The Sapienza’s purchased a home in an historic district in Sioux Falls, South Dakota, tore it down, and built a new home which the historic preservation board approved. However, the new house upset the neighbors who sued for injunctive relief (to include having the house torn down) arguing that the new structure violated certain height and setback restrictions. Liberty Mutual defended the Sapienza’s under a reservation of rights. The trial court in the underlying case granted injunctive relief after finding that “compensation would not provide adequate relief,” a ruling affirmed by the Supreme Court of South Dakota. The Sapienza’s were given 30 days to demolish their home which they did at the cost of more than $60,000.00. They then sued Liberty Mutual for breach of contract, both for failing to provide an adequate defense and for refusing to indemnify them for their out of pocket “damages”. They also filed three counts described as “bad faith” claims. The U.S. District judge granted Liberty Mutual’ s motion to dismiss the three bad faith claims, but denied the motion to dismiss the breach of contract claims. The judge gave plaintiffs 14 days to file a motion for leave to amend their complaint if they had a factual basis for alleging a breach of the duty to defend and certified a question to the South Dakota Supreme Court to decide whether “the costs the Sapienzas incurred to comply with the injunction constitute covered ‘damages’ under the Policies.”
We cover current issues, highlights and best practices exclusively on claims of bad faith and extra contractual damages.
Wisconsin Insurer’s Thorough, Adequate, and Timely Investigation and Proper Settlement Negotiation Tactics Bar Bad Faith and Statutory Pre-Judgment Interest Claims
Elizabeth Baires was in a car accident with an underinsured driver while insured by State Farm. After State Farm consented to settling with the underinsured motorist for its $100,000 limits, plaintiff and her husband demanded that State Farm settle her claims for the $200,000 UIM stacked limits. State Farm refused her demand, leading to plaintiff and her husband filing suit for breach of contract, loss of consortium, and bad faith refusal to pay plaintiff’s claim. Thereafter, the federal district court granted State Farm’s motion for partial summary judgment on the bad faith claim.
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.
Summary: A homeowner’s insurer brought an action against the insured for declaratory judgment that liability coverage was barred by an exclusion for bodily injury resulting from use of a “jet ski.” The insured counterclaimed alleging bad faith. The trial court found for the insurer on the bad faith claim after a first appeal found coverage was owed. The court held on the appeal of the bad faith ruling that the meaning of “jet ski” was ambiguous and fairly debatable, barring the bad faith action.
Wow! Wisconsin Supreme Court “Needlessly Alters the Well Established [Bad Faith] Law and Creates… New Pleading Requirements and Uncertain Procedures That are Unnecessary and Confusing.” (Bradl
Summary: Allstate insured Wanda Brethorst was injured while a passenger in the car her husband was driving. The Allstate policy provided both medpay and uninsured motorist coverages. Allstate paid her medical expenses up to the $5,000.00 medpay limit and offered to pay a small portion of the remaining $4,789.00 in medical expenses to settle the UM claim. She rejected the offer to settle the UM claim for roughly 37 percent of her unpaid medical expenses and filed a bad faith claim. The case was before the Supreme Court of Wisconsin on an interlocutory appeal to decide if Wisconsin law allowed her to proceed with a stand alone bad faith claim. In two separate opinions, the court unanimously agreed that she could.