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PA Supreme Court Addresses Level of Proof Required Under Statutory Bad Faith Claim

In an opinion dated September 28, 2017, the Pennsylvania Supreme Court, Western District, considered as an issue of first impression the level of proof required to prevail in a bad faith claim, examining the elements of a bad faith insurance claim under the PA bad faith statute, 42 Pa.C.S. Section 8371.  The lawsuit involved policy coverage issues under a cancer insurance policy issued to plaintiff as a supplement to her primary employer-based health insurance.  The Rancosky v. Washington National Insurance Company court confirmed that the two-step process, known as the Terletsky test, applied to determine whether a claimant could recover in a bad faith action.  More specifically, a plaintiff must prove by clear and convincing evidence that: (1) the insurer

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Texas Amends Insurance Code In Response To Weather Claims

On May 26, 2017, Texas Governor Greg Abbot signed into law Texas House Bill 1774/Senate Bill 10. The new law makes changes to the Texas Insurance Code that will impact the way in which weather claims are brought and how those claims may be defended. The new law becomes effective on September 1, 2017. The amendments to the Texas Insurance Code add a new Chapter 542A, which governs certain consumer actions related to claims for property damage. Specifically, Chapter 542A applies to any first-party claim which arises from “damage to or loss of covered property caused, wholly or partly, by forces of nature, including an earthquake or earth tremor, a wildfire, a flood, a tornado, lightning, a hurricane, hail, wind,

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Ninth Circuit Upholds Bad Faith Award Despite Issues With Policy Limits Demand

In Madrigal v. Allstate Indemnity Co., Cause No. 16-55830 (9th Cir. June 15, 2017), the Ninth Circuit upheld a jury award assessing $14 million in bad faith damages, even though it was unclear whether the insurer could have met the settlement demand which it allegedly refused in bad faith. The Underlying Dispute In 2009, Carlos Madrigal (“Madrigal”) was riding a motorcycle when he was hit by a car driven by Richard Tang. The accident left Madrigal a paraplegic. A police report for the accident listed Madrigal at fault for the accident. Allstate provided insurance to Richard Tang and his wife, Anna Tang, with limits of $100,000 per claimant. Madrigal, through counsel, offered to settle his claims against Richard Tang for

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West Virginia Supreme Court: Bad Faith Claims Are Premature when the Insurer Is Providing a Defense

The West Virginia Supreme Court recently granted an insurer the extraordinary legal remedy of a writ of prohibition, awarding it an immediate dismissal of the insureds’ bad faith claims. State ex rel. Universal Underwriters Insurance Company v. Wilson, ___ S.E.2d ___, 2017 WL 2415343 (W. Va. Jun. 1, 2017). The court reasoned that because the insurer is defending the insureds in the underlying tort action, the insureds have not yet suffered any recoverable item of damages as necessary to make their bad faith claims ripe for adjudication. The defendants in the underlying tort lawsuit include Salvatore Cava, Salvatore’s father, Daniel Cava, and Daniel Cava’s business, Dan’s Car World, LLC d/b/a Dan Cava’s Toyota World (“Dan’s Car World”). The insurer’s policy

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Eastern District of California Dismisses Bad Faith Action, Where Misrepresentation Voids Policy

On June 6, 2017, the U.S. District Court for the Eastern District of California found, consistent with longstanding California precedent, that a material misrepresentation made in the course of a coverage investigation voids coverage. The holding reaffirms the importance of the insurer’s investigation into claims it suspects may be fraudulent. The court also, again consistent with California precedent, declined to find any bad faith conduct in the absence of coverage. Young v. Progressive Casualty Insurance Co., No. 1:16-CV-01198-DWM, 2017 WL 2462497 (E.D. Cal. Jun. 6, 2017) concerned Young’s claim to Progressive for the theft of his motor home. His policy provided comprehensive coverage with an agreed value for the motorhome of $63,000 with no deductible. Law enforcement recovered the motor

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Eleventh Circuit Reaffirms There Is No Bad Faith Unless the Settlement Offer Fully Protects the Insured

