Bad Faith Blog

An insurer is required to know the law, and to fulfill any obligations that would exist even in its “least coverage” scenario. The Louisiana Court of Appeal found an insurer committed bad faith by failing to pay a statutorily-mandated amount despite pending litigation involving the matter that could result in reimbursement in excess of that amount. The Court required the insurer to pay the minimum due first, unless there exists a legitimate concern the statutory minimum is not owed at all. The fact that more might be owed does not amount to such a concern.

Summary: Dana Johno brought a suit against Leon Duplessis & Sons, Inc. (“Duplessis”) alleging it demolished his home without consent following Hurricane Katrina. Johno also named as parties to the suit Duplessis’s two subcontractors (Hard Rock Construction and Pro Tree Services), its insurer (Scottsdale Insurance Company) and the local parish government which hired Duplessis.

Summary: Insureds appealed the ruling that their insurer Automobile Club Inter-Insurance Exchange did not act in bad faith in denying their property damages claim. They argued the insurer should have accepted a late premium payment, as it had done in the past, so that the policy did not lapse. The Louisiana Court of Appeals affirmed the trial court’s ruling finding even if the insurer was equitably estopped from denying coverage it had not acted in bad faith.