Claims and Bad Faith Law Blog

VIRGINIA UNFAIR CLAIM SETTLEMENT PRACTICES STATUTE NOT ACTIONABLE IN 2022.

(Bridge Collapse / USA TODAY)

Virginia's Unfair Claim Settlement Practices Act is codified in VA. CODE ANN. § 38.2-510.  It parallels the National Association of Insurance Commissioners' Model Unfair Claim Settlement Practices Act in pertinent part.  See generally 1 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH, § 3:28 (addressing statutory bases of bad faith in third-party claims) (3d Edition West Publishing Co., 2022 Supplements in process); 2 id., §§ 9:14 & 9: 15 (Express and Implied Causes of Action, respectively, under bad faith statutes in first-party cases).

The Virginia Unfair Claim Settlement Practices Act does not convey a cause of action, however.  Sustainable Sea Prod's Int'l, LLC v. Am. Emp. Surplus Lines Ins. Co., No. 3:21cv697, 2022 WL 3573247, at *4 (E.D. Va. Aug. 19, 2022).

Please read the disclaimer.  ©2022 Dennis J. Wall.  All rights reserved.

FLORIDA, STATUTORY BAD FAITH, AND FORCE-PLACED INSURANCE

The Florida Legislature may have added a force-placed insurance, statutory bad faith cause of action when it enacted the following Unfair Method of Competition and Unfair or Deceptive Act or Practice effective June 16, 2021:

(1) Unfair methods of competition and unfair or deceptive acts.--The following are defined as unfair methods of competition and unfair or deceptive acts or practices:

* * *

(z) Sliding.--Sliding is the act or practice of any of the following:

* * *

4. Initiating, effectuating, binding, or otherwise issuing a policy of insurance without the prior informed consent of the owner of the property to be insured.[1]

At least arguably, every homeowner with a mortgage owns the property to be insured.  Force-placing an insurance policy is also at least arguably "initiating, effectuating, binding or otherwise issuing a policy of insurance" on "the property to be insured."  By definition, force-placed insurance policies are placed by force without the prior informed consent of the homeowner.

            The argument that the Florida Legislature has intentionally or otherwise enacted a statutory provision which makes lender force-placed insurance an actionable unfair method of competition or unfair or deceptive act or practice, may be undercut by the Florida Legislature's adoption of the following provision at the same time in the same legislation:

5. Mailing, transmitting, or otherwise submitting by any means an invoice for premium payment to a mortgagee or escrow agent, for the purpose of effectuating an insurance policy, without the prior informed consent of the owner of the property to be insured. However, this subparagraph does not apply in cases in which the mortgagee or escrow agent is renewing insurance or issuing collateral protection insurance, as defined in s. 624.6085, pursuant to the mortgage or other pertinent loan documents or communications regarding the property.[2]

These two subparagraphs which have just been quoted, subparagraphs 4 and 5, respectively, of paragraph (z), subsection (1) of Florida's Unfair Methods of Competition and Unfair or Deceptive Acts or Practices Act or UCDPA,[3] have apparently not yet been reconciled by a court of competent jurisdiction as these words are written.  Their reconciliation remains in the arguments yet to come from practitioners, and others.  However it is worth pointing out that the Florida Legislature could have made subparagraph 4 subject to the same exception as it wrote in subparagraph 5 but it did not do so.

[1] Fla. Stat. § 626.9541(1)(z)4.

[2] Fla. Stat. § 626.9541(1)(z)5 (emphasis supplied).

[3] Fla. Stat. § 626.9541(1)(z)4&5.

There are all kinds of questions about statutory bad faith, including express causes of action, implied causes of action, preemption, civil remedy notices, and damages.  Many of the questions are asked and answered in statutes and interpreted in third-party bad faith cases, see generally 1 DENNIS J. WALL, §§ 3:28-3:30, LITIGATION AND PREVENTION OF INSURER BAD FAITH (West Publishing Co. 3d Edition, 2022 Supplements in process), and in first-party cases too.  See generally 2 id. §§ 9:14-9:16.

Insurer bad faith ramifications of force-placed insurance are addressed in 2 id. §§ 9:33-9:35.  The whole field of force-placed insurance, also known as lender-placed insurance, and also known as lender force-placed insurance, is a book by itself.   There was no book on the subject so I wrote the first one that I know of.  Still very much in use today, it was published by American Bar Association Publishing in 2015, LENDER FORCE-PLACED INSURANCE PRACTICES.

Please read the disclaimer.  ©2022 Dennis J. Wall.  All rights reserved.

REASONABLENESS IS A QUESTION OF FACT IN BAD FAITH CASE.

In Robinson v. Charter Oak Fire Ins. Co., No. 20-cv-1534-RMR-MEH, 2022 WL 2753524 (D. Colo. May 26, 2022), the Court applied Colorado law to first-party bad faith claims.  So far as bad faith cases are concerned, the issues in this case under Colorado law are determined in the same way as most if not all other American jurisdictions:

Insurance bad faith claims by their nature present questions of fact unsuitable for resolution on summary judgment except in limited circumstances. Therefore, whether an insurer's conduct was reasonable under the circumstances is ordinarily a question of fact for the jury.

Robinson, 2022 WL 2753524, at *2.  And so it was in this case.

There were two claims for bad faith at issue here.  One was for alleged Colorado statutory bad faith, which put the reasonableness of the carrier's conduct at issue in this case.  Robinson, 2022 WL 2753524, at *2.  The other bad faith claim was for alleged Colorado common law bad faith, which also put reasonableness at issue so far as the carrier's conduct is concerned here.  Robinson, 2022 WL 2753524, at *3.

