By: Daniel B. Heidtke
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.
Continue reading “Mistakes Do Not Prove Malice: Federal Court in Dallas Enters Summary Judgment on Policyholder’s Bad Faith Claim”
By: Daniel B. Heidtke
Earlier this month, the United States Court of Appeals for the Ninth Circuit certified the following questions to the Montana Supreme Court: “Whether an anti-concurrent cause (‘ACC’) clause in an insurance policy applies to defeat insurance coverage despite Montana’s recognition of the efficient proximate cause (‘EPC’) doctrine” and, if so, whether the relevant language in the policy at issue was an ACC clause that effectively circumvented the EPC doctrine.
In Ward v. Safeco Insurance Co. of America, Case No. 21-35757, the Court first analyzed Montana’s EPC doctrine, which provides: “where covered and noncovered perils contribute to a loss, the peril that set in motion the chain of events leading to the loss or the predominating cause is deemed the efficient proximate cause or legal cause of loss.”
Continue reading “ACCs and EPC: Ninth Circuit Certifies Question of Whether Policy Provision Can Circumvent Efficient Proximate Cause Doctrine”
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).)
Continue reading “Clock is Ticking: New Law Restricts Time-Limited Policy Limit Settlement Demands”
By: Daniel B. Heidtke
In a significant ruling issued less than one week ago, the Supreme Court of Texas adopted a modified form of the “Northfield exception” to the “eight-corners rule” previously set out by the U.S. Court of Appeals for the Fifth Circuit in Northfield Ins. Co. v. Loving Home Care, Inc., 363 F.3d 523 (5th Cir. 2004).
The court in Monroe Guaranty Ins. Co. v. BITCO General Ins. Co., Case No. 21-0232, explained that the practice of looking at extrinsic evidence outside of the four corners of the complaint and four corners of the insurance policy is permissible, in certain circumstances. As explained by the court, those circumstances require that the extrinsic evidence “(1) goes solely to the issue of coverage and does not overlap with the merits of liability; (2) does not contradict facts alleged in the pleading; and (3) conclusively establishes the coverage fact to be proved.”
Continue reading “Texas Law Allows Courts to Look Beyond Eight-Corners Analysis, Consider Extrinsic Evidence, in Certain Circumstances”
By: Dominica C. Anderson and Daniel B. Heidtke
In a 4-3 decision filed on March 11, the Nevada Supreme Court responded to a certified question from the United States Court of Appeals for the Ninth Circuit. In Nautilus Insurance Company v. Access Medical, LLC; Robert Clark Wood, II; and Flournoy Management LLC, 137 Nev. Adv. Op. 10 (Nev. 2021), the court held that an insurer that reserves its right to seek reimbursement of defense costs paid to defend an insured may recover those defense costs from the insured upon a showing that the claim was not covered. The court held, “when a court finally determines that the insurer had no contractual duty to defend, the insurer may ordinarily recover in restitution if it has clearly reserved the right to do so in writing.”
The coverage dispute arose out of underlying litigation between former business partners that worked together selling medical devices. “After the partnership soured,” one of the former business partners alleged in a lawsuit that his former business partners (the insureds, in the coverage dispute) intentionally interfered with his new business, including by allegedly telling a prospective client that he was “banned” from selling medical devices. The former business partner-insureds tendered the intentional interference claim to their insurance carrier.
Continue reading “Insurers in Nevada Are Entitled to Reimbursement of Defense Costs Paid to Defend Non-Covered Claims”
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.”
Continue reading “Rejection of Reasonable Settlement in Third Party Insurance Claim Not Per Se Unreasonable”
As we wrote earlier this week, legislators continue their efforts to address the enormous cost of business continuity losses. Most recently, Representative Mike Thompson of California, introduced H.R.6494, labeled the “Business Interruption Insurance Coverage Act of 2020”. Continue reading “Congress Proposes Bill for Coronavirus Business Interruption Insurance Coverage”
We previously wrote about the growing likelihood that insurance companies would face claims for business interruption and contingent business interruption insurance claims as their insureds looked to cope with the broad effects of the novel coronavirus outbreak and response. Heating Up: New Orleans-Based Oceana Grill Seeks Insurance Coverage for Coronavirus-Caused Business Interruption. Now, state and federal governments are beginning to consider ways that they might compel such coverage.
Last week, members of the federal government wrote to insurance industry leaders urging them to expand commercial business interruption coverage for COVID-19 losses. In response, the insurance industry leaders replied, “Standard commercial insurance policies offer coverage and protection against a wide range of risks and threats and are vetted and approved by state regulators. Business interruption policies do not, and were not designed to, provide coverage against communicable diseases such as COVID-19.” Continue reading “Statutes Compelling Coronavirus Business Interruption Insurance Should Face Constitutional Constraints”