Florida Appeals Court Refuses to Enter a Conditional Judgment Awarding Attorney’s Fees

Posted on December 28, 2011 by Aaron French

Summary: Insured motorist and his wife brought action against their insurer seeking underinsured motorist (UIM) benefits. After the trial court entered judgment in favor of the insureds, the insurer appealed. The appeals court affirmed but denied the insureds’ motion for appellate attorney’s fees. The appeals court, sitting en banc, granted the insureds’ motion for re-hearing on the denial of appellate attorney’s fees. The court of appeals held it could not enter a conditional judgment awarding appellate attorney’s fees contingent on the insureds subsequently prevailing on a bad faith claim.

Government Employees Insurance Company v. King, 68 So. 3d 267

Insured was driving a car when it was struck from behind by another vehicle. The liability insurance company for the other vehicle settled the claim of insured and his wife for its policy limits. Subsequently, the insured and his wife filed claims for UIM with Government Employees Insurance Company (GEICO). GEICO did not settle the UIM claims. The insured filed suit against GEICO. Ultimately, a jury returned a verdict in favor of the insured for approximately $1,588,000 and in favor of his wife for $50,000. The UIM limits were $25,000 per person.

Because the trial involved only a claim for UIM benefits under the insurance contract, the judgment on appeal was not a judgment for the full amount of the jury’s verdict, but rather a judgment based on the $25,000 in insurance coverage. After oral argument on appeal, the three judge panel determined that there was no reversible error and affirmed without a written opinion. The three judge panel denied the insureds’ motion for attorney’s fees because the judgment did not involve a denial of coverage and the insured’s proposal of settlement before the trial had been in the amount of $100,000, which was an amount in excess of the $25,000 policy limits.

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Insurer Did Not Commit Bad Faith in Denying Worker’s Comp Claim

Posted on November 16, 2011 by Aaron French

Summary: Worker’s compensation insurer filed dispute as to whether claimant’s compensable injury included right carpal tunnel syndrome, a wrist sprain/strain, and tendonitis. Following a contested case hearing with the Department of Worker’s Compensation, it was found that evidence of causation was insufficient to establish claimant’s injuries were work related. Claimant filed a bad faith action against the worker’s compensation insurer and its claims examiner for denying her claims. After the lower court granted summary judgment in favor of the worker’s compensation insurer, the Court of Appeals affirmed, holding that worker’s compensation insurer’s claims examiner did not act in bad faith by filing a dispute asserting that claimant’s compensable injury did not extend to carpal tunnel syndrome, wrist strain/sprain or tendonitis.

Aleman v. Zenith Insurance Company, 343 S.W.3rd 817 (Tx. App. 2011)

Rita Aleman (“claimant”) was employed as a packer by an automotive parts manufacturer.  Zenith Insurance provided worker’s compensation insurance for claimant’s employer.  Claimant filed an injury report alleging she had suffered an on-the-job injury to her right hand.  Claimant’s employer immediately referred her to a doctor who diagnosed her with a right wrist sprain and right tenosynovitis.  Claimant also visited a chiropractor who diagnosed her with a wrist sprain/strain and carpal tunnel syndrome.

Zenith handled claimant’s condition as a compensable but it continued to investigate the claim.  As part of the investigation, Zenith’s claims examiner took claimant’s statement and spoke with her employer about claimant’s duties.  Claimant’s supervisor refuted claimant’s claim she packaged 600 orders a day as the entire packaging department packaged only 160 to 165 orders per day.  Zenith and its claims examiner also reviewed the available medical information.  Claimant stated she was still in pain five to six weeks after the date of the injury and that was inconsistent with tendonitis or tenosynovitis according to the medical disability advisor.  Also, an MRI did not reveal any soft tissue swelling or tendon damage in the right wrist.  Zenith also consulted numerous peer reviewed medical studies which led it to conclude that claimant’s work activities would not have caused carpal tunnel syndrome.

