In a matter of first impression, under Iowa law, the Iowa Supreme Court held a common law claim for bad faith failure to pay workers’ compensation benefits was not available against the third-party claims administrator (“TPA”).
We cover current issues, highlights and best practices exclusively on claims of bad faith and extra contractual damages.
No Assignment, No Bad Faith: Rhode Island Supreme Court Finds Insurer Has No Duty to Third Party Claimant Unless There is an Assignment by the Insured
Automobile liability insurer brought action against its insured, an injured third-party claimant and claimant’s parents for declaratory judgment that it had no obligation to pay sums beyond the policy limits. Third-party claimant and his parents counterclaimed for declaratory relief. The Superior Court entered judgment in favor of the insurer. After appeal, the Rhode Island Supreme Court held the insurer owed no duty to third-party claimant and his parents to act in a reasonable manner and in good faith in settling claim.
Colorado Supreme Court Holds Insurers Must Evaluate and Pay Each Separate UM/UIM Component or Risk-Prompt Payment Penalties
The Supreme Court of Colorado, interpreting the state’s prompt-payment statute which provides that an insurer “shall not unreasonably delay or deny payment of a claim for benefits owed to or on behalf of any first-party [insured] claimant,” held that an insurer violated the statute when it withheld payment for undisputed medical expenses on the basis of the presence of separate disputed payments.
Colorado Excess Insurance Carrier’s Equitable Subrogation Claim Against Primary Carrier for Refusal to Settle Required Allegations and Proof of Bad Faith
The Colorado Court of Appeals held that an excess carrier asserting an equitable subrogation claim against a primary insurer for a failure to settle a claim within the primary carrier’s liability limits steps into the shoes of the insured, and must plead and prove bad faith to recover against a primary carrier for failing to settle. In the underlying case, a medical malpractice suit was filed against a physician with two separate professional liability policies.
Pennsylvania Insurer Protected From Unfounded Bad Faith Allegation, Requiring a “Clear Conviction” of Insurer’s Bad Faith
The Western District of Pennsylvania held that an insurer did not act in bad faith but was well within its rights in denying an insured’s claim and voiding his policy. The insured’s material misrepresentations caused the court to find that no reasonable jury could conclude that the insurer acted in bad faith in denying the claim. Mr. Felix submitted a homeowner’s insurance claim in excess of $1 million after a fire ravaged his home. The insurer assigned the case to a special investigations unit after identifying several “red flags” suggesting fraud.