In Snyder v. Erie Ins. Co., No. 1:22-cv-01205-STA-jay, 2023 WL 9503402 (W.D. Tenn. Dec. 12, 2023), the District Court summarized Tennessee law and the law applicable to this case:
Tennessee insurers have a duty to act in good faith, and, while there is no separate tort for breach of good faith, Tennessee statutory law allows insureds to seek a penalty up to 25% of the total liability when a claim is denied in bad faith. [Citation omitted.] Tennessee's bad faith statute provides as follows:
The insurance companies of this state, and foreign insurance companies and other persons or corporations doing an insurance or fidelity bonding business in this state, in all cases when a loss occurs and they refuse to pay the loss within sixty (60) days after a demand has been made by the holder of the policy or fidelity bond on which the loss occurred, shall be liable to pay the holder of the policy or fidelity bond, in addition to the loss and interest on the bond, a sum not exceeding twenty-five percent (25%) on the liability for the loss; provided, that it is made to appear to the court or jury trying the case that the refusal to pay the loss was not in good faith, and that the failure to pay inflicted additional expense, loss, or injury including attorney fees upon the holder of the policy or fidelity bond; and provided, further, that the additional liability, within the limit prescribed, shall, in the discretion of the court or jury trying the case, be measured by the additional expense, loss, and injury including attorney fees thus entailed.
Tenn. Code. Ann. § 56-7-105(a). Thus, under the statute, to recover a bad faith penalty, a plaintiff must prove (1) that the policy of insurance had, by its terms, become due and payable; (2) the plaintiff made a formal demand for payment and then waited sixty days after making the demand before filing suit; and (3) the refusal to pay was made in bad faith.
Snyder, 2023 WL 9503402, at *6-*7. Under Tennessee law as in this case, negligence alone is not legally sufficient to impose extracontractual damages for a failure to settle a claim. Snyder, 2023 WL 9503402, at *7.
Express statutory causes of action in first-party insurance cases, including under penalties statutes like the Tennessee statute at issue in Snyder, are discussed in Volume 2 of Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith § 9:14 (West Publishing Co. 3d Edition and 2023 Supplements, 2024 Supplements in process).
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