Claims and Bad Faith Law Blog

FLORIDA CIVIL REMEDY NOTICE OBSCURES ADVANCED PAYMENT, BARS BAD FAITH.

(Gridview_imagefull / Florida Department of Agriculture and Consumer Services)

The Fourth District Court of Appeal affirmed dismissal with prejudice of a policyholder's bad faith claim against his homeowner's carrier in Julien v. United Prop. & Cas. Ins. Co., ___ So. 3d ___, No. 4D19-2763, 2021 WL 824438 (Fla. 4th DCA March 3, 2021).

           On the facts, the appellate court pointed out that the carrier advanced payment to the policyholder while the carrier's investigation of his fire claim was pending.  The carrier also put him up in a hotel during that time.   Julien, 2021 WL 824438, at *1.  

           These facts did not determine the appellate court's holding in this case, however.  Its holding that a bad faith claim was not available under Florida law in that case was based instead on the quality of the policyholder's Civil Remedy Notice:

    Julien's civil remedy notice, it seems, listed every statutory provision and every policy provision available to him as the insured. For example, Julien included fourteen statutory provisions followed by twenty-one sections of the Florida Administrative Code. Furthermore, as the “specific policy language” relevant to the violation, Julien referenced the entire policy[.]

Julien, 2021 WL 824438, at *3.

           This behavior ran afoul of the Florida statute that authorizes bad faith actions against first-party insurers like Mr. Julien's homeowner's carrier in this case.  The Florida bad faith statute requires specificity of what was violated, in the Civil Remedy Notice that accuses the carrier of misconduct.  In this case, the CRN was woefully inadequate in the eyes of both the appellate court and the trial judge:

    Here, Julien did not substantially comply with the specificity standard and this was more than a mere technical defect. Julien listed nearly all policy sections and cited thirty-five statutory provisions. As a result, we conclude the circuit court correctly determined that Julien failed to satisfy the requirement that the insured identify the specific statute and specific policy provision relevant to Universal Property's alleged violation.

Julien, 2021 WL 824438, at *3.  Although the Florida appellate panel in this case issued this substitute opinion in March 2021 to supersede and replace the opinion it released in September 2020, the result did not change.  The panel affirmed the trial court's dismissal of Mr. Julien's statutory bad faith claim with prejudice, and denied his motion to certify a question of great public importance to the Florida Supreme Court for resolution.

           As seen by the Florida appellate panel in this case, the answer to the question was already clear to Florida lawyers and judges, and to the Florida public.

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WILDFIRE LOSS, COVERAGE DENIED: NO CONTRACT BREACH, NO BAD FAITH.

(Jose Carlos Fajardo / San Jose Mercury News, Associated Press)

In Jackquart v. State Auto Prop. & Cas. Ins. Co., No. 19-cv-2480-WJM-KMT,  2020 WL 7055500 (D. Colo. December 2, 2020), the Court was faced with a claim of losses from a wildfire.

The losses came from the destruction of a structure away from the "residence premises" identified in the homeowner's policy at issue.  In fact, the evidence reflected that the uses made by the policyholders of this structure -- which was located 119 miles away from their covered home -- were not consistent with the use of a covered structure away from the residence premises "in connection with the residence premises," in pertinent part:

    Apart from Plaintiffs’ ownership of both properties, Plaintiffs have not established that there is a credible link, relationship, or association between the Primary Residence and the La Veta Property. In addition to being located 119 miles away from the Primary Residence (see ECF No. 46-3), Plaintiffs’ use and enjoyment of the La Veta Property as a getaway was distinct from their use of the Primary Residence.

Jackquart, 2020 WL 7055500, at *5. 

Further, Mr. Jackquart testified that the structure was "investment property that the Plaintiffs planned to sell at the time of the fire."  Even further still, at the time of the fire they had a contract to sell it.  Jackquart, 2020 WL 7055500, at *6.

On this record, the Court granted the homeowners carrier's motion for summary judgment that there was no insurance coverage under the policy at issue and so there was no breach of contract when the carrier denied coverage.  Since there was no insurance coverage, it followed under Colorado law as under the law of the vast majority of jurisdictions in the United States, that there was no bad faith.  Accordingly, the Court also granted the carrier's motion for summary judgment on the bad faith claim in that case.

The holdings of Courts across the United States that where there is no insurance coverage, there is no bad faith, are addressed in 1 Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith § 3:28 (third-party cases) (Thomson Reuters West 3d ed. & 2020 Supps);  and in id., Volume 2, §§ 9:1 & 9:14 (first-party cases).

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BAD FAITH CLAIMS DEPENDED ON EVIDENCE. ANYTHING LESS DIDN’T COUNT.

