Increasingly, both in third-party bad faith cases and in first-party bad faith cases, Courts throughout the United States are finding insurer bad faith liability without insurance coverage. See generally the 5,000 authorities collected and particularly the authorities assembled on this issue in1 Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith § 3:105, "Bad Faith" Liability Without Coverage: Third party (West Publishing Co. 3d ed. and 2014 Supplement); 2 id. § 9:25, "Bad Faith" Liability Without Coverage: First-Party.
In the 2013 decision in the case of Siena Del Lago Condominium Association v. American Fire & Casualty Co., 2013 WL 2127137 (W.D. Wash. May 14, 2013), a U.S. District Court in the State of Washington took this line of case law back to the element of proximate cause and damages -- or so it appeared at first glance.
In the Siena Del Lago case, the District Court applied the general State-Court rule which prevails in the U.S., that without coverage, there is no bad faith claim, either. However, the Court in that case applied the rule only to one set of claims alleged in that first-party bad faith case.
The Court held that relief could not be granted upon the "bad faith" claims and certain of the statutory claims alleged in that case because no damages were shown to result from them:
The Court must dismiss Plaintiff's IFCA [Insurance Fair Credit Act] claim because Mt.Hawley's denial of coverage was proper and therefore it did not act unreasonably in denying coverage. The Court must dismiss Plaintiff's bad faith and CPA [Washington State Consumer Protection Act] claims because Plaintiff has failed to identify damages proximately caused by Mt.Hawley's conduct.
Siena Del Lago Condominium Association v. American Fire & Casualty Co., 2013 WL 2127137 *5 (W.D. Wash. May 14, 2013). Accordingly, the Court in that case granted the insurer's motion for summary judgment and dismissed the bad faith claims and related statutory claims with prejudice.
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