Accordingly, the Court in this case denied the carrier's motion for summary judgment on both counts of first-party bad faith.

Please read the disclaimer.  ©2022 Dennis J. Wall.  All rights reserved.

THE QUESTION OF FIRST-PARTY BAD FAITH--INVESTIGATION AND EVALUATION.

The question of bad faith involves insurance carriers' timely investigation and evaluation of claims against policyholders.  In many jurisdictions, the question of bad faith also involves the carrier's conduct before and after the bad faith lawsuit is filed.  See generally 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 9:6, The Question of Bad Faith -- Timely Investigation and Evaluation Before And After The First-Party Insurer is Sued for Bad Faith (West Publishing Co. 3d Edition, 2022 Supplements in process).

An opportunity for extracontractual exposure based on investigation and evaluation came in Nikfard v. State Farm Fire & Casualty Co.,[1] a first-party case involving loss from a fire.  The fire in that case damaged a rental house owned by the plaintiff policyholder, who made a claim for the damage caused by the fire.  His "first-party property insurance" carrier accepted coverage.  The carrier recommended that the policyholder contact a certain general contractor who doubled as an insurance restoration specialist, which he did.

The g.c. prepared a preliminary estimate of the cost of restoration of the policyholder's house, using a computerized program called Xactimate.  The Xactimate program is familiar both to insurance companies and to coverage practitioners. 

In this case, the evaluation was only intended to be preliminary.  It was never intended to be the basis for the g.c. performing the restoration work.  The preliminary evaluation was $149,900.86.[2]    The carrier seized upon this figure and this computer report and never let go.  However, the evidence showed that the repairs would realistically take at least $100,000.00 more than that before restoration was finished on this particular house.

In fact, the restoration project ultimately cost $334,470.00.  Before the project ended, the carrier paid $174,071.94.

Before the case was over, the carrier would pay $429,702.32.

The policyholder sued, alleging several claims.  One was for breach of contract.  He prevailed on this claim and received $160,398.06, which was the difference between what the project ultimately cost and what the carrier paid.[3] 

The policyholder's final claim among several claims he alleged, was brought under the Consumer Protection Act in Washington.  This claim was successful in generating an award of the policyholder's attorney's fees.  He recovered attorney's fees in the amount of $261,964.00 and costs in the amount of $7,339.36.  He proved his CPA claim in part by proof of a violation of an Unfair Claim Settlement Practices Regulation which has the force of law in Washington, and generally if not identically follows the Uniform Unfair Claim Settlement Practices Acts promulgated by the National Association of Insurance Commissioners and in force across the country.[4] 

In the end, the carrier's reliance on its original investigation and evaluation until the bad faith trial came to an end, cost it another quarter of a million dollars.

 

[1] Nikfard v. State Farm Fire & Cas. Co., No. C19-6001RSL 2021 WL 3620277 (W.D. Wash. August 16, 2021).

[2] Nikfard, 2021 WL 3620277, at *1.

[3] Nikfard, 2021 WL 3620277, at *4.

[4] See WALL, supra, §§ 9:14 (Express statutory causes of action) and 9:15 (Implied statutory causes of action), infra.  The effects of the UCSP Acts in third-party or liability insurance cases are discussed in § 3:28, supra.)

Please read the disclaimer.  This blog article ©2022 Dennis J. Wall.  All rights reserved.

A COURT EXPLAINS WHY REINSURANCE WORLD IS A SPECIAL PLACE.

A federal Court applying Illinois law recently held that there is no statutory bad-faith claim against a reinsurer's agents under 215 Ill. Comp. Stat. (ILCS) 5/155 because that statute does not apply to reinsurance contracts or to reinsurers' agents.  The federal Court followed a legion of State Court decisions.  Stonegate Ins. Co. v. Fletcher Reins. Co., No. 21 CV 3523, 2021 WL 5769528, at *7-*8 (N.D. Ill. December 6, 2021).  As the Court wrote:  "Given this precedent, it is clear that Section 155 does not permit a bad faith claim to be brought against a reinsurer’s agents, such as the Defendants. In other words, Stonegate cannot bring a claim against Defendants under Section 155, because Section 155 pertains only to insurance contracts – not reinsurance contracts."  Stonegate, 2021 WL 5769528, at *8 (emphases by the Court).

See generally 1 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 6:11, Primary And Excess Insurers And Reinsurers:  A Working Definition of Reinsurance--The Effect of Reinsuring Agreements or Treaties (3d Edition Thomson Reuters West, 2022 Supplements in process).

Please read the disclaimer.  ©2022 Dennis J. Wall.  All rights reserved.

UNFAIR CLAIMS SETTLEMENT PRACTICE ACTIONABLE UNFAIR OR DECEPTIVE ACT, PRACTICE?

There is a question which many courts are addressing concerning whether and when an Unfair Claims Settlement Practice is actionable as an Unfair or Deceptive Act or Practice.

Given this judicial debate, it is worth noting when an Unfair Claim Settlement Practice Act violation has been held to be the equivalent of an Unfair or Deceptive Act or Practice for purposes of a Consumer Protection Statute.  See McGilloway v. Safety Ins. Co., 488 Mass. 610, 618, 174 N.E.3d 1191, 1199 (Mass. 2021).

Please read the disclaimer.  This blog article ©2022 Dennis J. Wall.  All rights reserved.

FLORIDA CIVIL REMEDY NOTICE BY A DIFFERENT NAME ... Continued.

This continues the article begun here on Thursday, April 28, 2022.