There are two types of insurer bad faith claims under Ohio law, the federal judge ruled in a case involving coverage and bad faith claims under an insurance policy for losses from fire. The case is Jordan v. Liberty Mut. Fire Ins. Co., NO. 4:19CV0093, 2019 WL 3082304 (N.D. Ohio July 15, 2019), and the judge’s ruling applies at least in a first-party case subject to Ohio law like this case:

There are two types of bad faith claims that can be asserted: (1) when the insurer had no lawful basis for its refusal of the claim or (2) when the insurer failed to determine whether there was a lawful basis for the refusal. [Citations omitted.] This principle would appear to remain intact even after Zoppo v. Homestead Ins. Co., 71 Ohio St.3d 552[, 644 N.E. 2d 397] (1994)[, cert. denied, ___ U.S. ___, 116 S. Ct. 56 (1995)], overruled the portions of these decisions inserting an intent element. [Citations omitted.] The first type involves the merits of the contract claim. Therefore, in this type of bad faith claim, the success of the tort claim hinges on the success of the contract claim. [Citations omitted.]

Jordan v. Liberty Mut. Fire Ins. Co., NO. 4:19CV0093, 2019 WL 3082304, at *4 (N.D. Ohio July 15, 2019).
The second type of bad faith claim recognized under Ohio law, according to the federal court in this case, is predicated on an insurance carrier’s failure to determine a legitimate basis to deny the claim before it denies the claim. “A bad faith claim based on failure to determine whether there was a lawful basis to deny coverage is not tied to the underlying merits of the decision to grant or deny coverage.” Jordan v. Liberty Mut. Fire Ins. Co., NO. 4:19CV0093, 2019 WL 3082304, at *4 (N.D. Ohio July 15, 2019).
The federal court ruled that the plaintiff’s allegations in this case triggered both types of bad faith claims. The court denied the carrier’s motion for judgment on the pleadings, which was based on an argument that the contractual limitations period was exceeded as a matter of law when applied to the allegations in the complaint in this particular case.
Evidence is necessary in this case, not judgment on the pleadings, the federal judge ruled.

Download IBF 07.18.19.
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NO BAD FAITH, NO FORCE PLACED INSURANCE, BUT SUBROGATION.

   A fire loss was the reason for the claims in EMCASCO Insurance Co. v. Knight, 2014 WL 4269116 (N.D. Ala. August 22, 2014).  The insurance company, EMCASCO, declined to pay the Knights for the fire loss and sued them instead.  EMCASCO's complaint contained six (6) theories of declaratory relief, said the Court.  The Knights counterclaimed with five (5) claims of their own.

    One of the Knights' claims was insurance bad faith.  The Court wrote the equivalent of a transcript of the entire record in this case.  The Court granted EMCASCO's motion for summary judgment on the Knights' bad faith count, for two principal reasons.  First, the Knights could not survive a directed verdict on their contract claim, thereby failing to reach the Alabama standard of bad faith for that reason alone.  Second, the Knights failed to introduce evidence sufficient to raise a genuine issue of material fact that EMCASCO "acted with a dishonest purpose".

   Although as noted the Federal Court in this case wrote volumes about the facts that were in the record, it also did readers the favor of summarizing the record in this regard:

  Instead, the evidence shows, and the Knights do not dispute,that EMCASCO conducted an extensive investigation of their claim. EMCASCO supports its denial of the claim with the following undisputed facts, inter alia, discovered during its investigation: the fire was incendiary; the Knights were across the street when the fire started; they misrepresented the values of pageant dresses and a tanning bed; they concealed assets from a court of law; they provided inconsistent sworn testimony as to the origin of furniture; and they had twice previously collected insurance payments for fire damage. 

   The Court's disposition of claims surrounding the insurance policy's "mortgage clause" was shorter than the rest of the opinion bu perhaps of wider application and interest.  The Federal Court in this case began by reproducing the mortgage clause at issue, a standard provision by all appearances:

    K. Mortgage Clause

1. If a mortgagee is named in this policy, any loss payable under Coverage A or B will be paid to the mortgagee and you, as interests appear. If more than one mortgagee is named, the order of payment will be the same as the order of precedence of the mortgages.

2. If we deny your claim, that denial will not apply to a valid claim of the mortgagee, if the mortgagee:

a. Notifies us of any change in ownership, occupancy or substantial change in risk of which the mortgagee is aware;

b. Pays any premium due under this policy on demand if you have neglected to pay the premium; and

c. Submits a signed, sworn statement of loss within 60 days after receiving notice from us of your failure to do so. Paragraphs E. Appraisal, G. Suit Against Us and I. Loss Payment under Section I—Conditions also apply to the mortgagee.

