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Bad Faith Blog

We cover current issues, highlights and best practices exclusively on claims of bad faith and extra contractual damages.

Bad Faith Blog
July 17, 2019

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. 

Bad Faith Blog
May 19, 2015

Insurer Found to Be Reasonable in Disclaiming Coverage Even Though Illinois Appeals Court Found Coverage for UIM Benefits

Summary: Automobile insurer brought a declaratory judgment action against insureds and automobile rental company seeking to disclaim liability for underinsured motorist (UIM) benefits arising out of a collision between the insureds’ vehicle and a rental vehicle. Insureds filed counterclaims for breach of insurance policy and vexatious refusal to pay and the rental company filed counterclaims including request for declaration that it did not provide liability insurance arising out of the collision. After partial summary judgment was granted to the insurer by the trial court, the insureds appealed. The appellate court held the insureds were not required to exhaust the minimum financial responsibility amounts required to be provided by rental companies before they could collect UIM benefits and the insurer’s conduct was not vexatious and unreasonable.

Bad Faith Blog
August 18, 2014

Montana Supreme Court Rules State Farm Did Not Act in Bad Faith Because it had a Reasonable Basis to Refuse Settlement Offer

Summary: Automobile insurer filed suit seeking declaratory judgment that “Limits of Liability” for “Each Person” limited coverage on derivative claims brought by passenger’s daughter for passenger’s death as a result of a car accident caused by insured’s negligence to $50,000 limit that had already been paid to passenger’s estate. The insured and personal representative of passenger’s estate, who was also acting as a conservator for the daughter, filed a counterclaim for breach of policy and bad faith.The District Court ruled that the insurer had correctly interpreted “Each Person” limit of liability. However, the Montana Supreme Court reversed and remanded (Freyer I). On remand, the insured and personal representative/conservator amended the counterclaim adding a claim for violation of the Unfair Trade Practices Act (UTPA) and sought enforcement against insurer of a stipulated judgment of $2.7 million in the suit brought by personal representative/conservator against insured for wrongful death. The District Court entered summary judgment in insurer’s favor on all claims. However, the Supreme Court held that the insurer’s reliance on precedent at time of claim was not an affirmative defense to a claim for policy breach, but the stipulated judgment between the insured and the personal representative/conservator was not an appropriate measure of consequential damages to passenger’s daughter for insurer’s breach of duty to indemnify. Moreover, insurer did not act in bad faith or breach its duty of good faith and fair dealing by refusing the settlement offer on daughter’s claims. Further, insurer did not misrepresent the scope of coverage on daughter’s claim under the provision for “Each Person” Limit of Liability under the UTPA. (Freyer II)