Claims and Bad Faith Law Blog

ALL RISKS: REQUIRING PROOF OF "UNEXCLUDED" PROXIMATE PERIL, BAD FAITH?

It's a jury question in this case.

 In Vardanyan v. Amco Ins. Co., 243 Cal. App. 4th 779, 796, 197 Cal. Rptr. 3d 195, 208-09 (Cal. 5th DCA 2015), review denied (unreported), (Cal. March 9, 2016), the policy involved was issued to the owner of a rental house.  It was an all risks policy and the insured under an all risks policy "does not have to prove that the peril proximately causing his loss was covered by the policy.  This is because the policy covers all risks save for those risks specifically excluded by the policy."  [Emphasis by the Court.]

The all risks carrier in that case convinced the trial judge that its proposed jury instruction correctly stated what the law ought to be, shifting the burden of proof to the insured to prove that the proximate peril was not excluded.  The carrier's argument embodied in that requested instruction was so convincing that the defendant moved for a directed verdict on that ground.  The lower court granted the carrier's motion for directed verdict and accordingly entered judgment in the carrier's favor, both on the insured's claim for breach of contract and on the insured's claim for breach of the implied covenant of good faith and fair dealing.

On appeal, a California intermediate appellate court ruled that the trial court had improperly shifted the burden of proof.  The appellate court reversed the entire judgment previously entered in favor of the all risks carrier in that case, including on the insured's bad faith claim, and remanded for retrial.

The time to express disagreement with the burdens of proof under an all risks policy is before it is issued, such as by expressly changing the pertinent provisions in the policy or perhaps by not issuing an all risks policy at all.  On the other hand, once premiums are collected, the time has already passed for philosophical or any other form of disagreement with how the policy ought to afford coverage.

Please Read The Disclaimer.  © 2018 Dennis J. Wall.  All Rights Reserved.

FIRING BOB MUELLER: ACTIONABLE BAD FAITH?

We will keep the actors in the following scenes anonymous.  We will not only keep personalities out of this.  We will not distract our thinking with personalities.

Assume that when Special Counsel Robert Mueller is fired, that the person or persons involved do not have immunity for their conduct.

Assume further that someone would have standing to sue because Mr. Mueller is fired as Special Counsel.  (That is a big assumption given the current composition of the Supreme Court.)

There are questions whether firing Bob Mueller will be actionable bad faith under any likely set of circumstances.

Refusal or failure to defend?  Suppose that a liability carrier for one of the persons sued for firing Special Counsel Mueller, failed and refused to defend that person?

When a liability carrier wrongfully refuses or fails to defend, it is not so much bad faith as a breach of contract.  It may be a breach of contract with potentially disastrous consequences, that is sure, but it is a breach of contract nonetheless. 

Contract breach or bad faith, there could certainly be a wrongful refusal or failure to defend here, assuming coverage in the first place.

Failure to initiate settlement negotiations?

Breach of settlement duties?

These questions presuppose an answer to an underlying question:

What would settlement look like?

Until we have an answer to that question in our own minds, we cannot explore bad faith breach of settlement obligations of a liability carrier for a person responsible in some part for the firing of Special Counsel Robert Mueller.  Until then, we must come to a stop.

Perhaps this is an illustration of why "bad faith" does not always mean the same thing as extracontractual damages.

Please Read The Disclaimer.  ©2018 by Dennis J. Wall.  All Rights Reserved.

FLORIDA CIVIL REMEDY NOTICE DURING APPRAISAL ALLOWED.

In a 1-1-1 decision in Landers v. State Farm Fla. Ins. Co., 234 So.3d 856 (Fla. 5th DCA 2018), three of Florida's appellate judges on the Fifth District Court of Appeal each separately addressed a single question:  Whether an insured under any given policy must wait until after completing the appraisal process provided for in that policy, before the insured can file a Civil Remedy Notice of Insurer Violation.  In Florida, the CRN is a precondition to suing under the Florida Bad Faith Statute, Section 624.155.

Although they wrote separately, the three judges agreed on one result, in essence, and that is to allow the insured to file a CRN even while an appraisal contemplated by the insurance policy is still pending.

Please Read The Disclaimer.  ©2018 by Dennis J. Wall.  All Rights Reserved.

DELAWARE INSURANCE JUDGE REJECTS ANOTHER DELAWARE JUDGE'S "INTENTIONAL AND BAD FAITH" FRAUD RULING.

