Bad Faith Blog

An excess liability insurance carrier filed a state court declaratory judgment action seeking a declaration that a primary liability insurer was obligated to pay the entire judgment against the insured, as well as prejudgment interest and costs. After removal to federal court, the primary insurer counterclaimed seeking a declaratory judgment that the excess carrier was liable for equitable indemnity and equitable subrogation. The district court ruled that the primary insurer had a claim for equitable subrogation (not equitable indemnity), but that jury questions remained regarding whether the excess insurer had unreasonably refused to settle the underlying personal injury action within its policy limits.

Fidelity National defended Lehman Commercial in multiple cases and settled approximately $900,000 worth of claims presented, but was unable to defeat Lehman’s claim for “bad faith breach” as a matter of law on its motion for summary judgment.

Summary: The District Court dismissed Plaintiffs’ claims for negligence, negligent infliction of emotional distress and unfair business practice in violation of the California Unfair Competition Law statute. The District Court held that the Unfair Competition Law (“UCL”) claim was legally barred because it attempted to enforce a provision of the Unfair Insurance Practices Act (“UIPA”) that does not give rise to a private cause of action. The District Court also held that California law does not allow negligence claims to be asserted against insurers relating claims handling.

SUMMARY: California appeals court finds insurer breached its duty of good faith and fair dealing when it pursued a subrogation action against a tortfeasor to recover the cost of repairs after the insured had not authorized repairs or pursuit of the subrogation action. Hibbs v. Allstate Insurance Company. 2011 WL 1485623 (Cal.App. 2 Dist.)) The Hibbs’ vehicle, which was insured by Allstate, was damaged when it was struck by Brooks. Hibbs towed the vehicle to a body shop and contacted Allstate. The Hibbs informed Allstate’s claims adjuster that they believed the vehicle was a total loss.