Propitious and Connacht were co-owned. Propitious owned the building from whom Connacht leased the first floor to operate a restaurant and sports bar. Propitious insured the structure through Badger Mutual Insurance Company and Connacht insured its business through Society Insurance when the building and business had a damaging water loss. After Propitious and Connacht were unable to resolve their insurance claims with Badger and Society, they joined in a suit in which they jointly sued Badger and Society. Society moved to dismiss multiple counts and succeeded in getting those statutory bad faith and extra-contractual counts dismissed without prejudice.
We cover current issues, highlights and best practices exclusively on claims of bad faith and extra contractual damages.
Summary: Lamar Ragland sued State Farm Mutual Automobile Insurance Company (State Farm) for State Farm’s alleged bad faith in failing to pay an underinsured motorist (UIM) claim. Ragland was injured in an automobile accident by an underinsured motorist in January 2012 and claimed that he was entitled to UIM benefits from State Farm for the same amount he could collect from the motorist. Two separate complaints were filed and then consolidated. The circuit court dismissed the bad faith claim. Ragland appealed. The Supreme Court of Alabama remanded to the circuit court which ruled the bad faith claim was final and appealable pursuant to Rule 54(b). State Farm moved to dismiss, claiming the circuit court had exceeded its discretion. The Supreme Court agreed and dismissed Ragland’s appeal as taken from a nonfinal judgment.
Summary: The seller of a home was insured under a Homeowner’s Policy and a Renter’s Policy issued by United Services Automobile Association (USAA). Past basement problems, including flooding, were not disclosed by the seller. The basement flooded after the buyer took possession, and buyer sued the seller. After USAA denied coverage, the parties reached a settlement wherein a consent judgment was entered for $300,000 in favor of Huckins in the underlying case and Huckins then filed suit against USAA for breach of the duty to defend Van Sickle, breach of contract, common law and statutory bad faith, and punitive damages. The District Court held that USAA had not breached its duty to defend, as the claim was not an “occurrence,” and the buyer appealed. The Montana Supreme Court reversed and held USAA had a duty to defend under the renter’s policy.
Insured injured in a car accident claimed underinsured motorist (UIM) benefits because the adverse driver was insufficiently insured. The insured asked the court to assess penalty interest under the Uniform Trade Practices Act (UTPA) for payments made far beyond the statutory deadline. The trial court and Court of Appeals refused finding that penalty interest did not apply because the claim essentially placed the insured in the shoes of a third-party claimant. Because the claim was “reasonably in dispute” for purposes of MCL 500.2006(4), no penalty interest was owed. The Supreme Court of Michigan held that an insured making a first party claim cannot be considered a “third party tort claimant” under the Act. The Court reversed and remanded for further proceedings.
Toby Thornton filed a lawsuit against his employer’s insurer, American Interstate Insurance, alleging common law bad faith for denying his claim for permanent and total disability (PTD) and his request for partial commutation of benefits. The district court found that American Interstate acted in bad faith as a matter of law by opposing Thornton’s workers’ compensation claims. On appeal, the Supreme Court of Iowa agreed American Interstate had no basis to challenge Thornton’s PTD status and affirmed summary judgment on that issue. However, the Court held that the district court improperly found the insurer acted in bad faith as a matter of law on the commutation issue. Thus, the Court reversed part of the judgment and the damages awards and remanded the case for a new trial on the remaining bad-faith claims.