In Part I of this series, we explored the differences between institutional and non-institutional bad faith. For claims of institutional bad faith, plaintiffs often attempt to demonstrate a pattern and practice by offering evidence of claims of other policyholders. Unlike claims of institutional bad faith premised on the insurer’s policies and procedures, “other claims” allegations do not require knowledge of the insurer’s motives or internal programs, but instead rely on evidence of repeated behavior to make the threshold showing of bad faith. When a plaintiff attempts to offer specific factual allegations relating to other policyholders in order to demonstrate a general business practice, the relevant inquiries relate to any actual similarities between the claims and the threshold at which the…
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Defending Institutional Bad Faith Claims, Part III – Proof by Other Claims
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Defending Institutional Bad Faith Claims, Part II – Focusing on Plausibility
In Part I of this series, we discussed institutional bad faith and best practices for insurers to minimize the risk of these costly and intrusive lawsuits. In Part II, we will focus on cutting discovery off at the pleadings—by narrowing the plaintiff’s claim, you limit the scope of relevance in discovery. Under Federal Rule of Civil Procedure 26(b), “[p]arties may obtain discovery regarding any non-privileged matter that is relevant to any party’s claim or defense and proportional to the needs of the case….” Plaintiffs often allege institutional bad faith by providing a small amount of information pertaining to the company at large, and then making significant inferences and conclusions and offering those inferences as factual allegations. A skilled attorney can…
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Defending Institutional Bad Faith Claims, Part I – A Primer on Institutional Bad Faith
Broadly speaking, there are two types of bad faith claims that may be alleged against an insurance company—traditional or non-institutional bad faith, and institutional bad faith. For the former, a policyholder would seek to hold an insurer liable for its acts or omissions that directly and adversely affected the policyholder. For example, in the third-party context, a policyholder may file a bad faith claim against its insurer if the insurer failed to settle a lawsuit against the policyholder within policy limits and a judgment is entered against the policyholder in excess of policy limits. Institutional bad faith, in contrast, goes beyond a single policyholder. In claims of institutional bad faith, the plaintiff or plaintiffs will attempt to demonstrate a company…
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Georgia Supreme Court Spares Insurance Company from a $5.3 Million Bad-Faith Verdict
Last week, the Georgia Supreme Court confirmed that an insurance carrier’s duty to settle a claim against its policyholder arises only after an injured claimant presents a “valid offer” to settle within policy limits. In First Acceptance Insurance Company of Georgia v. Hughes,[1] the Court found that, because the letter presented to First Acceptance by the injured parties’ counsel was not a time-limited settlement demand, First Acceptance’s failure to respond before the injured parties withdrew their offer did not constitute negligence or a bad faith failure to settle the claim within policy limits. In 2008, First Acceptance’s policyholder caused a multi-car crash killing the policyholder and injuring five others, including Julie An and her 2-year-old daughter. The policy had the…
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The Supreme Court of Texas Clarifies That a Party Can Testify as an Expert Witness without Waiving the Attorney-Client Privilege
Litigation usually involves complex issues related to technology, products, or business processes. In many cases, clients are the best subject-matter experts of their craft. Nevertheless, attorneys are sometimes hesitant to designate a client or a client’s employee as an expert witness for fear of waiving attorney-client privilege. In a recent decision, the Supreme Court of Texas addressed this very issue and held that the attorney-client privilege remains unscathed when a party (or its corporate representative) is designated as a testifying expert witness. See In re City of Dickinson, — S.W.3d —, No. 7-0020, 2019 WL 638555 (Tex. Feb. 15, 2019). Background City of Dickinson concerned whether a property insurer underpaid insurance benefits related to a Hurricane Ike claim made by…
