bad faith – Duane Morris Insurance Law

February 21, 2023 by Daniel B. Heidtke

Mistakes Do Not Prove Malice: Federal Court in Dallas Enters Summary Judgment on Policyholder’s Bad Faith Claim

Alleging an insurer was “dilatory, deficient, and pre-textual” in its handling of a claim is not enough to state a claim for bad faith, explained the Northern District of Texas, as it entered summary judgment against a policyholder’s breach of the duty of good faith and fair dealing claim earlier this month. After recognizing that the record lacked “expert testimony, proof of standard industry practices, [] legal authority” or evidence that demonstrated duplicity, the court held that the policyholder failed to meet his burden. After all, the court explained, “mistakes do not prove malice” nor “does delay ensure duplicity”.

In Craig Collins v. State Farm Lloyds, Civil Action No. 3:21-cv-0982 (N.D. Tex. Feb. 3, 2023), Collins filed a claim on his homeowner’s insurance policy after a tornado damaged his home. Collins’s insurer sent an adjuster to his home, who “took photographs, inspected the property, and filed a report.” The adjuster recommended a total replacement cost, which Collins’s insurer paid. The insurer continued to adjust and investigate his claim, performing a second inspection of Collins’s roof and, after paying an additional sum, sent a third adjuster to inspect Collins’s home. The third adjuster recommended that the insurer pay an additional sum, which the insurer did, and hired an engineering firm to further inspect the property. After concluding its inspection, the engineering firm concluded that no further damages were due to the tornado, but were due to “foundation movement and age-related deterioration.” Evidently unhappy with the outcome and perhaps equally unhappy with the process, Collins filed suit alleging breach of contract, violation of the Texas Prompt Payment of Claims Act, violations of the Texas Deceptive Trade Practices Act, and breach of the common-law duty of good faith and fair dealing.

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December 27, 2022 by Daniel B. Heidtke

Clock is Ticking: New Law Restricts Time-Limited Policy Limit Settlement Demands

By: Dominica Anderson and Daniel B. Heidtke

Certain time-limited settlement demands delivered on or after January 1, 2023 will be subject to additional restrictions as California Code of Civil Procedure (“CCP”) Sections 999-999.5 take effect in the New Year. In the past, policyholder counsel have issued policy-limit demand letters, with little detail, and little time to respond; threats and concerns over acting in “bad faith” abound. In enacting CCP § 999-999.5, the California Legislature set about to establish restrictions and, importantly, clearer guidelines—for both policyholders and insurers.

Pursuant to CCP § 999(b)(2), a “time-limited demand” is defined as:

“an offer prior to the filing of the complaint or demand for arbitration to settle any cause of action or a claim for personal injury, property damage, bodily injury, or wrongful death made by or on behalf of a claimant to a tortfeasor with a liability insurance policy for purposes of settling the claim against the tortfeasor within the insurer’s limit of liability insurance, which by its terms must be accepted within a specified period of time.”

Thus, the new statutory requirements apply only to pre-litigation settlement demands and further only to limited causes of action and claims under automobile, homeowner, motor vehicle, or commercial premises liability insurance policies for property damage, personal or bodily injury and wrongful death claims. (CCP § 999.5(a).)

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March 17, 2021 by Daniel B. Heidtke

Rejection of Reasonable Settlement in Third Party Insurance Claim Not Per Se Unreasonable

In an opinion filed on March 8, the California Court of Appeal, Second District, reversed a jury verdict against an insurer because the jury failed to make an explicit finding that the insurer acted unreasonably in some respect. In Alexander Pinto v. Farmers Ins. Exch., Case No. B295742, the court held that a bad faith claim requires a finding that the insurer acted unreasonably in some respect. Because the jury made no such finding (because the verdict form lacked any question asking the jury to make such a finding), the court vacated the verdict in favor of the insured and remanded the case for further proceedings.

The coverage dispute arose out of a single-car traffic accident. The victim offered to settle his claim against the vehicle owner in exchange for payment of the vehicle owner’s insurance policy limits. The offer lapsed before the insurer accepted it. The victim then obtained a judgment in excess of the vehicle owner’s insurance policy limits. The vehicle owner then assigned her claims against the insurer to the victim. The victim then sued the insurer alleging that the insurer should be held liable for its alleged bad faith failure to settle. The victim prevailed at trial against the insurer.

At issue in the appeal was the lack of an express finding by the jury that the insurer had acted unreasonably (again, the lack of an express finding was because the jury had not been asked this question on the verdict form). The court explained, “[t]he issue is whether, in the context of a third party insurance claim, failing to accept a reasonable settlement offer constitutes bad faith per se. We conclude it does not.”

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October 2, 2015 by Max H. Stern

Protections Against Defended Policyholder Manufacturing Bad Faith Case Via Stipulated Judgment Confirmed By California Court

The California Court of Appeal for the Fourth District, Division Two, in 21st Century Ins. Co. v. Superior Court (Tapia), ___ Cal.App.4th ___ (No. E062244, September 10, 2015), recently confirmed some of the important protections for defending insurers against stipulated judgments that were established in the Hamilton and Safeco decisions and limited the application of other decisions that have been relied on by claimants and policyholders seeking to get around the Hamilton rule against bad faith actions premised on such stipulated judgments. Continue reading “Protections Against Defended Policyholder Manufacturing Bad Faith Case Via Stipulated Judgment Confirmed By California Court”