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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
January 31, 2019

Bad Pleading Bars Bad Faith/ Extra-Contractual Claims

Propitious and Connacht were co-owned.  Propitious owned the building from whom Connacht leased the first floor to operate a restaurant and sports bar.  Propitious insured the structure through Badger Mutual Insurance Company and Connacht insured its business through Society Insurance when the building and business had a damaging water loss. After Propitious and Connacht were unable to resolve their insurance claims with Badger and Society, they joined in a suit in which they jointly sued Badger and Society. Society moved to dismiss multiple counts and succeeded in getting those statutory bad faith and extra-contractual counts dismissed without prejudice.

Bad Faith Blog
October 30, 2016

Against Public Policy But Not Vexatious and Unreasonable

Summary: The Hadarys were involved in an automobile accident with Carlos Velez, a rental car driver. Both the Hadarys and Velez had automobile insurance at the time of the accident. Velez declined to purchase the supplemental liability insurance offered by Hertz at the time of the rental, and his insurance policy limit was too low to cover the injuries incurred by the Hadarys. The Hadarys had underinsured motorist coverage through Safeway, but Safeway pointed to an “exhaustion clause” in its policy providing that Hertz had to first exhaust its financial responsibility liability before Safeway would have to pay. The trial court agreed with Safeway, but the appellate court reversed holding that the lower court’s result was against public policy. Furthermore, the trial court found that Safeway did not engage in unreasonable and vexatious conduct. The appellate court affirmed the trial court ruling reasoning that Safeway’s interpretation of its policy was reasonable but wrong because its interpretation contravened public policy.

Bad Faith Blog
August 9, 2016

Reasonable Claims Handling Defeats Colorado Insured’s UIM Bad Faith Claim

Summary: Williams was injured in a car accident, settled with the at-fault driver’s insurance company for the policy limits of $25,000, and then made a claim against her own insurance policy under the underinsured motorist (UIM) provision. Her Owners Insurance Company (“Owners”) policy provided $100,000 of UIM coverage. Claiming medical expenses in excess of $50,000 and lost wages in excess of $60,000, she demanded the policy limits, but her demand was rejected. Williams then filed suit against Owners alleging breach of contract and both common law and statutory bad faith delay in processing her claim. The district court granted Owners’ motion for summary judgment after finding that Williams failed to produce evidence showing the unreasonableness of Owners’ conduct. On Williams’s appeal, the United States Court of Appeals for the 10th Circuit affirmed on all counts.

Bad Faith Blog
April 29, 2016

Attorneys’ Bad Faith Prosecution of Bad Faith Claims Warrants Sanctions

Summary: Federal law provides for the imposition of sanctions against attorneys who unreasonably and vexatiously cause an opponent to incur excess costs and fees. A bad faith finding is required to impose those sanctions. In the Nielsen case, the plaintiff’s attorney filed a lengthy complaint alleging eleven causes of action and that ERISA did not apply to a case which was obviously an ERISA case. Two counts were for insurance bad faith and violations of Washington’s Insurance Fair Conduct Act (IFCA). After multiple dismissals, Unum filed a motion for summary judgment attacking the alleged insurance bad faith and IFCA violations. Plaintiff’s attorney filed a “non-opposition.” In light of that non-opposition the court granted the partial summary judgment and dismissed all remaining non-ERISA claims.

Bad Faith Blog
February 3, 2016

Bad Faith Claims Are Not Covered by Re-Insurance

United States Fidelity & Guaranty Company (USF&G) sued its re-insurers, including American Re-Insurance Company, seeking to recover “a share of the nearly billion dollars it paid in settling asbestos claims.” An earlier summary judgment motion had been appealed to, ruled upon, and remanded by the highest court in New York after finding a fact issue remained whether “USF&G, in allocating the settlement amount, reasonably attributed nothing to the so called ‘bad faith’ claims made against it. …” On remand the re-insurers sought to put on evidence of the reasonableness of the allocation of all settlement dollars. The trial court denied that motion, a ruling affirmed on appeal. The re-insurers could challenge at trial USF&G’s zero dollar allocation to bad faith claims and whether USF&G had given unreasonable values to certain classes of asbestos injury (“lung cancer asbestosis, pleural thickening and ‘other cancers’”). In other words, the trial was to be limited to determining whether those classes of asbestos claims had been “inflated by USF&G,” and whether part of those values should have been attributed to bad faith claims. The trial was not to determine any other reasonableness issues.