Summary: Charter Oak Insurance was punished for willfully deceiving a claimant about coverage for her UIM claim. Defendant Charter Oak was the commercial insurer of Billion Empire Motors, an auto dealership in South Dakota. Billion loaned a car to Peterson who had an accident that severely injured her passenger, Dziadek. Peterson had $100,000 worth of coverage for Dziadek. Charter Oaks’ claims representative contacted the lawyer for Dziadek and told him there was no coverage under the Charter Oak policy for under-insured motorists.
We cover current issues, highlights and best practices exclusively on claims of bad faith and extra contractual damages.
Insureds Did Not Establish Consequential Damages to Support Claim for Breach of the Implied Covenant of Good Faith and Fair Dealing
The Tenth Circuit Court of Appeals affirmed the trial court’s grant of summary judgment in favor of the insurer, USAA, finding the insureds failed to establish damages to support their claim for breach of the implied covenant of good faith and fair dealing. Specifically, the court found the insureds failed to establish unusual emotional distress, recoverable attorneys’ fees, or recoverable diminution in value damages that could independently support the claim.
Pennsylvania Supreme Court Holds Pennsylvania Law Does Not Require a Policyholder to Prove Insurer’s Self-Interest or Ill Will to Succeed on a Bad Faith Claim
Insured LeAnn Rancosky, who was employed as a letter carrier for the United States Postal Service, purchased a “cancer insurance” policy from Washington National Insurance Company. Rancosky’s employer automatically deducted her bi-weekly premium payments from her paycheck. The policy contained a “waiver-of-premium” provision, which excused premium payments in the event Rancosky became disabled due to cancer. The waiver provision set forth certain requirements be met, including being disabled due to cancer for a period greater than 90 consecutive days beginning on or after the date of diagnosis. Rancosky was diagnosed with cancer, became disabled, and made claims under the policy. Her claims were later denied due to an erroneous statement of disability provided by her physician, which the carrier did not follow up on despite having adequate information in its possession calling into question the physician’s statement. She sued the carrier for breach of contract and bad faith under the Pennsylvania statute. The Pennsylvania Supreme Court, clarifying Pennsylvania law, held that a policyholder is not required to prove the insurance carrier’s subjective ill will or self-interest to succeed on a statutory bad faith claim under Pennsylvania law.
Ninth Circuit Finds California’s Genuine Dispute Doctrine Does Not Bar Bad Faith Judgment Against Excess
LMA North America, Inc. (LMA) sued National Union for breach of contract and bad faith after defendant refused to either contribute $3.75 million towards the settlement of counter-claims asserted by LMA’S competitor, Ambu, or take over the defense of the trade disparagement and false advertising claims. After settling the underlying claims above the $1M primary coverage, LMA asked National Union to pay the balance of the settlement or assume the defense. After the settlement was finalized, National Union agreed to assume the defense. LMA claimed in the coverage and bad faith case that National Union acted in bad faith. The district court denied National Union’s motion for summary judgment and entered judgment for LMA on the jury’s verdict in favor of LMA on the breach of contract and bad faith claims while rejecting the punitive damages claim. The Ninth Circuit affirmed the contract and bad faith judgments.
Salvati’s husband died as a result of a work injury. Ms. Salvati sued several parties she believed responsible for her husband’s death. The parties in the underlying action and their primary carrier agreed at mediation to a $6,000,000 settlement. The primary carrier tendered its $1,000,000 in coverage, but the excess carrier (American Insurance Company (AIC) refused to pay. The case against AIC asserted breach of contract, declaratory judgment, Massachusetts Consumer Protection violation, unfair and deceptive acts in insurance, and professional negligence for failure to settle the claims.