Bad Faith Blog

Insured motorist who was injured in an accident with an at-fault motorcyclist brought action against the automobile insurer’s adjuster who handled the claim for bad faith and violation of the Consumer Protection Act. After the trial court dismissed the action and certified it for appellate review, the Court of Appeals held the duty of good faith imposed on “all persons” involved in insurance applies equally to individuals acting as insurance adjusters. Also, the appellate court held individual insurance adjusters can be liable for a violation of the Consumer Protection Act, even if no contractual relationship exists with the individual insured.

James Demetre carried liability insurance on his vacant lot, which was previously a gas station. Demetre was notified that a family occupying a nearby residence was bringing environmental claims against him stemming from the alleged migration of petroleum from his property. Indiana Insurance Company provided a defense under a reservation of rights, sought declaratory judgment on its coverage dispute, and ultimately indemnified Demetre in relation to the final settlement. Nevertheless, Demetre sued Indiana Insurance for bad faith breach of his insurance contract. These claims went to trial and Demetre was awarded $925,000 in emotional distress damages and $2.5 million in punitive damages. The resultant question is: how is such a result possible?

Perez-Crisantos sustained injuries resulting in more than $50,000 in medical bills. After settling with the underinsured motorist (UIM) and collecting $10,000 in medical expenses and $400 in lost wages under the PIP coverage from State Farm, his insurer, he sought additional funds from State Farm, claims which eventually went to arbitration. The arbitrator largely ruled in favor of Perez-Crisantos who then filed claims for bad faith, negligence, violation of Washington’s Consumer Protection Act (CPA), and violation of IFCA. After a reduction for the sums already paid, there was a net UIM award of $24,000. Perez-Crisantos’s “IFCA claim [was] based on the violation of IFCA regulations relating to unfair settlement practices[,]” contending “that State Farm forced him to litigate in order to get payments that were due to him.” The trial court granted State Farm’s motion for summary judgment after concluding there was no “scintilla of evidence” that State Farm’s actions were “unreasonable and there must have been some ulterior motive” for them, such as “some sort of incentive program to ‘lowball claims.’” On direct appeal to the Supreme Court of Washington, the court affirmed.

Summary: Plaintiff sued title insurer upon learning of burdensome recorded easement after purchase of property. Plaintiff sought recovery for breach of contract as well as under the Consumer Protection Act, The Insurance Fair Conduct Act, negligence, and breach of the duty of good faith. Prior to filing suit, Plaintiff sought $125,000 based on diminution in value of the property due to the easement. Title insurer accepted coverage but disagreed as to damage caused by the easement. Title insurer hired expert appraiser who determined diminution in value was $25,000 and title insurer immediately offered to pay that amount. Plaintiff then demanded $100,000 settlement. Title insurer then mailed check to Plaintiff for $25,000, which was rejected and returned by Plaintiff.