In an insurance case, a Delaware judge reportedly ruled on March 1, 2018 that Delaware law should apply to an insurance case.  The Delaware judge in the insurance case reportedly ruled that "'[a]lthough it may strain public policy to allow a director to collect insurance on a fraud, it does not appear to be explicitly prohibited by Delaware statutory law.'"

Don't strain yourself judge.  Another Delaware judge already determined that the fraud involved was "intentional and in bad faith."

The insurance case in Delaware grew out of an earlier fraud case in Delaware.  The fraud case involved the same individuals who are apparently claiming Directors and Officers Coverage in the insurance case.  Their fraud was actually proven in a trial in the Delaware fraud case.  The fraud was that the individuals gave the board of directors of Dole Food Co. false estimates of "how much money the company could save" from accepting a buyout offer from one of the individuals.  James Rufus Koren, "A Court Found That an L.A. Billionaire Duped Dole Investors.  Now He Wants to Stick Insurers With The Bill" (Los Angeles Times Online, Friday, March 9, 2018).

After the trial of the Delaware fraud case concluded, the Delaware judge presiding wrote that the defendants' "'actions were not innocent or inadvertent, but rather intentional and in bad faith.'"  James Rufus Koren, supra, quoting the 2015 opinion of Delaware Chancery Court Chancellor J. Travis Laster.

Stop and reflect with me for a moment.  Has an insurance coverage trial lawyer ever been born who would not be really happy with Judge Laster's quoted ruling, if you had to prove intentional and bad faith conduct that barred all coverage for it?  Now back to the rest of the story so to speak.

Judge Laster held in the Delaware fraud case that the two individuals who would later claim coverage as directors' and officers' policy "insureds" should accordingly pay $148 million.  Apparently before judgment was entered in that amount, the individuals settled -- for that amount together with interest. 

The Directors and Officers Carriers Raise the Fraud Ruling as a Defense to Coverage.

 The Directors and Officers Carriers filed an action in Delaware to declare that their insurance policies did not cover the "intentional and bad faith" fraud.  They argued in particular that their position was a "slam dunk" under California law, but the judge in the Delaware insurance case declined to bar the coverage claim under any State's law.  As noted, the Delaware judge in the insurance case reportedly ruled that Delaware law should apply, and anyway, "'[a]lthough it may strain public policy to allow a director to collect insurance on a fraud, it does not appear to be explicitly prohibited by Delaware statutory law.'"

So there you have it.  Where are the "fortuity" ideologues when they might do some good?  The fortuity ideologues are people who claim, at least when they have a dog in the fight and it is to their advantage, that insurance does not apply unless the covered risk was fortuitous and, moreover, that the party claiming coverage has a burden to prove that the risk involved was fortuitous.  There can be no judicial declaration of coverage, the fortuitous ideologues continue, unless the risk is fortuitous.

A trial in the insurance case in Delaware is reportedly currently scheduled for July, 2018.

Stay tuned.

Please Read The Disclaimer.  ©2018 by Dennis J. Wall.  All Rights Reserved.

IN PENNSYLVANIA, DISCOVERY VIOLATIONS ARE HELD NOT BAD FAITH.

In Homer v. Nationwide Mut. Ins. Co., ___ Fed. App'x ___, No. 16-3686, 2018 WL 1081230 (3d Cir. February 27, 2018), the Third Circuit Court of Appeals refused to recognize an insurance carrier's alleged litigation conduct consisting of retaining and presenting the allegedly skewed testimony of experts, as actionable bad faith.

The Third Circuit based its holding in this case on the record facts and on the Court's understanding that even though Pennsylvania bad faith law allows evidence of litigation conduct in a bad faith lawsuit, still it does not allow "discovery disputes" to rise to the level of actionable bad faith:

Both this Court and the Pennsylvania Superior Court have, however, held that pure discovery violations cannot rise to the level of bad faith. W.V. Realty [W.V. Realty, Inc. v. Northern Ins. Co., 334 F.3d 306], 314 [(3d Cir. 2003)]; O’Donnell [O’Donnell ex rel. Mitro v. Allstate Ins. Co., 734 A.2d 901,] 908-09 [(Pa. Super. Ct. 1999)]..

Homer v. Nationwide Mut. Ins. Co., ___ Fed. App'x ___, No. 16-3686, 2018 WL 1081230, at *2 n.10 (3d Cir. February 27, 2018).

Please Read The Disclaimer.  ©2018 by Dennis J. Wall.  All Rights Reserved.