Recently, the Eleventh Circuit, applying Georgia law, reaffirmed that an insurer cannot be liable for negligently failing to settle a case unless the settlement demand provides protection to the insured against all potential claims, even those which have not been asserted. Linthicum v. Mendakota Insurance Company, No. 16-16593 (11th Cir. May 3, 2017) arises from truly tragic circumstances.  While driving intoxicated, Bobby James Hopkins, II, struck and killed the Linthicums’ 11 year old son.  Hopkins fled the scene, and attempted to have his car repaired.  The child lived a short time before dying.  When the claim was reported, Mendakota Insurance Company (Insurer) noted that there was a “probable recovery” and set the reserves for the $25,000 policy limit of Hopkins’

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Florida Alert: Can a Liability Carrier be Sued for Bad Faith when Its Insured Was Not Exposed to Liability In Excess of the Policy Limits?

The Third District Court of Appeals finding recently held that in certain circumstances, a third party can maintain a bad faith claim against an insurer even if the insured is not exposed to liability in excess of the policy limits.  The insurer, claiming that the decision is in direct contradiction to established Florida Supreme Court precedent and other precedential decisions, petitioned the Florida Supreme Court to review the decision.  See Infinity Indemnity Insurance Company v. Delia Reyes, et al., Case No. SC17-659 (Florida, April 26, 2017). The bad faith lawsuit arose out of an auto accident case.  Delia Reyes was involved in a car accident with Jorge Arroyo, Jr., who is now deceased.  Reyes filed a personal injury lawsuit against

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Pennsylvania Federal District Court: Insurer’s Reliance on “Reasonable” Interpretation of Law Does Not Automatically Bar Bad Faith

On March 13, 2017, the United States District Court, Eastern District of Pennsylvania, rejected the argument that an insurer does not act in bad faith if it relies on a reasonable interpretation of unsettled case law.  The court explained that while supporting case law is highly relevant to the bad faith determination, it does not automatically defeat a bad faith claim.  Allstate Ins. Co. v. Lagreca, 2017 WL 959543, at *2 (E.D. Pa. Mar. 13, 2017).  Nevertheless, the district court ultimately found the insurer’s initial decision to deny liability coverage was reasonable, and granted summary judgment on the bad faith claim, as the insurer “engaged in a reasoned process” prior to denying coverage. Background In the underlying lawsuit, the plaintiff

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Washington: Third-Party Administrators and Adjusters Can Be Liable in Bad Faith Actions

On April 11, 2017, the Division III Washington Court of Appeals, on a 2 to 1 vote, held that third party administrators and adjusters can be liable in bad faith actions under multiple legal theories.  Merriman v. Am. Guar. & Liab. Ins. Co., No. 33929-7-III (Apr. 11, 2017). In Merriman, the storage warehouse owned by Bernd Moving Systems (“Bernd”) and its customer-owned contents, burned to the ground. Customers William and Colleen Merriman (“Merrimans”) lost contents worth over $300,000. Before the fire, the Merrimans had been assured by Bernd that their property would be fully insured. Following the fire, the insurer engaged an independent adjusting firm (“IA”) to adjust the claims for the fire and more broadly administer the entire review,

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South Carolina Federal District Court: Insurer May Act in Bad Faith by Considering Extrinsic Evidence to Deny Duty to Defend

On February 6, 2017, the United States District Court, District of South Carolina, found a genuine dispute of material fact existed as to whether a Roofing Limitation Endorsement in a liability policy barred the insurer’s duty to defend. Williford Roofing, Inc. v. Endurance Am. Specialty Ins. Co., 2017 WL 479507, at *3-4 (D.S.C. Feb. 6, 2017). Moreover, while an insurer’s defense obligations are “not strictly controlled by the complaint” under South Carolina law, evaluating the complaint is the insurer’s “first step.” Id. at *4. Here, the district court found the insurer skipped the first step and instead looked first to extrinsic evidence to “deny coverage altogether.” Id. As such, the court concluded the trier of fact could find the insurer

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Avoiding Insurance Bad Faith
Cozen O’Connor represents insurance clients in jurisdictions throughout the U.S. against statutory and common law first- and third-party extracontractual claims for actual and consequential damages, penalties, punitive and exemplary damages, attorneys’ fees and costs, and coverage payments. Whether bad faith claims are addenda to a broader coverage matter or are central to the complaint, Cozen O’Connor attorneys know how to efficiently respond to extracontractual causes of action. More
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