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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
April 23, 2019

Pennsylvania Insurer Protected From Unfounded Bad Faith Allegation, Requiring a “Clear Conviction” of Insurer’s Bad Faith

The Western District of Pennsylvania held that an insurer did not act in bad faith but was well within its rights in denying an insured’s claim and voiding his policy.  The insured’s material misrepresentations caused the court to find that no reasonable jury could conclude that the insurer acted in bad faith in denying the claim. Mr. Felix submitted a homeowner’s insurance claim in excess of $1 million after a fire ravaged his home. The insurer assigned the case to a special investigations unit after identifying several “red flags” suggesting fraud. 

Bad Faith Blog
July 21, 2016

Insured’s Repeated Refusal to Attend a Reasonably Requested IME Defeated His Bad Faith Claim

Summary: The insured filed suit against his insurer for breach of contract and bad faith after repeatedly failing to attend an independent medical examination (“IME”) scheduled by his insurer. On appeal, the Third Circuit held the insured materially breached the insurance contract by failing to appear for the IME. The court further held the insurer had a reasonable basis for the IME and its subsequent denial of the claim. Because there was a reasonable basis for its actions, the insurer did not commit bad faith.

Bad Faith Blog
May 5, 2015

Providing a Defense and Filing a DJ Approved

Summary: In this bad faith action the issue on appeal was whether the insurer lacked “a reasonable basis in law or fact for denying the claim” which is one of the three elements that a plaintiff must allege to maintain a bad faith claim under Kentucky law.