Bad Faith Blog

The Tenth Circuit affirmed summary judgment in favor of State Farm on the insureds’ count for bad faith relating to a property damage claim. The court found State Farm relied upon a legitimate dispute of the scope of coverage in initially denying and delaying agreement to an appraisal. The court further found the insureds had produced no evidence to support their claim State Farm performed an inadequate investigation of the claim. The insureds disputed the findings of State Farm’s investigation was insufficient to infer the investigation was inadequate.

Summary: Property Gusma Properties owned and insured was damaged in Hurricane Ike. When the insurer demanded an appraisal, Gusma hired an attorney to assist. Following the appraisal award, the insurer tendered a check to the attorney for the full amount, all of which the attorney retained. Gusma sued the attorney and the insurer to recover its losses. Gusma claimed it was entitled to prompt payment penalties from the insurer for issuing the check jointly payable to Gusma and its counsel. The Texas Court of Appeals affirmed the trial court’s ruling that Gusma was not entitled to penalties. The Court of Appeals held, on this issue of first impression, that an insurer does not “delay payment, within the meaning of the Prompt Payment provisions, when it tenders payment to the insured’s authorized counsel in the form of a negotiable instrument that is made jointly payable to both insured and its counsel.”

Summary: Bruhn Farms Joint Venture (“Bruhn”) suffered significant hail damage to crops. Bruhn notified the insurer of the hail damage. After a month of no action, Bruhn requested and received approval to harvest the crops. By the time insurer sent adjusters to the farm, additional inclement weather had occurred. The adjusters, after spending minimal amount of time in the fields, determined the payable loss and notified Bruhn. Bruhn disagreed with the adjusted loss and refused to sign the proof of loss. The insurer sent payment for the loss without further discussion with Bruhn. Bruhn contacted his insurance agent to negotiate with the insurer. Allegedly both parties agreed to re-calculate the loss using the historical yields. The insurer notified Bruhn’s agent it was willing to pay additional funds on Bruhn’s claim. However, when Bruhn’s agent attempted to accept, the insurer alleged the claim was properly adjusted and paid.