Bad Faith Blog

An insured motorist who sustained injuries in a motor vehicle accident brought a first party bad faith action alleging the automobile insurer acted in bad faith in attempting to settle the claim for underinsured motorist (UIM) benefits. The district court granted summary judgment for the insurer; however, the Eleventh Circuit held that although actions of the insured or the insured’s lawyer were part of the “totality of circumstances” to be considered in bad faith claims, there were factual issues that still existed precluding summary judgment.

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: State Farm issued an uninsured motorist policy to Enrique with a $100,000 limit. Enrique was injured in an auto accident, sought UM benefits and also sought to recover bad faith damages. The bad faith portion of the case was stayed pending resolution of the UM claim which resulted in a jury verdict awarding $260,000. However, the trial court granted summary judgment in favor of State Farm on the bad faith claim which a divided Delaware Supreme Court affirmed.

Summary: The insured filed suit against his insurer for breach of contract and bad faith after repeatedly failing to attend an independent medical examination (“IME”) scheduled by his insurer. On appeal, the Third Circuit held the insured materially breached the insurance contract by failing to appear for the IME. The court further held the insurer had a reasonable basis for the IME and its subsequent denial of the claim. Because there was a reasonable basis for its actions, the insurer did not commit bad faith.