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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
February 26, 2018

Kentucky High Court Upholds Bad Faith Determination Despite Reservation of Rights Defense and Filing Declaratory Judgment

James Demetre carried liability insurance on his vacant lot, which was previously a gas station. Demetre was notified that a family occupying a nearby residence was bringing environmental claims against him stemming from the alleged migration of petroleum from his property. Indiana Insurance Company provided a defense under a reservation of rights, sought declaratory judgment on its coverage dispute, and ultimately indemnified Demetre in relation to the final settlement. Nevertheless, Demetre sued Indiana Insurance for bad faith breach of his insurance contract. These claims went to trial and Demetre was awarded $925,000 in emotional distress damages and $2.5 million in punitive damages. The resultant question is: how is such a result possible?

Bad Faith Blog
November 5, 2017

South Dakota Provides Remedy for Deceit by Insurer

Summary: Charter Oak Insurance was punished for willfully deceiving a claimant about coverage for her UIM claim. Defendant Charter Oak was the commercial insurer of Billion Empire Motors, an auto dealership in South Dakota. Billion loaned a car to Peterson who had an accident that severely injured her passenger, Dziadek. Peterson had $100,000 worth of coverage for Dziadek. Charter Oaks’ claims representative contacted the lawyer for Dziadek and told him there was no coverage under the Charter Oak policy for under-insured motorists.

Bad Faith Blog
September 25, 2016

Proper Brandt Fees Usage to Calculate Punitive Damages in California Bad Faith Cases

Summary: Stonebridge Life provided hospital indemnity coverage to Nickerson who was hospitalized for 109 days after a severe leg fracture. The trial court directed a verdict for Nickerson on the breach of contract claim, entered judgment on the jury verdict for breach of the implied covenant of good faith and fair dealing, and imposed a $19,000,000 punitive damages award. The parties stipulated to attorneys’ fees (Brandt fees) of $12,500 to be imposed by the trial court post-verdict. The trial court reduced the punitive damages award to $350,000, 10 times the compensatory damages, but did not include the Brandt fees in that calculation. The California Supreme Court reversed and found the Brandt fees were incurred to recover the insurance benefits so were properly a component of compensatory damages. Accordingly, they were properly included when calculating the ratio of punitive to compensatory damages to determine whether the punitive damages award satisfied due process.

Bad Faith Blog
July 31, 2016

New York’s Highest Court Applies Ohio’s Bad Faith Law

Summary: The New York Court of Appeals affirmed the trial court’s denial of Seneca Specialty Insurance Company’s (“Seneca Specialty”) motion to dismiss. Seneca Specialty relied upon New York’s restrictive bad faith requirements for this commercial property loss even though the insured’s building was located in Ohio. The prevailing conflicts of law rule provides that whenever the insured risk is located entirely within one state, that state’s law will control the litigation.