Connecticut Court Confronts Duty to Investigate

In Capstone Building Corp. v. American Motorists Ins. Co., 2013 Conn. LEXIS 187 (Conn. June 11, 2013), the Supreme Court of Connecticut declined to recognize a cause of action for an insurer’s alleged bad faith conduct in investigating a general liability insurance claim, relying on the policy terms which expressly granted the insurer discretion to conduct an investigation.  The Capstone court also addressed other certified questions including whether faulty construction work could be an “occurrence,” the meaning of “property damage” and application of the business risk exclusions.  As to the bad faith issue, the court held that a bad faith action “must allege denial of the receipt of an express benefit under the policy.”  Id. at *64.  The court reasoned that because the covenant of good faith and fair dealing “requir[es] that neither party [to a contract] do anything that will injure the right of the other to receive the benefits of the agreement,’ it is not implicated by conduct that does not impair contractual rights.”  Id. at *67.  However, insurers take note – even in the absence of an affirmative cause of action for the bad faith failure to investigate, an insurer’s conduct in the investigation of a liability claim can be considered as evidence of bad faith.

For more details on the court’s ruling, see our Bad Faith Alert here.

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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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