Bad Faith Blog

Summary: The Trust owned a building in Galena, Illinois which was leased to an architect and artist. When the Trust sold the real estate, it removed and destroyed artwork and other personal items without the artist’s permission. He filed suit in federal court under multiple theories for wrongfully evicting him without proper notice and the destruction of his personal items without compensating him. After Country Mutual denied duties to defend and indemnify, the Trust filed a declaratory judgment action. The trial court found coverage, but denied plaintiff’s motion for sanctions under Illinois’ vexatious refusal statute. The appellate court affirmed finding Country Mutual had a duty to defend the federal lawsuit under the policy’s personal and advertising injury coverage, but vexatious penalties were properly denied.

Summary: Stewart Title Guarantee Company provided title insurance to Randy Spalding for nearly 420 acres in Cass County, Missouri in the amount of $1.7 million. It also provided title insurance coverage to Paul Estes for a one acre tract in the middle of the 428 acres, which Spalding and others were trying to develop. Stewart Title’s investigation showed that Estes had the superior claim, but the value assigned by Stewart Title Guarantee Company was $10,000.00 whereas Paul Estes demanded payment of $387,000.00. After a jury trial, the circuit court entered judgment in favor of Spalding in the amount of $1,100,000.00 on the policy, vexatious penalties in the amount of $110,150.00, and attorney’s fees in the amount of $81,000.00. The court rejected Stewart Title’s appeal and affirmed the judgment.

Summary: May & May Trucking (“May & May”) was insured by Progressive. May & May leased one of its dump trucks to Trent Quinn who took it to New Orleans after Hurricane Katrina where it was stolen. Sometime after the leasing to Quinn the coverage limits were increased by $50,000. After disputes arose, May & May filed suit for breach of contract and vexatious refusal to pay. The circuit court’s summary judgment in favor of Progressive was reversed on appeal.

Drury Company was a subcontractor which added a commercial roofing product to the Jackson R-2 School District school building. Missouri United School Insurance Counsel (MUSIC) issued an all risk “special property coverage” policy which included “automatic builders risk” insuring the School District, its prime contractor, and all levels of subcontractors. MUSIC denied the claim of subcontractor Drury Company, but the trial court denied MUSIC’s Motion to Dismiss while granting Drury’s Motion for Summary Judgment, which included a statutory vexatious award. The Missouri Appellate Court 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.