vacating the house. The vacant and unheated house during a Colorado winter resulted in water pipes freezing and breaking. Despite a payment of the full policy limits, the Dunns had the right to pursue a bad faith claim for allegedly bad faith conduct due to delays and the manner in which American Family adjusted the claim.