3. If we decide to cancel or not to renew this policy, the mortgagee will be notified at least 10 days before the date cancellation or nonrenewal takes effect.

4. If we pay the mortgagee for any loss and deny payment to you:

a. We are subrogated to all the rights of the mortgagee granted under the mortgage on the property; or

b. At our option, we may pay to the mortgagee the whole principal on the mortgage plus any accrued interest. In this event, we will receive a full assignment and transfer of the mortgage and all securities held as collateral to the mortgage debt.

5. Subrogation will not impair the right of the mortgagee to recover the full amount of the mortgagee's claim.

 

The Federal Court ruled that the policyholders suffered no damages for EMCASCO's alleged failures in honoring its obligation to pay under the mortgage clause because the Knights would not "necessarily be freed of their financial obligations under the mortgage" even if EMCASCO had timely and fully paid the mortgagee.  [Emphasis by the Court.]  According to the Federal Court in this case, the reason is that the insurance company would have been subrogated against its own insureds, because "the mortgage clause ... provides that EMCASCO will be subrogatged to the rights of the mortgagee (i.e., Regions) against the mortgagor (i.e., the Knights) upon payment to the mortgagee."

 

This holding may not have been necessary to the ultimate outcome in this case.  The Federal Court granted EMCASCO's motion for summary judgment on the three claims which the Knights alleged based on the mortgage clause.

 

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No Documents, No Complete EUOs? No Bad Faith Tort.

   An Insurance Company's Motion for Summary Judgment was granted in Download Foster v. State Farm Fire and Casualty Co. (N.D. Ind. Case No. 1.10CV20, Order and Opinion Filed August 17, 2011) PUBLIC ACCESS, also published as 2011 WL 3610425 (N.D. Ind. August 17, 2011)(authorized password required to access Westlaw).  In considering a Claim for alleged First-Party Bad Faith and Punitive Damages in connection with Claims under a Homeowners Policy, the Federal Court in that case very usefully and concisely summarized the applicable law.

   The Court's holding in this case is echoed in many respects in the decisions of Courts in many other jurisdictions which also recognize the Tort of First-Party Bad Faith.  The Court's holding, as follows and as discussed below, is authority on First-Party Bad Faith Claims which can and likely will be cited in Courts beyond the borders of one State or jurisdiction:

While there is no exhaustive or exclusive list of bad faith actions that an insurer can take, the obligation of good faith and fair dealing includes the obligation to refrain from (1) making an unfounded refusal to pay policy proceeds; (2) causing an unfounded delay in making payment; (3) deceiving the insured; and (4) exercising any unfair advantage to pressure an insured into a settlement of his claim.  [Citations omitted.] For example, an insurer that denies liability “knowing that there is no rational, principled basis for doing so had breached its duty.”  [Citations omitted.]   “As a general proposition, ‘[a] finding of bad faith requires evidence of a state of mind reflecting dishonest purpose, moral obliquity, furtive design, or ill will.’ “

 Foster v. State Farm Fire & Casualty Insurance Co., 2011 WL 3610425 at *17.

    Further, "[t]o prove that an insurance company committed the tort of bad faith in Indiana, a plaintiff must establish that his claim was underpaid or wrongfully denied in the first place."  Id. at *18. 

    However, the Insurance Company in that case had not denied the Policyholders' Claim.  Id.  The Defendant contended that the Policyholders filed their lawsuit first, before the Insurance Company completed its investigation.  Id. at *2.

    Further, the fire at the base of the Policyholders' Claims was unexplained.  Ignition took place when no-one was present, or at least no-one who was available to testify about it.  Even if the Insurance Company is determined to Breach its Insurance Contract by not paying a First-Party Claim, the Insurance Company may in Good Faith dispute that Claim under the prevailing substantive law, the Court held.   "A good faith dispute about the amount of a valid claim or about whether the insured has a valid claim does not supply the grounds for a bad faith cause of action."  Id.  at *18.

    Accordingly, the Defendant Insurance Company in that case was held entitled to Judgment as a matter of law, there being no genuine issues of material fact.  Since the standard of Bad Faith liability is even higher than the standard for assessing Punitive Damages in Indiana, the Federal Court also granted Summary Judgment with respect to the Policyholders' Claim for Punitive Damages in this case.  Id. at *19.

