In AAA Nevada Insurance Co. v. Chau, Download AAA Nevada Insurance Co. v. Chau (D. Nev. Case No. 08.cv.00827, Order Filed July 15, 2010)FREE ACCESS DOWNLOAD also published as 2010 WL 2802164 (D. Nev. July 15, 2010)(Westlaw subscription required to access Westlaw), a Federal Judge repeated a holding that has been reached on the facts of many alleged Bad Faith Cases in many different Courts: When the Claimant makes an unreasonable demand, that eliminates the ordinary Bad Faith Claim; it is not a separate "Defense" of a "Bad Faith Setup".
As the Court described the holding:
As a matter of law, Plaintiff's [Liability Insurance Company's] actions did not amount to bad faith. Plaintiff clearly had a reasonable basis for their failure to comply with the two-week deadline.
Interveners' [sic] argue that there are materially disputed facts regarding the reasonableness of Plaintiff's actions. Plaintiff recites evidence that AAA's agents knew the claim was going to exceed the policy limits (see Claim Log Notes, 11/28/2006, Ex. 1, # 83); it was twenty-eight days after the injury that the demand letter was sent; the testimony of Interveners' [sic] insurance expert ...; Plaintiff's decision not to solicit the wrongful death claim ...; Plaintiff's failure to settle within the time allowed by the demand letter; Plaintiff's alleged failure to keep its insureds informed of settlement; and AAA's "admission" that there were factual disputes as to the policy limits. None of this is sufficient to create a genuine dispute of material facts as to whether or not AAA lacked a reasonable basis to comply with the demand letter. Interveners' [sic] demand letter was itself unreasonable and appears to be nothing more than an attempt to set up a potential bad faith claim. Accordingly, summary judgment [for the Liability Insurance Company on the Bad Faith Claim in that case] is appropriate.
AAA Nevada insurance Co. v. Chau, 2010 WL 2802164 at *5. [Emphasis added.]
As noted, this holding is in line with the majority view, if not unanimous view, on this issue. See generally Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith", Ch. 5, Insurer's Defenses Against Action by Insured -- Settlement, ยง 5:18, "Unreasonable Demand by Third Party" (Shepard's/McGraw-Hill First Edition; West Publishing Co. Second Edition and 2010 Supplement).
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