An Insurance Company's Motion for Summary Judgment was granted in Download Foster v. State Farm Fire and Casualty Co. (N.D. Ind. Case No. 1.10CV20, Order and Opinion Filed August 17, 2011) PUBLIC ACCESS, also published as 2011 WL 3610425 (N.D. Ind. August 17, 2011)(authorized password required to access Westlaw). In considering a Claim for alleged First-Party Bad Faith and Punitive Damages in connection with Claims under a Homeowners Policy, the Federal Court in that case very usefully and concisely summarized the applicable law.
The Court's holding in this case is echoed in many respects in the decisions of Courts in many other jurisdictions which also recognize the Tort of First-Party Bad Faith. The Court's holding, as follows and as discussed below, is authority on First-Party Bad Faith Claims which can and likely will be cited in Courts beyond the borders of one State or jurisdiction:
While there is no exhaustive or exclusive list of bad faith actions that an insurer can take, the obligation of good faith and fair dealing includes the obligation to refrain from (1) making an unfounded refusal to pay policy proceeds; (2) causing an unfounded delay in making payment; (3) deceiving the insured; and (4) exercising any unfair advantage to pressure an insured into a settlement of his claim. [Citations omitted.] For example, an insurer that denies liability “knowing that there is no rational, principled basis for doing so had breached its duty.” [Citations omitted.] “As a general proposition, ‘[a] finding of bad faith requires evidence of a state of mind reflecting dishonest purpose, moral obliquity, furtive design, or ill will.’ “
Foster v. State Farm Fire & Casualty Insurance Co., 2011 WL 3610425 at *17.
Further, "[t]o prove that an insurance company committed the tort of bad faith in Indiana, a plaintiff must establish that his claim was underpaid or wrongfully denied in the first place." Id. at *18.
However, the Insurance Company in that case had not denied the Policyholders' Claim. Id. The Defendant contended that the Policyholders filed their lawsuit first, before the Insurance Company completed its investigation. Id. at *2.
Further, the fire at the base of the Policyholders' Claims was unexplained. Ignition took place when no-one was present, or at least no-one who was available to testify about it. Even if the Insurance Company is determined to Breach its Insurance Contract by not paying a First-Party Claim, the Insurance Company may in Good Faith dispute that Claim under the prevailing substantive law, the Court held. "A good faith dispute about the amount of a valid claim or about whether the insured has a valid claim does not supply the grounds for a bad faith cause of action." Id. at *18.
Accordingly, the Defendant Insurance Company in that case was held entitled to Judgment as a matter of law, there being no genuine issues of material fact. Since the standard of Bad Faith liability is even higher than the standard for assessing Punitive Damages in Indiana, the Federal Court also granted Summary Judgment with respect to the Policyholders' Claim for Punitive Damages in this case. Id. at *19.
The decision in this case is also noteworthy for other holdings. Besides pursuing a First-Party Bad Faith Claim, the Plaintiffs-Policyholders alleged a Claim for Breach of Contract. Their alleged basis for this Claim was that the Defendant failed to "pay the Plaintiffs' $2,888,432 claim for the loss of their dwelling and personal property caused by a fire." Id. at *1. The Defendant Insurance Company countered that the Plaintiffs-Policyholders failed to provide requested documentation to the Defendant and further that they failed to complete Mrs. Foster's Examination Under Oath as required by their Policy. Although the Federal Court mentioned Mrs. Foster's incomplete EUO several times, the Court actually concentrated on the Fosters' contention that they had produced all the documents they had.
The Plaintiffs-Policyholders thus replied to State Farm's requests for documentation, that they had no more documents to give and that they told the Defendant that they were prepared to complete the uncompleted EUO anyway. Then the Plaintiffs filed their lawsuit against the Defendant, in fairly short order. Id. at *2. Over nearly half-a-dozen full pages, the Federal Judge set out a "timeline" of the events concerning investigation of the Plaintiffs' Claim in the year following the fire, id. at *4-*10.
The Federal Judge in this case also summarized the applicable Policy Conditions concerning production of documents and sitting for EUOs. The provisions are standard Conditions setting forth what the Insured must do after loss. They are in use in many Policies across the country. "The duties at issue in this case are, 'as often as [the insurer] reasonably require[s]' that the insured provide records and documents the insurer requests, and submit to statements and examinations under oath." Id. a *11.
In this case, the issue raised by the Defendant Insurance Company concerning the Policyholders' compliance with these provisions was whether they substantially complied with, or materially breached these provisions. As noted above, the Policyholders maintained that there came a point when they had no more documents to give. The Federal Court examined this contention in the course of reviewing the "timeline" summarized in some 6 pages of the Court's Opinion as published on Westlaw. "However, this Court's review of the designated evidence, even when viewed most favorably to the Plaintiffs, does not support their claim that they fully complied with the Defendant's document requests." Id. at *13.
On first blush, this judicial statement almost seems like the Court is saying that it weighed credibility issues. It apparently did no such thing. The Policyholders did not apparently submit much beyond their assertion that they had no more to produce: "The evidence in support of the Plaintiffs' claims that they produced all documents are their own sworn statements and a letter their attorney sent to the Defendant." Id. at *13. The Court contrasted these items with the materials of record and concluded differently from what the Plaintiffs asserted to be the case here. "The Court does not doubt that in some cases an insured will have substantially complied with document requests despite a failure to meet every demand. This is not such a case.... The Plaintiffs' unsupported claim that they fully complied with all document requests could not convince a reasonable jury that the Defendant was the first to breach its contractual obligations." Id. at *17.
The Court in this case granted the Defendant's Summary Judgment on the Breach of Contract Claim as well.
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