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Is It Bad Faith to Delay the Pay? Federal Court in Pennsylvania Says No

Posted on November 9, 2011 by Aaron French

Summary: Uninsured motorist filed a bad faith action against his automobile insurer for failure to pay underinsured motorist (UIM) benefits. Insurer moved for summary judgment and district court held that insurer’s delay in paying UIM benefits did not constitute bad faith.

Rossi v. Progressive Insurance, 2011 WL 1565848 (M.D.Pa. 2011)

On January 5, 2007, the insured, Rossi was involved in an automobile collision with McGroarty. Rossi was insured by Progressive, and his policy provided UIM coverage with a limit of $30,000. The insured turned his car left across on-coming traffic lanes and collided with McGroarty’s vehicle. Both liability and the insured’s damages were hotly contested, which resulted in extensive discovery. Approximately two years after being provided notice of insured’s UIM claim, Progressive forwarded a $30,000 settlement draft to the insured’s attorney. Progressive paid the $30,000 policy limits approximately one year after the insured had filed a bad faith action against it.

Under Pennsylvania law, an insurer has a duty to act in the “utmost good faith towards its insured.” Pennsylvania courts have defined bad faith as “any frivolous or unfounded or refusal to pay proceeds of a policy; it is not necessary that such refusal be fraudulent. For purposes of an action against an insurer for failure to pay a claim, such conduct imports a dishonest purpose and means a breach of a known duty (i.e., good faith and fair dealing), through some motive of self interest or ill will; mere negligence or bad judgment is not bad faith.” Under Pennsylvania law, a plaintiff must prove bad faith by clear and convincing evidence.

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Clearly Written Exclusion Defeats Contract and Bad Faith Claims

Posted on October 24, 2011 by John Sandberg

Summary: “Use” is an easily understood word that includes both intentional and accidental actions such that any use of an illegal drug triggered the exclusion.

Sonja Skinner v Guarantee Trust Life Insurance Company, 2011 WL 1598787 (S.D.Ohio)

In this United States District Court case the plaintiff’s husband died while insured under an accidental death and dismemberment insurance policy issued by defendant Guarantee.  The dispute was whether the husband’s death was excluded by a provision of the policy that excluded deaths resulting from taking narcotics, amphetamines or other stimulants without a prescription.  The decedent died of methadone intoxication.  He did not have a prescription for methadone but the wife did and the wife argued that her husband accidentally took the methadone pills in the middle of the night thinking it was his own prescription medication.  The plaintiff contended that the exclusion of the use of methadone only included voluntary or intentional acts of consuming and did not include the accidental use of methadone.

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One Reasonable Basis for Denying Coverage Defeats Bad Faith in Iowa

Posted on October 17, 2011 by Anthony Martin

Summary: Pella Corporation, an Iowa company, was a defendant in two class action cases in Illinois. Those cases alleged that Pella’s windows were defectively designed and manufactured. Liberty Mutual filed a declaratory judgment action in Iowa federal court contending it owed no coverage. The District Court ruled that Liberty Mutual had a duty to reimburse Pella’s defense costs, but denied Pella’s bad faith denial of coverage claim. The Eighth Circuit affirmed the bad faith ruling on appeal.

Liberty Mutual Insurance Co. v. Pella Corp., 650 F.3d 1161, (8th Cir. Iowa) 2011 W.L. 3611485

Pella found itself a defendant in Illinois state and federal court class action cases alleging that Pella defectively designed and manufactured windows which resulted in damage to those windows.  The plaintiffs in the underlying cases alleged multiple theories of recovery.  Liberty Mutual denied coverage, but entered into an apparent cost-sharing agreement with Pella’s pre-2001 carriers to pay portions of the defense costs.  Thereafter, it filed a declaratory judgment action contending that it had no duty to reimburse Pella.

The Eighth Circuit reviewed several arguments Liberty Mutual raised in support of its coverage denial.  The Eighth Circuit held that several of Liberty Mutual’s positions were not supported by the policy language and controlling authorities.

