We cover current issues, highlights and best practices exclusively on claims of bad faith and extra contractual damages.
Indiana Court of Appeals Finds Legal Malpractice Claims are Not Assignable and Voluntarily Providing a Defense Does Not Create a Duty When No Duty to Defend Existed
The Court of Appeals of Indiana held legal malpractice claims are not assignable and affirmed dismissal of a claim against an insurer for vicarious liability for the alleged negligence of retained defense counsel. The Court additionally held when an insurer does not owe a duty to defend or indemnify, it cannot be held liable for a breach of the duty to defend if it voluntarily and gratuitously provided a defense anyway.
Insurer Twice Failed to Conduct a Reasonable Claim Investigation, Now Liable for $5.4 Million in Bad Faith Damages
The First Circuit Court of Appeals recently upheld a $5.4 million award against a nightclub’s insurer after it found the insurer engaged in unfair claim settlement practices by failing to conduct a reasonable investigation into claims by a 20-year old dancer who was seriously injured in a car accident after the nightclub allowed the dancer to drive away heavily intoxicated. The dancer, who was known to be underage, was an independent contractor at a nightclub in Worcester, Massachusetts. On the night in question, the dancer drank heavily while working at the nightclub, and after her shift ended, was escorted to her car by the nightclub’s bouncer, who knew the dancer was intoxicated but nonetheless let her drive away. Shortly after leaving the nightclub, the dancer was involved in a two-car collision, resulting in significant injuries, disfigurement, and more than $375,000 in medical expenses. The nightclub’s insurer referred the matter to a third-party adjuster and instructed it to perform a “limited investigation.” The insurer concluded the investigation before the third-party adjuster discovered the nightclub’s policy requiring dancers to encourage patrons to buy them drinks.
As expected, the unprecedented impact of COVID-19 has resulted in businesses looking to the insurance industry as a means for economic relief. Insurers have faced – and will likely continue to face – a deluge of claims relating to property and business interruption insurance coverage. Disclaimers of coverage for these claims have been primarily due to the lack of direct physical loss, damage, or injury to tangible property. Litigation quickly ensued. While many policyholder lawsuits have focused solely on coverage for their claimed losses, some suits assert claims of bad faith as an additional avenue of relief.
Washington Supreme Court Holds Insurer that Breached its Duty to Defend in Bad Faith is Estopped from Denying Coverage Absent an Applicable Affirmative Defense
The insureds sued their title insurer alleging breach of the duty to defend after Indian tribes asserted their treaty right to harvest shellfish from insureds' tidelands. The Washington Supreme Court held an insurer’s breach of its duty to defend was in bad faith because the insurer’s arguable interpretation of Washington law was not consistent with the insurer’s obligation to provide its insured with the benefit of any doubt regarding a duty to defend.