 

That is not the end of the story, however.  The new statute provides for the eventuality that the claimant has also served a notice of intent to initiate litigation, but the appraisal or alternative dispute resolution has not taken place within the times set out in the statute:

If the appraisal or alternative dispute resolution has not been concluded within 90 days after the expiration of the 10-day notice of intent to initiate litigation specified in subsection (3), the claimant or claimant's attorney may immediately file suit without providing the insurer additional notice.[1]

[1] Fla. Stat. § 627.70152(4)(b).

 

Please read the disclaimer.  This blog article ©2022 Dennis J. Wall.  All rights reserved.

Common Law and Statutory Requirements for Civil Remedy Notices to Insurers are discussed in 2 DENNIS J. WALL, LITIGATION AND PREVENTION INSURER BAD FAITH § 9:21 (Third Edition, 2022 Supplements in process).

A FLORIDA CIVIL REMEDY NOTICE BY A DIFFERENT NAME.

The requirements of a Civil Remedy Notice under Florida's Bad Faith Statute, Section 624.155, have been in place for awhile.  Effective July 1, 2021, another Florida Statute took effect containing a requirement of specified notice within a specified time as a "condition precedent to filing suit under a property insurance policy[.]"[1] 

The new statute, Section 627.70152, applies "exclusively" to "all suits not brought by an assignee arising under a residential or commercial property insurance policy, including a residential or commercial property insurance policy issued by an eligible surplus lines insurer."[2]

The notice required by Section 627.70152 "must state with specificity" at least eight things, most of which are in numbered sections or paragraphs.[3]  If the notice meets the statutory requirements, then the carrier must respond in specified ways, ordinarily within specified periods of time.[4]  One response among the range of responses by the property insurance carrier is to "respond by making a settlement offer or requiring the claimant to participate in an appraisal or another method of alternative dispute resolution."  The statute requires this response, in fact, if the notice alleges "an act or omission by the insurer other than a denial of coverage[.]"[5]

To be continued .... 

This blog article ©2022 Dennis J. Wall.  All rights reserved.  Please read the disclaimer.

 

[1] Fla. Stat. § 627.70152(3)(a).

[2] Fla. Stat. § 627.70152(1).  As of April, 2022, six cases are listed in Florida Statutes Annotated as citing or interpreting this statute.  All six involved motions to dismiss and all six were decided by federal courts.  It appears that none of them involved bad faith claims.

[3] See Fla. Stat. § 627.70152(3)(a).

[4] See Fla. Stat. § 627.70152(4)(a) & (b).

[5] Fla. Stat. § 627.70152(4)(b).

COLORADO GOES AGAINST THE GRAIN TO BAR ADJUSTER PERSONAL LIABILITY.

Colorado stands to the contrary of most jurisdictions that recognize a case for personal liability of insurance adjusters when claims under insurance policies are delayed or completely unpaid; Colorado does not recognize such personal liability.

Colorado's position comes because of a statute which prohibits unreasonable delay or denial of an insurance claim by "a person engaged in the business of insurance," Colo. Rev. Stat. § 10-3-1115 (2021), and under another statute which provides a cause of action for the unreasonable delay or denial of a claim for insurance benefits prohibited by the first statute.  Colo. Rev. Stat. § 10-3-1116 (2021).  The Colorado Supreme Court resolved this issue in its answer to a question certified from the United States District Court for the District of Colorado, in Skillett v. Allstate Fire & Cas. Ins. Co., 505 P.3d 664, ¶ 1, at p. 665 (Colo. 2022):

Specifically, the certified question asks:

Whether an employee of an insurance company who adjusts an insured's claim in the course of employment may for that reason be liable personally for statutory bad faith under Colorado Revised Statutes Sections 10-3-1115 and -1116 (“Statutes”).

Given the plain statutory language, we answer that question in the negative. An action for unreasonably delayed or denied insurance benefits under Colorado law may be brought against an insurer, not against an individual adjuster acting solely as an employee of the insurer.

Please read the disclaimer.  ©2022 Dennis J. Wall.  all rights reserved.

FLORIDA CIVIL REMEDY NOTICE: SPECIFICITY GOOD, TMI BAD.

In Gooden v. People's Trust Ins. Co., ___ So. 3d ___,  No. 4D20-2760, 2022 WL 945507 (Fla. 4th DCA March 20, 2022), Florida's Fourth District Court of Appeal has decided that a Civil Remedy Notice quoting provisions of Florida's Bad Faith Statute, and provisions of Florida's version of the NAIC's Unfair Claim Settlement Practices Act, met the Bad Faith Statute's specificity requirements.  (The statute's specificity requirements as they existed at the time of Ms. Gooden's claim, and as they still exist now, are set out in Fla. Stat. § 624.155(3)(b).)

More to the point, the nine statutory provisions Ms. Gooden quoted in her CRN were relevant to her Bad Faith claim against People's Trust, and so was her invocation of just one of her insurance policy provisions.  As the Fourth District panel described the CRN:

Gooden's civil remedy notice cited nine statutory provisions and a single policy provision, listing only the statutory and policy provisions relevant to his [sic] allegations.

Gooden, 2022 WL 945507, at *1.  Further, Gooden's CRN explicitly stated what the carrier would need to do to cure its alleged bad faith. 

In the judgment of the Fourth District, this specificity distinguished Ms. Gooden's CRN from the CRN involved in Julien v. United Prop. & Cas. Co., 311 So. 3d 875 (Fla. 4th DCA 2021).  The Fourth District decided both cases, Gooden and Julien.

