Claims and Bad Faith Law Blog

REASONABLENESS JUDICIALLY CONSIDERED: WHEN LIABILITY IS REASONABLY CLEAR, REASONABLE OFFERS.

In Urban v. Zurich Am. Ins. Co., ___ F. Supp. 3d ___, No. 21-CV-11182-AK, 2024 WL 4379927 (D. Mass. Sept. 30, 2024), a U.S. District Judge in Massachusetts considered whether the liability insurance carrier defendant had violated Massachusetts statutes by failing to make a reasonable offer after the policyholder’s-insured’s liability had become reasonably clear.

          As to whether the policyholder-insured’s liability was reasonably clear at any point during the underlying claim, this case involved the possibility of a jury finding of comparative negligence.  The Court pointed out that “[w]hile comparative negligence can, in some cases, prevent liability from becoming reasonably clear,” insurance carriers have an obligation to make a reasonable settlement offer, which they cannot avoid “by hiding behind the gamesmanship of anticipated success at trial.”  Urban, 2024 WL 4379927, at *21. 

          As to the reasonableness of the carrier’s offers, the Court noted that under Massachusetts law (as under the law in most if not all U.S. jurisdictions) all insurance carriers are subject to the following legal standard:  “Reasonableness can be measured by looking to the undisputed evidence indicating the damages suffered against the offer tendered.”  Urban, 2024 WL 4379927, at *6. 

          The Court in this case awarded double damages against the defendant carrier in the amount of “$2,841,358.26, plus attorneys’ fees” because it failed to make a reasonable offer after the liability of its policyholder-insured had become reasonably clear in the underlying case.  Urban, 2024 WL 4379927, at *25.

Statutory bases for liability in settlement, such as in the Urban case and Massachusetts General Laws chapter 176D, § 3(9)(f) which was the statutory provision involved in the Court’s determinations in that case, are discussed in 1 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 3:28 (Thomson Reuters West Publishing Co. Third Edition & 2024 Supplements).

Please read the disclaimer.  ©2024 Dennis J. Wall.  All rights reserved.  Interested in many things including Claims and Bad Faith Law?  Check out my Substack newsletter. 

HOW FORTUITOUS FOR THE CARRIER THAT REFUSED TO PAY.

In Hansen Storage Co. v. Emp'rs Mut. Cas. Co., ___ F. Supp. 3d ___, No. 23-CV-362-SCD, 2024 WL 2272621 (E.D. Wis. May 20, 2024) (USMJ), the concept of fortuity as understood in Wisconsin law was expressed by a U.S. Magistrate in a bad-faith case in these terms:  "The proper focus is not whether the damage existed at the time the policy took effect, but rather whether the parties 'knew about or contemplated the damage's cause before the policy's issuance.'"  Hansen Storage, 2024 WL 227621, at *6.

    The commercial insurance policy at issue "does not list any specific covered perils.  Rather, it covers 'risks of direct physical loss unless the loss is limited or caused by a peril that is excluded.'"  Hansen Storage, 2024 WL 227621, at *4.  The Magistrate Judge described this as an "all risk" policy.  In Wisconsin, the burden of proof of fortuity is apparently placed upon the policyholder.  Hansen Storage, 2024 WL 227621, at *5.

    Here, the policyholder-plaintiff did not meet that burden in the eyes of the Magistrate Judge, who denied Hansen's motion for summary judgment.

Please read the disclaimer.  ©2024 Dennis J. Wall.  All rights reserved.  Judicial use and misuse of the "Fortuitous" concept as an Exclusion in decided cases involving all risks policies is explored by Dennis Wall in CATASTROPHE CLAIMS / INSURANCE COVERAGE FOR NATURAL AND MAN-MADE DISASTERS, § 7:4 (Thomson Reuters June 2024 Edition).

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