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Being Wrong Is Okay If the Answer Is in Doubt

Posted on October 3, 2011 by John Sandberg

Summary: After plaintiff homeowners discovered significant water damage to their home, they filed a claim with their homeowner insurer, defendant Chubb, which denied the claim on the basis that it was excluded under the policy. Homeowners filed suit against Chubb in Minnesota state court. Chubb removed the case to the US District Court. After the court denied Chubb’s Motion for Summary Judgment, plaintiffs moved to amend the complaint to assert a bad faith claim under a Minnesota statute that allows such claims. The court considered the merits of the proposed bad faith claim on the basis that an amendment may be denied when it would not withstand a motion to dismiss.

Joseph and Carolyn Friedberg v Chubb and Son, Inc. (D. Minnesota F. Supp. 2d 2011 WL 3347850)

The Minnesota statute provides for a bad faith claim and allows costs and attorney’s fees.  The statute requires that the insured show two things:

  1. The absence of a reasonable basis for denying the benefits in the insurance policy; and
  2. That the insurer knew of the lack of a reasonable basis for denying benefits in the insurance policy or acted in reckless disregard of the lack of a reasonable basis to do so.

Minn. Stat. §604.18, subd 2(a).  The district court focused its analysis on the first prong of the test and analyzed whether the claim was properly investigated and whether the result of the investigation was subjected to reasonable evaluation and review.

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California State Pleading Rules Don’t Govern in California Federal Court, but What About Twombly and Iqbal?

Posted on September 26, 2011 by Anthony Martin

Summary: Bruce Rodgers was driving a company car when he was involved in an accident which injured his passenger.  After his passenger sued him, the defense was tendered to Greenwich which defended under a reservation of rights before filing a declaratory judgment action.  Rodgers counterclaimed for breach of contract and breach of the covenant of good faith and fair dealing and also sought punitive damages.  The plaintiff’s motions to dismiss/strike portions of the counterclaim, as well as the motion to add the injured plaintiff in the underlying case as a necessary party were ruled upon by the U. S. District Judge.  Iqbal and Twombly were cited and received lip service, but it seems like the judge followed the Conley v. Gibson rule instead.

Greenwich Insurance Company v. Rodgers, et al., 729 F.Supp.2d 1158 (C.D. California 2010)

Why the insurance company filed a motion to dismiss the breach of contract count is unclear.  It did, the counterclaim alleged the required elements, and the motion to dismiss was overruled.

Of greater importance in the bad faith world was the court’s ruling on the motion to dismiss the claim for breach of the covenant of good faith and fair dealing.  Under California law the test is “whether the insurer withheld payments of an insured’s claim unreasonably and in bad faith.”  There must be a showing of “a conscious and deliberate act, which unfairly frustrates the agreed common purposes and disappoints the reasonable expectations of the other party thereby depriving that party of the benefits of the agreement.”  Importantly, the District Judge noted that “bad faith” is usually a question of fact.  Because of the factual nature of the inquiry, and in light of the allegation that the insurer “withheld payments due under the insurance contract,” coupled with allegations that the insurance company “ceased paying the costs of [ ] defense without justification,” the District Judge was unwilling to grant the motion to dismiss.  Furthermore, the court rejected the insurer’s argument that the “perceived delay in paying defense costs” was insufficient for pleading bad faith by finding that the alleged delay of approximately six months “may amount to a constructive refusal.  To hold otherwise would allow insurance companies to avoid liability for improperly withholding benefits simply by ceasing payment without acknowledging their actions openly.”  Based upon that logic, the court denied the motion to dismiss the bad faith counterclaim.

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Nevada Mother Lies and Loses

Posted on September 19, 2011 by Anthony Martin

Summary: A Nevada mother applied for health insurance coverage on behalf of her four-year-old daughter.  About two weeks later, the daughter was seen by a doctor who diagnosed sexual precocity, made a referral to a specialist, and ordered tests and x-rays.  A week thereafter, an underwriting interview was conducted and the mother failed to reveal facts which would have resulted in the carrier refusing to write the health insurance coverage, including the diagnosis, referral to a specialist, and ordering tests.  The health insurer discovered the misrepresentations, rescinded the policy, and thereafter the parents filed suit.  The U. S. District Judge entered summary judgment in favor of the health insurance carrier on all grounds, including the bad faith claim.