In the judgment of the trial court, in contrast, the Gooden CRN looked like the Julien CRN and so the trial judge dismissed Gooden's statutory bad faith claim for supposed failure "to meet section 624.155's specificity requirements."  As noted, the Fourth District had a different judgment, and so the Fourth District said, "We reverse."  Gooden, 2022 WL 945507, at *1.

The Julien case was the subject of commentary here first on October 15, 2020 when the decision was not yet officially released, and thereafter when released for publication in Westlaw, on March 10, 2021.

The various requirements for Civil Remedy Notices across the United States, including Florida, are examined in third-party cases in 1 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 3:30, "Legal Bases of Liability in Settlement -- Statutory Requirement of Notice of Violation" (Thomson Reuters West 3d ed., 2022 Supps in process), and in first-party cases in id., Volume 2, § 9:21, "Common Law and Statutory Regulation of Civil Remedy Notice to Act in Good Faith."

            Defenses raised by failure to comply with CRN requirements are also discussed in third-party insurance bad faith actions in id., Volume 1, § 5:57, and in first-party insurance bad faith actions in id., Volume 2, § 11:24. 

Please read the disclaimer.  2022 Dennis J. Wall.  All rights reserved.

CAN INSURANCE BAD FAITH SURVIVE "A CONGERIES OF" JUSTICES?

Some say that the current majority of the U.S. Supreme Court has a tendency to reach a chosen result regardless of the law.  Some even call them the Gang of Six.

          Whatever they may be, something they have recently done, or more accurately, something that four of them have done, caught my eye.  What they did came in the case of Moore v. Harper, 595 U.S. ___, No. 21A455, 2022 WL 667937 (U.S. March 7, 2022), in which a majority of the Court denied an application by the North Carolina Speaker of the House and some of his colleagues to stay the ruling of the North Carolina Supreme Court that the Congressional districts drawn by the North Carolina Legislature violated various provisions of the North Carolina Constitution.

          The four U.S. Supreme Court Justices were led by Justice Samuel Alito who wrote a dissent joined by Justices Clarence Thomas and Neil Gorsuch.  The fourth Justice, Brett Kavanaugh, concurred in the denial of the stay but agreed with the others that the Court should review the districting issue on the merits when and if a petition for certiorari is ever filed in the future.

          The reasoning of the four reached only one of the four reasons that Justice Alito listed for the result in the North Carolina Supreme Court, which were, he wrote, "a congeries of state constitutional provisions."  The provisions of the North Carolina Constitution which were violated by the districting conduct of the North Carolina Legislature were Equal Protection of the Laws including No Discrimination By the State Because of Race, Color, Religion, or National Origin; Freedom of Speech and of the Press;  Freedom to Assemble and to Petition for Redress of Grievances; and that "[a]ll elections shall be free."  To say again, the four U.S. Supreme Court Justices addressed only one of these.[1]

          The one provision of the North Carolina Constitution which they addressed was the only one of these provisions that has no direct counterpart in the United States Constitution, namely, the provision that all elections shall be free, N.C. Const. art. 1, § 10.  In addressing this one provision, the four took the position that the North Carolina Legislature presented a "stronger" argument than the North Carolina Supreme Court partly because this was really a question of Federal law which, they implied, preempts State Constitutions in respect to how the laws are carried out in the States including, in this case, drawing districts in which to vote for candidates for Congress.

          This raises a question that is still playing out in my mind:  If a current majority of the U.S. Supreme Court decides that insurance bad faith cases and claims, which are all creatures of State law, should somehow be prevented or regulated, how would they do it?  Well, I know how they would do it, I suppose, but what would they say were the reasons they did it?

          It is not a huge leap at all in my mind, from interfering with State Constitutions and State Supreme Court decisions, to interfering with State Courts which in many cases have fashioned new causes of action for insurer bad faith.  For that matter, it is not a far distance to interfere with State Legislatures which have enacted statutory provisions for remedies that can be claimed against alleged insurer bad faith.

          So, what might they say?  Perhaps they would rule on the pretext of Interstate Commerce.  There may be an argument that insurer bad faith cases affect the business not only of insurance companies operating across State lines, but of other companies as well.  These can include business policyholders, or interstate businesses providing claim-related services such as adjusting.

          Or perhaps they might rule on the pretext of Due Process.  State insurer bad faith causes of action may deprive corporations of their asserted "right" to arbitrate rather than litigate such claims.  Or perhaps it could be so argued.

          Or perhaps on the pretext of Equal Protection.  The argument might be accepted that the States have only made special causes of action available against insurance carriers, and by and large the States have not made special causes of action available against policyholders.

          There are many possibilities in a congeries[2] of possibilities, to refashion a phrase chosen by Judge Alito in the Moore case, supra, in which he wrote to announce that he would have stayed the North Carolina Supreme Court's decision that the North Carolina Legislature violated provisions of the North Carolina State Constitution.  As we have seen from recent events, there is more to come whether we expect it or not, and at this point, whether we like it or not.

Please read the disclaimer.  ©2022 Dennis J. Wall.  All rights reserved.