   The decision in this case is also noteworthy for other holdings.  Besides pursuing a First-Party Bad Faith Claim, the Plaintiffs-Policyholders alleged a Claim for Breach of Contract.  Their alleged basis for this Claim was that the Defendant failed to "pay the Plaintiffs' $2,888,432 claim for the loss of their dwelling and personal property caused by a fire."  Id. at *1.  The Defendant Insurance Company countered that the Plaintiffs-Policyholders failed to provide requested documentation to the Defendant and further that they failed to complete Mrs. Foster's Examination Under Oath as required by their Policy.  Although the Federal Court mentioned Mrs. Foster's incomplete EUO several times, the Court actually concentrated on the Fosters' contention that they had produced all the documents they had.

   The Plaintiffs-Policyholders thus replied to State Farm's requests for documentation, that they had no more documents to give and that they told the Defendant that they were prepared to complete the uncompleted EUO anyway.  Then the Plaintiffs filed their lawsuit against the Defendant, in fairly short order.  Id. at *2.  Over nearly half-a-dozen full pages, the Federal Judge set out a "timeline" of the events concerning investigation of the Plaintiffs' Claim in the year following the fire, id. at *4-*10.

   The Federal Judge in this case also summarized the applicable Policy Conditions concerning production of documents and sitting for EUOs.  The provisions are standard Conditions setting forth what the Insured must do after loss.  They are in use in many Policies across the country.  "The duties at issue in this case are, 'as often as [the insurer] reasonably require[s]' that the insured provide records and documents the insurer requests, and submit to statements and examinations under oath."  Id. a *11.

   In this case, the issue raised by the Defendant Insurance Company concerning the Policyholders' compliance with these provisions was whether they substantially complied with, or materially breached these provisions.  As noted above, the Policyholders maintained that there came a point when they had no more documents to give.  The Federal Court examined this contention in the course of reviewing the "timeline" summarized in some 6 pages of the Court's Opinion as published on Westlaw.  "However, this Court's review of the designated evidence, even when viewed most favorably to the Plaintiffs, does not support their claim that they fully complied with the Defendant's document requests."  Id. at *13.

   On first blush, this judicial statement almost seems like the Court is saying that it weighed credibility issues.  It apparently did no such thing.  The Policyholders did not apparently submit much beyond their assertion that they had no more to produce:  "The evidence in support of the Plaintiffs' claims that they produced all documents are their own sworn statements and a letter their attorney sent to the Defendant."  Id. at *13.  The Court contrasted these items with the materials of record and concluded differently from what the Plaintiffs asserted to be the case here.  "The Court does not doubt that in some cases an insured will have substantially complied with document requests despite a failure to meet every demand.  This is not such a case....  The Plaintiffs' unsupported claim that they fully complied with all document requests could not convince a reasonable jury that the Defendant was the first to breach its contractual obligations."  Id. at *17.

   The Court in this case granted the Defendant's Summary Judgment on the Breach of Contract Claim as well.

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California Fire Coverage Exclusion, Summary Judgment on Good Faith.

   In Download Bishara v. Century Surety Co. (C.D. Cal. Case No. EDCV 09.01745, Order Filed April 6, 2011) PUBLIC ACCESS, also published as 2011 WL 1334406 (C.D. Cal. April 6, 2011)(authorized password required to access Westlaw), three rulings in particular deserve to be highlighted.  This is a case in which the Insurance Company issued a Policy which provided Coverage for loss  by Fire, but in which the Insurance Company denied all Coverage under an Exclusion for loss or damage caused by or resulting from a dishonest or criminal act by or on behalf of the Insured, among other provisIons.

   The Federal Court applied California Law and granted the Defendant Insurance Company's Motion for Summary Judgment of Good Faith, holding in pertinent part:

1. The Court held that the Exclusion was properly applied by the Insurance Company to deny all Coverage, carefully pointing out that in doing so, "the Court does not opine or make any findings as to whether Swidan actually set fire to the Restaurant.  Rather, the Court finds only that the uncontroverted evidence satisfies Defendant's burden of demonstrating there is an absence of evidence establishing Defendant breached the Policy" by denying Plaintiff's Coverage Claim.  Bishara v. Century Surety Co., 2011 WL 1334406 at *9.
2. As there was no Coverage, there could be no Bad Faith in this case under California Law, the Federal Court concluded.  Id. at *10.
3. Even if there could be a legally cognizable Bad Faith Claim in this case, said the Federal Court, California law would still impel the grant of Summary Judgment to the Insurance Company because of the California "genuine dispute" rule.  In this case, the Insurance Company relied on the Report of an Expert as to the cause of the Fire Loss in question before the Insurance Company denied all Coverage for the Fire Loss.  Under the California "genuine dispute" rule, Coverage may be genuinely disputed on the basis of "'a single, thorough report by an independent expert'".  Id. at *11.  So it was in this case.

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