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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
September 4, 2019

Breach of Contract Claims Survived (Barely), But All Bad Faith Claims Dismissed

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.”

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Bad Faith Blog
November 13, 2016

First-Party Bad Faith Claim Precluded Where Insurer Does not Breach Contract

Summary: Insured’s property was destroyed by fire. Homeowner’s insurer denied claim based on nonrenewal of policy prior to fire loss. Mortgagee institutes foreclosure action against insured, who filed third-party action against insurer for breach of contract, bad faith refusal to pay claim, and indemnity and contribution, claiming attempt to non-renew did not comply with South Carolina law and was invalid. The trial court entered summary judgment for insurer, finding its notice of nonrenewal complied with South Carolina law. Because the nonrenewal was proper, the bad faith refusal to pay claim failed as a matter of law.

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Bad Faith Blog
September 1, 2016

Iowa Rule: First-Party Bad Faith Claim Barred Because Not Brought With Breach of Contract Suit Against Insurer

Summary: The insured made significant improvements to its building, thereby increasing building’s value. Insurer made initial payments to insured under building, personal property and business income coverages. After substantial negotiations between insurer and insured’s counsel, insured filed breach of contract action against insurer. Insured won at trial, and insurer paid the judgment and interest and obtained a satisfaction of judgment.

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Bad Faith Blog
August 27, 2015

Florida Merges Third-Party and First Party Bad Faith Discovery Rules

Summary: Maharaj filed a third-party bad faith claim against GEICO on behalf of her son after GEICO insisted that Maharaj sign a release that included objectionable indemnification and property damage clauses to conclude the settlement. After removing the bad faith case to federal court, a discovery dispute arose. The Magistrate Judge partially granted Maharaj’s Motion to Compel Production of Documents withheld on privilege grounds.

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Bad Faith Blog
July 5, 2012

There is No First Party Common Law Bad Faith Cause of Action Declares Florida Supreme Court

Summary: Hurricane Wilma caused over $7,000,000 of damage to the Chalfonte Condominium complex in 2005. The property damage, subject to a substantial hurricane deductible, was covered, but the condominium association was not entitled to more than $270,000 for “breach of the implied warranty of good faith and fair dealing” which had been awarded by a federal court jury.

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