 

[1] Without distracting from the focus here, it is worth noting that the North Carolina Supreme Court's decision involved "strict scrutiny" under the North Carolina Constitution of the North Carolina Legislature's districting maps in this case.  The majority of the North Carolina Supreme Court held that what the majority called the Free Elections, Equal Protection, Free Speech and Freedom of Assembly provisions in the North Carolina Constitution convey fundamental rights.    Harper v. Hall, ___ S.E.2d ___, No. 413PA21, 2022-NCSC-17, 2022 WL 496215, at ¶ 179, p. *42 (N.C. Feb. 14, 2022).  Together, these provisions of the North Carolina Constitution convey a further fundamental right:   "The right to vote on equal terms is a fundamental right in this state[.]"  Harper v. Hall, 2022 WL 496215, at ¶ 181, p. *43.  The second part of the strict scrutiny test applied in North Carolina requires a compelling State justification for its action.  There was no compelling justification here, the North Carolina Supreme Court ruled:  "Partisan advantage, however, is not a compelling governmental interest."  Harper v. Hall, 2022 WL 496215, at ¶ 181, p. *43.

[2] I looked up the word, "congeries," not because I did not necessarily know what it means but because applying an old tactic I wanted to learn what might be in Justice Alito's mind when he wrote it.  Webster's defines "congeries" as an aggregation or collection.  Among the synonyms given by Roget's Thesaurus are "mass," "lump," and "amassment."  Interesting word to describe fundamental rights, "a congeries" of State Constitutional provisions that went unaddressed in Washington.

REINSURERS ARE NOT LIABILITY CARRIERS ... UNLESS THEY ACT LIKE THEM.

Reinsurers generally are not liable for extracontractual, "bad faith" damages.  Four exceptions have been recognized, and the biggest exception is where the reinsurer acts like a liability carrier in the situation at hand.  It is significant as well that the reinsurance contract can provide, expressly or implicitly, that the reinsurer is basically just another liability carrier for a common insured.  See 1 DENNIS J. WALL, § 6:11, Primary and Excess Insurers and Reinsurers:  A Working Definition of Reinsurance--The Effect of Reinsuring Agreements or Treaties, LITIGATION AND PREVENTION OF INSURER BAD FAITH (3d edition Thomson Reuters, 2022 Supplements in process).

          In a recent decision in a federal court in Illinois, the Court held that 215 Ill. Comp. Stat. (ILCS) 5/155 does not apply -- and consequently there is no statutory bad-faith claim under Illinois law -- to agents of a reinsurer under these general principles applied in a host of cases decided under Illinois law.  Stonegate Ins. Co. v. Fletcher Reins. Co., No. 21 CV 3523, 2021 WL 5769528, at *7-*8 (N.D. Ill. December 6, 2021).  In the words of the Court:  "Given this precedent, it is clear that Section 155 does not permit a bad faith claim to be brought against a reinsurer’s agents, such as the Defendants. In other words, Stonegate cannot bring a claim against Defendants under Section 155, because Section 155 pertains only to insurance contracts – not reinsurance contracts."  Stonegate, 2021 WL 5769528, at *8 (emphases by the Court).

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

UNDERINSURED MOTORIST CLAIMS v. BAD FAITH CLAIMS IN TWO UIM CASES.

The nature of underinsured/uninsured motorist coverage in a given jurisdiction can determine the outcome of a bad faith claim against the UM/UIM carrier.

          In Washington, uninsured/underinsured motorist coverage is secondary to liability coverage, which is primary:

Plaintiff received $95,000.00 and left over $1 million in liability insurance coverage on the table. Thus, Plaintiff cannot now argue that the available liability insurance coverage was inadequate to compensate for his injuries.

    The purpose of UIM coverage is to place the insured in the same position as if a tortfeasor carried adequate liability insurance. [Citation omitted.] Thus, a UIM insured is not entitled to be put in a better position by virtue of colliding with an uninsured or underinsured motorist than by colliding with a tortfeasor that carries adequate liability insurance. [Citations omitted.]

    In Washington, an “underinsured motor vehicle” is one for which “either no bodily injury or property damage liability bond or insurance policy applies at the time of an accident,” or where the “the sum of the limits of liability under all … insurance policies applicable to a covered person after an accident is less than the applicable damages which the covered person is legally entitled to recover.” RCW 48.22.030(1) (emphasis added). The fundamental policy underlying UIM is that liability insurance is primary, while UIM insurance is secondary. The intent is that UIM insurance supplement but not supplant liability insurance.

Dean v. GEICO Ins. Agency Inc., No. 2:20-cv-01496-BAT, 2021 WL 4963638, at *3-*4 (W.D. Wash. October 26, 2021) (Tsuchida, USMJ).

          When an insured settles for less than the liability limits, as here, the insured's settlement is evidence in Washington that the insured's damages are less than the available UIM limits.  Accordingly, the Magistrate Judge granted the UIM carrier's motion for summary judgment on all claims including the bad faith claim in this case and dismissed the case with prejudice.  Dean, 2021 WL 4963638, at *4.

          On the day before the Magistrate Judge in Washington ruled in the Dean case, a U.S. District Judge ruled in another UIM case, this one in Nevada.  The defendant once again is GEICO.  Sahinov v. GEICO Adv. Co., No. 2:21-CV-919 JCM (VCF), 2021 WL 4954311 (D. Nev. October 25, 2021).

          The defendant UIM carrier filed a motion to dismiss an insured's extracontractual claims.   The insured pled three groups of extracontractual claims.  The District Court dismissed them all without prejudice, and all for the same reason:  The claims were not alleged with enough facts but were alleged with slogans in the eyes of the District Judge, so that the claims were not plausible when they were presented to the District Judge in this Nevada case. 

          First, in Nevada there is an implied covenant of good faith in every contract.  That includes underinsured motorist insurance contracts.  However, the insured in this case pled the same facts that the insured pled in support of a claim for breach of contract.  There are not two claims for the same breach of contract under Nevada law, and an alleged breach of the implied covenant is redressable as a contract claim under Nevada law.  Sahinov, 2021 WL 4954311, at *2-*3.

