We cover current issues, highlights and best practices exclusively on claims of bad faith and extra contractual damages.
Washington Supreme Court Holds Insurer that Breached its Duty to Defend in Bad Faith is Estopped from Denying Coverage Absent an Applicable Affirmative Defense
The insureds sued their title insurer alleging breach of the duty to defend after Indian tribes asserted their treaty right to harvest shellfish from insureds' tidelands. The Washington Supreme Court held an insurer’s breach of its duty to defend was in bad faith because the insurer’s arguable interpretation of Washington law was not consistent with the insurer’s obligation to provide its insured with the benefit of any doubt regarding a duty to defend.
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?