Bad Faith Blog

Summary: Professional liability insurer brought a declaratory judgment action against its insured, an accounting firm, seeking a declaration that it owed the insured no defense or obligation beyond its $100,000 sub-limit and seeking recovery of overpayments of defense costs above the sub-limit. The insured accounting firm filed counterclaims seeking a declaration that the insurer’s duty to defend and indemnify was not limited by the sub-limit and for bad faith. The United States District Court for Eastern District of Pennsylvania granted the insurer’s summary judgment motion for declaratory judgment and for recovery for over-payment. The insured appealed to the Third Circuit United States Court of Appeals and the Court of Appeals affirmed.

Summary: Great American insured Bayley, a general contractor on a $12.3 million renovation project in Orange County, California. After its air conditioning subcontractor was found to have violated California’s prevailing wage law, the Community College District served Bayley with a “Notice of Withholding Contract Payments” as well as the procedural right to dispute the withholding. On cross-motions for partial summary judgment the district court found that Great American had a duty to defend which Great American had breached, but also found in favor of Great American on the statutory and non-statutory bad faith claims.