          Second, there is an actionable tort of bad faith under Nevada law.  That can include an alleged bad faith denial of UIM benefits.  However, the insured must allege what was not alleged in this case:

    To state a claim for bad faith, the insured must plausibly allege that: (1) an insurer denied a claim; (2) without any reasonable basis; and (3) with the knowledge or reckless disregard of any reasonable basis to deny coverage.  [Citation omitted.]  Bad faith requires an insurer was actually or impliedly aware that there was no reasonable basis to deny the claim.

Sahinov, 2021 WL 4954311, at *3.

          Third and finally, the Nevada Unfair Claim Settlement Practices Act conveys a statutory claim or cause of action for bad faith.  Once again, however, the allegations in the complaint in this case did not convey plausibility on the statutory claim here.  Sahinov, 2021 WL 4954311, at *4-*5.

          Accordingly, the District Judge in Nevada dismissed all extracontractual claims without prejudice in this case.

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

DEBATING FAIRLY DEBATABLE CLAIMS MEANS NO TEXAS BAD FAITH CLAIMS.

In Texas, "[a]n insurer can deny debatable claims without being liable for breach of the duty of dealing in good faith."  Aspen Spec. Ins. Co. v. Yin Inv's USA, LP, No. 6:20-cv-00153, 2021 WL 4666775, at *3 (E.D. Tex. October 7, 2021).

          If there is no common-law claim for breach of the duty of dealing in good faith in Texas, then there are likewise no statutory claims available under Texas Insurance Code § 541 (prohibiting unfair methods of competition and unfair or deceptive acts or practices), Texas Deceptive Trade Practices Act § 17.41 (prohibiting the same methods, acts or practices), and Texas Insurance Code § 542 (requiring prompt payment of claims), all of which were also at issue in Aspen Specialty.   The predicates are the same whether the claims are alleged on the basis of the Texas common law or on the bases of the cited Texas statutes.

          Summary judgment for the carrier on the Texas common-law claims in Aspen Specialty meant summary judgment for the carrier on these statutory claims as well.  Aspen Specialty, 2021 WL 4666775, at *3.

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

DOING NOTHING IS NO DEFENSE TO BAD-FAITH SETTLEMENT CONDUCT.

For years, some defense lawyers have counselled their insurance company clients that an insurance company has no legal duty to do anything in settlement negotiations.  This insistence on the theoretical obscures the reality of bad-faith claims decided by judges and juries.  If a carrier follows such advice, the consequences can include exposure to extracontractual liability and the policy limits will be irrelevant in such a case.

 

SETTLEMENT DUTIES OF INSURANCE CARRIERS:  THE THEORETICAL UNIVERSE vs. THE PRACTICAL, THE REAL, THE ACTUAL WORLD.

 

          In Nichols v. Zurich Am. Ins. Co., ___ S.W.3d ___, No. 2020-SC-0284-DG, 2021 WL 4487529 (Ky. September 30, 2021)(stated not final and not yet to be cited as authority in Kentucky courts), the Kentucky Supreme Court confronted just such a case, i.e., a case in which the record showed that the carrier did little to nothing to settle an Uninsured Motorist (UIM) claim.

          The carrier's settlement conduct was bound up in its belief that there should not have been any UIM coverage under the policy at bar.  On a previous appearance of this case in the Kentucky Supreme Court, the Court disagreed.  The Court held that the policy at issue provided UIM coverage at all material times, in effect.  The case presented many issues the first time around, but the one we are concerned with here relates to the Supreme Court's treatment of the carrier's conduct concerning settlement negotiations.

 

RECORD EVIDENCE OF DOING SOMETHING TO INITIATE SETTLEMENT NEGOTIATIONS IN GOOD FAITH.

 

          Putting evidence into the record can go a long way toward proving the carrier's settlement conduct in good faith; having no evidence in the record can be bad.   See generally 1 Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith, § 3:16, Duty to initiate settlement negotiations.

          "When insurance companies investigate the applicability of policy provisions to individual claims, their conduct is governed by the UCSPA [Unfair Claims Settlement Practices Act] as well as common law principles of good faith and fair dealing."  Nichols, 2021 WL 4487529, at *4.

          The Uniform Claims Settlement Practices Act has been enacted in much the same form across the country.  See generally 1 Dennis J. Wall, supra, § 3:28 Legal bases of liability in settlement--Statutory (third-party or liability insurance bad-faith claims); 2 id., §§ 9:14 & 9:15 (Express and Implied statutory causes of action in first-party bad-faith claims). 

          As the Nichols Court pointed out, the UCSPA incorporates a duty of good faith to attempt to effectuate "prompt, fair and equitable settlements of claims in which [the insured's] liability has become reasonably clear."   Kentucky's version of this duty is embodied in Ky. Rev. Stat. Ann. § 304.12-230(6):

    It is an unfair claims settlement practice for any person to commit or perform any of the following acts or omissions:

* * *

    (6) Not attempting in good faith to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear[.]

The Kentucky Supreme Court applied this statutory standard in Nichols.

 

EVIDENCE OF POST-LITIGATION SETTLEMENT CONDUCT

 

          There was one crucial addition in this case that applies in most States, not just in Kentucky:   The Kentucky Supreme Court's case law is predicated "on the understanding that the insurer's duty of good faith to the insured does not end until the claim has been settled."  Nichols, 2021 WL 4487529, at *6.

