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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
September 17, 2019

Minnesota Court Declares First-Party Bad Faith Test While Affirming Bad Faith Judgment Against Insurer

Peterson filed an underinsured motorist claim against her UIM carrier, Western National, which had a $250,000 policy limit. After a series of migraine headaches caused by her whiplash injury, she started receiving periodic Botox injections to help her manage those headaches. Her insurance company made a series of “low ball” settlement offers after she settled the liability claim for $45,000 of the $50,000 limit of the tortfeasor’s policy.

Bad Faith Blog
September 4, 2019

Breach of Contract Claims Survived (Barely), But All Bad Faith Claims Dismissed

The Sapienza’s purchased a home in an historic district in Sioux Falls, South Dakota, tore it down, and built a new home which the historic preservation board approved. However, the new house upset the neighbors who sued for injunctive relief (to include having the house torn down) arguing that the new structure violated certain height and setback restrictions. Liberty Mutual defended the Sapienza’s under a reservation of rights. The trial court in the underlying case granted injunctive relief after finding that “compensation would not provide adequate relief,” a ruling affirmed by the Supreme Court of South Dakota. The Sapienza’s were given 30 days to demolish their home which they did at the cost of more than $60,000.00. They then sued Liberty Mutual for breach of contract, both for failing to provide an adequate defense and for refusing to indemnify them for their out of pocket “damages”. They also filed three counts described as “bad faith” claims. The U.S. District judge granted Liberty Mutual’ s motion to dismiss the three bad faith claims, but denied the motion to dismiss the breach of contract claims. The judge gave plaintiffs 14 days to file a motion for leave to amend their complaint if they had a factual basis for alleging a breach of the duty to defend and certified a question to the South Dakota Supreme Court to decide whether “the costs the Sapienzas incurred to comply with the injunction constitute covered ‘damages’ under the Policies.”

Bad Faith Blog
January 31, 2019

Bad Pleading Bars Bad Faith/ Extra-Contractual Claims

Propitious and Connacht were co-owned.  Propitious owned the building from whom Connacht leased the first floor to operate a restaurant and sports bar.  Propitious insured the structure through Badger Mutual Insurance Company and Connacht insured its business through Society Insurance when the building and business had a damaging water loss. After Propitious and Connacht were unable to resolve their insurance claims with Badger and Society, they joined in a suit in which they jointly sued Badger and Society. Society moved to dismiss multiple counts and succeeded in getting those statutory bad faith and extra-contractual counts dismissed without prejudice.

Bad Faith Blog
October 1, 2017

Alabama Supreme Court Dismisses Appeal of Bad Faith Claim Dismissal

Summary: Lamar Ragland sued State Farm Mutual Automobile Insurance Company (State Farm) for State Farm’s alleged bad faith in failing to pay an underinsured motorist (UIM) claim. Ragland was injured in an automobile accident by an underinsured motorist in January 2012 and claimed that he was entitled to UIM benefits from State Farm for the same amount he could collect from the motorist. Two separate complaints were filed and then consolidated. The circuit court dismissed the bad faith claim. Ragland appealed. The Supreme Court of Alabama remanded to the circuit court which ruled the bad faith claim was final and appealable pursuant to Rule 54(b). State Farm moved to dismiss, claiming the circuit court had exceeded its discretion. The Supreme Court agreed and dismissed Ragland’s appeal as taken from a nonfinal judgment.

Bad Faith Blog
September 24, 2017

Montana Supreme Court: $300,000 Consent Judgment Proper

Summary: The seller of a home was insured under a Homeowner’s Policy and a Renter’s Policy issued by United Services Automobile Association (USAA). Past basement problems, including flooding, were not disclosed by the seller. The basement flooded after the buyer took possession, and buyer sued the seller. After USAA denied coverage, the parties reached a settlement wherein a consent judgment was entered for $300,000 in favor of Huckins in the underlying case and Huckins then filed suit against USAA for breach of the duty to defend Van Sickle, breach of contract, common law and statutory bad faith, and punitive damages. The District Court held that USAA had not breached its duty to defend, as the claim was not an “occurrence,” and the buyer appealed. The Montana Supreme Court reversed and held USAA had a duty to defend under the renter’s policy.