David Siefers, et al. v. PacifiCare Life Assurance Company, 729 F.Supp.2d 1229

The mother of a four-year-old child prepared a health insurance application late in April 2007, signed the application, and submitted it.  That application made it clear that the failure to truthfully answer the questions could lead to a policy rescission.  It further stated that coverage was not in force until the carrier agreed to accept the risk.  The mother signed the application and submitted a deposit premium of $84.00.

About two weeks later, she took her four-year-old daughter in to see a doctor for a pre-school physical.  That doctor apparently diagnosed sexual precocity, referred the four-year-old girl to a pediatric endocrinologist and ordered lab work and a hand x-ray.  A week thereafter an underwriting assistant called and spoke with the mother and asked about the May 4 visit to the doctor.  The mother failed to respond truthfully to questions about the further testing, the treatment, and the referral.  Instead, the mother said that the child had been seen “only for her allergies” and that the child was “perfectly healthy except for allergies.”  Four days later, the insurance company issued the health policy.

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Almost Getting It Right Does Not Foreclose a Bad Faith Suit in Colorado

Posted on September 12, 2011 by Anthony Martin

Summary: American Family insured the Dunns who had sewer and water backup flooding in their basement.  That flooding led to a mold build up and them vacating the house.  The vacant and unheated house during a Colorado winter resulted in water pipes freezing and breaking.  Despite a payment of the full policy limits, the Dunns had the right to pursue a bad faith claim for allegedly bad faith conduct due to delays and the manner in which American Family adjusted the claim.

Michael Dunn v. American Family Insurance, 251 P.3d 1232 (Colo.Ct.App. 2010)

The Dunns had a string of bad luck which began with a sewer backup in their basement. Their property and casualty insurer, American Family, provided the Dunns with contact information for a remediation company, Insurance Contractors and Associates (ICA). Unfortunately, ICA did not succeed in its task and black mold was detected near the furnace. Thereafter, the plaintiffs left their home. After ICA’s remediation attempts failed, the Dunns hired a second, then a third, and then a fourth contractor to finish the work on their house. The house was vacant during the winter months, which resulted in the water pipes breaking. All during this time the mold continued to spread, which caused the Dunns to replace all of the contents in the home. American Family ended up paying approximately $340,000 to the Dunns. The Dunns were not satisfied with this payment and filed suit against American Family alleging a bad faith breach of their insurance contract.

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Court Finds No Bad Faith Due to Bona Fide Dispute Over Coverage for Wind Damaged Roof

Posted on August 29, 2011 by Aaron French

Summary: The District Court granted partial summary judgment in favor of insurer on bad faith claim regarding roof damage. The District Court found there was a bona fide dispute whether coverage applied, but that the insurer had not acted in bad faith by relying on its experts’ reports which concluded that the damage was not caused by Hurricane Ike.

Lee v. Catlin Specialty Insurance Company, 766 F.Supp.2d 812 (S.D. Tx. 2011)

Insured plaintiff owned a commercial shopping center and purchased a commercial property insurance policy from defendant insurer.  The policy provided coverage up to $1.7 million for wind damage with a $36,000 deductable.  Insured submitted a loss notice claiming that the roof of the shopping center sustained damage caused by Hurricane Ike.

The loss was submitted on September 24, 2008, approximately 10 days after the loss was allegedly sustained.  On September 25, 2008, insurer acknowledged receipt of the claim and it retained an independent private adjuster to adjust the claim.  The independent adjuster attempted to contact the insured several times by telephone between September 26 and October 2, 2008, to arrange for an inspection.  On November 9, 2008, the adjuster sent the insured a letter to schedule a time to inspect the property.

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