          That observation led the Court in Nichols to consider the discovery of post-litigation materials, meaning discovery of materials generated by the insurance carrier after the bad-faith lawsuit was filed.  The Court made it clear in Nichols that "even evidence of settlement behavior is not automatically admissible."  Nichols, 2021 WL 4487529, at *6.  In fact, in this case, the Court expressly ruled that "Nichols is entitled to the internal Zurich documents relating to the insurer's initial denial of his claim."  Nichols, 2021 WL 4487529, at *7.

          The Supreme Court further cautioned "that in all circumstances trial courts must remain vigilant and cautious prior to admitting any post-litigation evidence."  Earlier in its opinion, the Kentucky Court noted that "[t]he trial court granted Nichols' discovery requests in part, limiting it specifically to Zurich's settlement conduct." Nichols, 2021 WL 4487529, at *4.

          Later in its opinion, the Kentucky Supreme Court added this observation regarding evidence of the carrier's post-litigation settlement conduct in this case:

However, since Zurich simply opted out of engaging in the settlement process entirely, Nichols has no other remedy under our procedural rules.

Nichols, 2021 WL 4487529, at *7 (emphasis added).

 

CONCLUSION

 

          In the end, doing nothing is no defense.  Simply opting out of engaging in the settlement process entirely is not a good option, even in those few jurisdictions which do not require insurance carriers to do something to initiate settlement negotiations.

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

KENTUCKY LAYS OUT ELEMENTS OF BAD-FAITH CAUSE OR CLAIM.

In Nichols v. Zurich Am. Ins. Co., ___ S.W.3d ___, No. 2020-SC-0284-DG, 2021 WL 4487529 (Ky. September 30, 2021)(stated not final and not yet to be cited as authority in Kentucky courts), the Kentucky Supreme Court laid out the elements of a bad-faith cause of action or claim under Kentucky State law.

          This was an uninsured motorist (UIM) case.  The carrier denied all UIM coverage under Nichols's employer's policy.  On this record and with the history of this particular case, the Kentucky Court previously reached a decision that Nichols's UIM claim was covered here.

          In the present iteration of this case, the Court declared the elements of proving bad faith in Kentucky:

        In an insurance bad-faith cause of action, the claimant must prove the insurer (1) was obligated to pay the claim under the terms of the policy; (2) lacked a reasonable basis in law or fact for denying the claim; and (3) either knew it had no reasonable basis for denying the claim or acted with reckless disregard for whether such a basis existed.

Nichols, 2021 WL 4487529, at *1.

          With this declaration of elements, the Kentucky Supreme Court joined a number of courts which essentially require the party claiming bad faith to prove that the carrier had no reasonable basis to contest coverage or liability, i.e., that the carrier "lacked a reasonable basis in law or fact for denying the claim," not simply that the claim was covered or that the carrier lacked any basis for denying the claim.

          In our next article, we will address an even more significant aspect of the Kentucky Court's decision:  The Court's decision on the potentially devastating consequences to an insurance carrier of the carrier's failure even to initiate settlement negotiations.

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

LATE NOTICE, NO COVERAGE. THEREFORE NO BAD FAITH IN GEORGIA.

In Currie v. Auto-Ins. Co., No. 1:20-CV-02160-ELR, 2021 WL 4354188 (N.D. Ga. August 12, 2021), a policyholder sued a homeowner's carrier for statutory bad faith late payment of his claim under Georgia law.  His excuse for being late with his notice was that he did not know the defendant was his homeowner's carrier.

          The homeowner's carrier defended its conduct against the bad faith claim with this argument:  "Defendant asserts that Plaintiff's bad faith claim fails as a matter of law because Defendant had a reasonable, non-frivolous reason for rejecting Plaintiff's Claim."   Currie, 2021 WL 4354188, at paragraph immediately following title of Section IV of the Court's Opinion (page numbers not provided as of the time that this article is published).

          The federal court agreed and entered summary judgment for the homeowner's carrier in this case.  Currie, 2021 WL 4354188, at Section IV.B of the Court's Opinion (page numbers not provided as of the time that this article is published).

          The morals of the story here are two:  (1) There are apparently better excuses for being late in notifying your homeowner's carrier of your claim, and (2)  Your lateness does not impose an obligation on your homeowner's carrier in Georgia, as in most places.

P.S. SUBSEQUENT HISTORY AS OF WED., 09.29.21:

Since this article was posted, Westlaw has provided the following information on the subsequent history of the Currie case:  appeal docketed, No. UNAVAILABLE (11th Cir. Sept. 10, 2021).

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

HOW HOMEOWNER'S CARRIER'S PAYMENT IS USED MAKES ALL THE DIFFERENCE.

In Elder v. State Farm Fire & Cas. Co., No. 1:19-cv-05077-SDG, 2021 WL 4048789, at *7 (N.D. Ga. August 2, 2021), a federal judge in Georgia resolved a homeowner's carrier's motion for summary judgment in favor of the carrier because the policyholder failed to perform a clear condition precedent to coverage in that case:

    The parties agree the damage to the roof necessitated a full replacement. Based on its repair estimate, State Farm paid Elder $66,512.70 in actual cash value for such replacement. To receive additional replacement cost value payments, the Policy required Elder to “complete the actual repair or replacement of the damaged part of the property within two years after the date of loss.”  It is undisputed that Elder has not done so. Instead, he paid a fraction of the actual cash value to McGuire for various repairs and kept the remainder of the money for himself. Accordingly, Elder has failed to satisfy an unambiguous condition precedent to recover replacement cost value under the Policy. Given these undisputed facts, no reasonable juror could find that State Farm committed a breach or that Elder is entitled to further payment. 