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In Rhode Island, No Duty of Good Faith to Third Party Claimant
In Summit Insurance Company v. Stricklett, — A.3d —, No. 2017185APPEALPC12536, 2019 WL 190358, (R.I. Jan. 15, 2019), the Supreme Court of Rhode Island held that – similar to many jurisdictions – the duty to act in a reasonable manner and in good faith settling a claim does not run to the claimant absent an assignment from the insured. The facts of Stricklett are simple. Mr. Stricklett’s vehicle was insured by Summit under a policy with a $25,000 per person, $50,000 per accident coverage limit. In 2002, Stricklett allegedly collided with eleven-year-old Scott Alves, requiring that Alves undergo medical treatment. Alves’s parents submitted the medical bill to Summit Insurance Company, who investigated the incident and determined that Stricklett was not…
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ALLEGED BAD FAITH FAILURE TO ADVISE POLICYHOLDER OF CONSEQUENCES OF SETTLEMENT CONDUCT CAUSES INSURER TO SETTLE $22 MILLION LAWSUIT
Progressive recently settled a bad faith lawsuit with the guardians of a child injured in a car accident driven by a Progressive policyholder, Earl Lloyd. Progressive faced liability for an underlying judgment in excess of $22 million against Lloyd, who had purchased a $10,000 auto policy from Progressive. The bad faith lawsuit alleged that Progressive failed to advise its insured regarding the significance of executing a financial affidavit. Had the insured executed the financial affidavit, the claimant allegedly would have accepted the insured’s $10,000 policy limits in exchange for a release of Lloyd. The case, Wallace Mosley v. Progressive American Insurance Company, was set for trial beginning December 10, 2018 in the U.S. District Court for the Southern District of…
From Birdseed to Crop Dusting, Liability-Triggering Event Determines Number of Occurrences
Texas applies the “cause” test to determine the number of accidents or occurrences, but its emphasis on the “liability-triggering event” requires an analysis of intervening causes. The Fifth Circuit Court of Appeals doubled-down on its focus on the liability-triggering event, reversing the trial court and finding a truck driver’s negligent operation of his vehicle that caused multiple collisions (four autos and a toll plaza booth) was one accident for purposes of liability insurance in Evanston Ins. Co. v. Mid-Continent Cas. Co., —F.3d.—, No. 17-20812, 2018 WL 6037507. The court acknowledged that the analysis espoused in Pincoffs[1] and Goose Creek[2] (i.e., count the number of acts by the insured that give rise to liability) is incomplete because it does not address…
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Fort Worth Court of Appeal Reverses Judgment Awarding Bad Faith Damages Against Insurer
While the November 8, 2018 Court of Appeal of Texas, Fort Worth Division opinion reverses a trial court’s judgment on grounds of legal insufficiency and standing, the court’s analysis and application of current Texas bad faith law is of much more interest. The trial court judgment held that Old American Insurance Company violated both the Texas Unfair Settlement Practices and the Prompt Payment of Claims Acts by failing to promptly pay benefits owed under the life insurance policy assigned to Lincoln Factoring, LLC (assignee of beneficiary’s policy benefits). But the appellate court reversed, concluding that as a matter of law Lincoln could not recover damages on the claims it plead. Old Am. Ins. Co. v. Lincoln Factoring, LLC, No. 02-17-00186-CV,…
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The Florida Supreme Court Pushes Florida Bad Faith Standard Closer to Negligence in Harvey v. GEICO Decision
The Florida Supreme Court recently decided Harvey v. GEICO Gen. Ins. Co., No. SC17-85, 2018 WL 4496566, at *1 (Fla. Sept. 20, 2018), an important case setting forth what many will try to argue has lessened the standard for bad faith law in Florida to one of negligence plus. The case has a detailed but uncomplicated factual history. However, the factual summary contained in the majority’s opinion must be read along with that of Justice Canady’s dissent in order to understand the full picture factually. On August 8, 2006, GEICO’s insured, James Harvey (“Insured” or “Mr. Harvey”), was in a motor vehicle accident. The accident resulted in the fatality of the other driver, and Mr. Harvey was at fault. Mr.…
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