On June 29, 2021, Governor Parson signed into law Missouri HB 345, which amends R.S.Mo. § 537.065 (permitting contracts to limit recovery to specified assets or insurance policies) and R.S.Mo. § 435.415 (Missouri’s Uniform Arbitration Act). This legislation is an effort to reform insurance “bad faith” litigation in Missouri, supplement legislation passed in 2017, and address recent tactics to avoid the statutory protections granted to insurers in 2017.
We cover current issues, highlights and best practices exclusively on claims of bad faith and extra contractual damages.
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.
As expected, the unprecedented impact of COVID-19 has resulted in businesses looking to the insurance industry as a means for economic relief. Insurers have faced – and will likely continue to face – a deluge of claims relating to property and business interruption insurance coverage. Disclaimers of coverage for these claims have been primarily due to the lack of direct physical loss, damage, or injury to tangible property. Litigation quickly ensued. While many policyholder lawsuits have focused solely on coverage for their claimed losses, some suits assert claims of bad faith as an additional avenue of relief.
Seventh Circuit finds a “mere possibility of liability” against an insured is insufficient for an insurer’s duty to settle to arise under Illinois law.
The Seventh Circuit Court of Appeals concluded the mere possibility of liability against an insured is insufficient for an insurer’s duty to settle to arise under Illinois law.
American Physicians Assurance Corporation, Inc. and American Physicians Capital, Inc. (“APA”) issued a medical malpractice insurance policy to Surgery Center at 900 North Michigan Avenue, LLC (“Surgery Center”) with a $1 million limit of liability. APA defended Surgery Center for medical malpractice claims brought against it by Gwendolyn Tate for complications resulting from a surgery performed by Dr. Harrith Hasson at the Surgery Center. Dr. Hasson was an outside physician with privileges at Surgery Center but not its employee.