Insurer Twice Failed to Conduct a Reasonable Claim Investigation, Now Liable for $5.4 Million in Bad Faith Damages
The First Circuit Court of Appeals recently upheld a $5.4 million award against a nightclub’s insurer after it found the insurer engaged in unfair claim settlement practices by failing to conduct a reasonable investigation into claims by a 20-year old dancer who was seriously injured in a car accident after the nightclub allowed the dancer to drive away heavily intoxicated. The dancer, who was known to be underage, was an independent contractor at a nightclub in Worcester, Massachusetts. On the night in question, the dancer drank heavily while working at the nightclub, and after her shift ended, was escorted to her car by the nightclub’s bouncer, who knew the dancer was intoxicated but nonetheless let her drive away. Shortly after leaving the nightclub, the dancer was involved in a two-car collision, resulting in significant injuries, disfigurement, and more than $375,000 in medical expenses. The nightclub’s insurer referred the matter to a third-party adjuster and instructed it to perform a “limited investigation.” The insurer concluded the investigation before the third-party adjuster discovered the nightclub’s policy requiring dancers to encourage patrons to buy them drinks.