Bad Faith Blog

The West Virginia Supreme Court of Appeals found an insurer, who defended and settled claims brought by downhill homeowners against its insured, a residential construction company, was not liable for first party common law bad faith or statutory bad faith as a matter of law. State ex rel. State Auto Property Insurance Companies v. Stucky, -- S.E.2d -- , No. 17-0257, 2017 WL 4582607 (W.Va. Ct. Oct. 10, 2017) State Auto Property Insurance Companies (“State Auto”) issued a CGL policy to its insured, CMD Plus, Inc. (“CMD”), a residential construction company, with $1 million in policy limits. CMD contracted to build a custom home on a parcel of property uphill from and adjacent to property owned by Barry and Ann Evans (“Plaintiffs”).

Summary: Ibsen, Inc., the owner and operator of an urgent care medical clinic filed a four count complaint against a health insurance company, Caring For Montanans, and others, alleging violations of Montana’s Unfair Trade Practices Act (UTPA) and alleged common law counts for breach of fiduciary duty, breach of contract, and unjust enrichment. The Montana District Court held that all four counts were essentially for alleged violations of the UTPA and found that Montana did not allow a private right of action for such violations. Accordingly, it dismissed the individual and class action claims Ibsen sought to pursue. A unanimous Montana Supreme Court affirmed.

Summary: The insured, Morlan Enterprises (Morlan), brought an action against Owners Insurance Company (Owners) alleging bad faith and a violation of the Unfair Trade Practices Act (UTPA). In response, Owners sought a writ of prohibition seeking to prevent the Circuit Court from exercising jurisdiction over Owners, from applying West Virginia substantive law rather than Ohio law to an insurance coverage dispute, from allowing Morlan to proceed on its bad faith claim, and from prohibiting presentation of certain evidence. The majority of theSupreme Court of Appeals of West Virginia held in three opinions that Owners had not established the necessary elements for the granting of a writ and, therefore, denied the requested writ of prohibition.

Summary: Automobile insurer filed suit seeking declaratory judgment that “Limits of Liability” for “Each Person” limited coverage on derivative claims brought by passenger’s daughter for passenger’s death as a result of a car accident caused by insured’s negligence to $50,000 limit that had already been paid to passenger’s estate. The insured and personal representative of passenger’s estate, who was also acting as a conservator for the daughter, filed a counterclaim for breach of policy and bad faith.The District Court ruled that the insurer had correctly interpreted “Each Person” limit of liability. However, the Montana Supreme Court reversed and remanded (Freyer I). On remand, the insured and personal representative/conservator amended the counterclaim adding a claim for violation of the Unfair Trade Practices Act (UTPA) and sought enforcement against insurer of a stipulated judgment of $2.7 million in the suit brought by personal representative/conservator against insured for wrongful death. The District Court entered summary judgment in insurer’s favor on all claims. However, the Supreme Court held that the insurer’s reliance on precedent at time of claim was not an affirmative defense to a claim for policy breach, but the stipulated judgment between the insured and the personal representative/conservator was not an appropriate measure of consequential damages to passenger’s daughter for insurer’s breach of duty to indemnify. Moreover, insurer did not act in bad faith or breach its duty of good faith and fair dealing by refusing the settlement offer on daughter’s claims. Further, insurer did not misrepresent the scope of coverage on daughter’s claim under the provision for “Each Person” Limit of Liability under the UTPA. (Freyer II)

Summary: Safeco had reviewed the facts, carefully evaluated the value of the Plaintiff’s uninsured motorist case, round tabled the case when challenged that its offers were too low, and documented well its offers and the reasons for those offers. Although the Court did not rule on the breach of contract claims filed against Safeco, the Court found both that Safeco’s conduct was not in bad faith and was not in violation of the New Mexico statutes. Accordingly, the bad faith and extra-contractual damage claims against the adjuster and Safeco were dismissed and summary judgment was entered against Plaintiff on those claims. The insured’s positions were not helped by his attorney’s failure to abide by the local court rules.