Bad Faith Blog

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?

Summary: The insureds sued their homeowners’ insurer and the defense attorneys hired by the insurer alleging bad faith in handling their claim, legal malpractice, and breach of fiduciary duty. The insurer resolved the bad faith claim by funding a settlement of the underlying third party claim. The Court of Appeals affirmed judgment entered in favor of the defense attorneys after an analysis of the challenging relationship between insurer, defense attorney, and insured. This case serves as a reminder that proper handling of the tri-partite relationship is necessary whenever the insurer has a duty to defend; otherwise, the insurer may face bad faith exposure.

Summary: In a traditional garnishment case against the liability insurer, the Missouri Supreme Court held recovery against the insurer was limited to the policy limits. The court held absent a finding of bad faith by the insurer, no extra-contractual damages were awardable.

Summary: A.M. Best and Best’s Recommended Insurance Attorneys and Adjusters has released the latest installment of the Insurance Law Podcast, a series that examines timely insurance issues from an attorney’s point of view.

Summary: Cincinnati Insurance concluded that it had no duty to defend tenant Moon for a child’s drowning death in a swimming pool while Moon was babysitting the child. The Northern District of Georgia agreed with Cincinnati and the 11th Circuit Court of Appeals affirmed.