          In sum, the evidence in that case showed no genuine issue that the carrier paid the policyholder the actual cash value to replace a damaged roof that required a complete replacement.  That is why the carrier gave the money which the carrier acknowledged to be due to the policyholder.

          The evidence in that case also showed that the policyholder used the money for some repairs and kept the rest, in short.  On this record, the policyholder did not fulfill the policy's condition precedent of "complet[ing] the actual repair or replacement of the damaged part of the property within two years after the date of loss."  The carrier did not breach the policy contract; the policyholder failed to satisfy a condition precedent on this record.

          The Court also entered summary judgment for the carrier on the policyholder's bad-faith insurance claim under a Georgia statute providing a bad-faith "penalty and attorney fees" for an allegedly delayed payment.  Elder v. State Farm, 2021 WL 4048789, at *7 n.49.  The statute might have applied to the policy at bar, but the facts of this case certainly did not. 

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

NO FORCE-PLACED INSURANCE OR COVID COVERAGE, NO BAD FAITH.

The court ruled in the case of Lonnie Dupuis v. American Sec. Ins. Co., No. 6:21-CV-01154, 2021 WL 3520514, at *1-*3 (W.D. La. August 10, 2021), that Mr. Dupuis was neither an insured or an intended third-party beneficiary capable of enforcing the contract of lender force-placed insurance.  Mr. Dupuis's claims for coverage for Hurricane losses were dismissed.   This is a common result in lender force-placed insurance cases, but the results depend on the wording of the insurance policy involved.

          In the Dupuis case, the court also dismissed a claim for insurer bad faith on the ground that where there is no coverage, there can be no bad faith.  The court granted leave to amend, however, as this case is "in its infancy[.]"  Dupuis, 2021 WL 3520514, at *3.

          In another case the plaintiff claimed insurance coverage for alleged losses caused by COVID.  The court in this case, too, denied coverage.  Identity Dental Mktg., LLC v. Twin City Fire Ins. Co., No. 20-cv-06883, 2021 WL 35242111, at *3-*4 (N.D. Ill. July 19, 2021).  As with force-placed insurance policies, the results depend on the wording of the insurance policy involved.

          In the Identity Dental case, too, the court granted leave to amend.  That would necessarily include Identity Dental's "bad faith claim," i.e., its claim for bad faith damages under 215 ILCS 5/155 for vexatiously denying coverage.  The court ruled that where there is no coverage, there are no Section 155 damages.  Identity Dental, 2021 WL 35242111, at *4.  As noted, the court granted leave to amend one time, giving Identity Dental "one opportunity to amend if it can."  Identity Dental, 2021 WL 35242111, at *5.

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved. 

BAD FAITH TO RELY ON COMPUTER PRELIMINARY RESTORATION EVALUATION.

In Nikfard v. State Farm Fire & Cas. Co., No. C19-6001RSL 2021 WL 3620277 (W.D. Wash. August 16, 2021), a fire damaged a rental house owned by the plaintiff policyholder.  After he made a claim for the damage, his "first-party property insurance" carrier accepted coverage and recommended that the policyholder contact a certain insurance restoration specialist, which he did.

          The insurance restoration specialist was a general contractor.  The g.c. prepared a preliminary estimate of what it would take to restore the house, using a computerized program called Xactimate.  The program is familiar to insurance companies and to coverage practitioners. 

          In this case, the evaluation was only intended to be preliminary.  It was never intended to be the basis for the g.c. (or, apparently, anyone else) to perform the restoration work.  The preliminary evaluation was $149,900.86.  Nikfard, 2021 WL 3620277, at *1.  The carrier seized upon this figure and this computer report and never let go.  Even though the evidence showed that the repairs would realistically take at least $100,000.00 more than that before restoration was finished on this particular house.

          In fact, the restoration project ultimately cost $334,470.00.  Before the project ended, the carrier paid $174,071.94.

          The policyholder sued, alleging several claims.  First and foremost, he sued for breach of contract and was awarded the difference between what the carrier paid and what the restoration ultimately and actually cost, which was a difference of $160,398.06.  Nikfard, 2021 WL 3620277, at *4.

          He also alleged a pair of claims which were unsuccessful, for one reason or another, for the "tort of bad faith in insurance claim handling"  and for alleged violation of IFCA the Washington State Insurance Fair Conduct Act. Nikfard, 2021 WL 3620277, at *5.

          The policyholder's final claim, brought under the Consumer Protection Act in Washington, was successful in providing the basis for an award of his attorney's fees.  He proved his CPA claim in part by proof of a violation of an Unfair Claim Settlement Practices Regulation which has the force of law in Washington, and generally if not identically follows the Uniform Unfair Claim Settlement Practices Acts promulgated by the National Association of Insurance Commissioners and in force across the country.  See 2 Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith §§ 9:14 (Express statutory causes of action) and 9:15 (Implied statutory causes of action) (3d Edition Thomson Reuters West, with 2021 Supplements).  (The effects of the UCSP Acts in third-party or liability insurance cases are discussed in Volume 1 of id., § 3:28.)

          The policyholder's attorney's fees in this case were awarded in the amount of $261,964.00 and his costs were awarded in the amount of $7,339.26.

          The homeowner's carrier's continued reliance on a preliminary computerized restoration evaluation of just under $150,000.00 in this case, ultimately cost it $429,702.32.

          The moral of the story?  Well, one moral to draw is that basing a final position on a preliminary investigation is never a wise thing to do, even if the preliminary evaluation was done on a computer.  What's important is that it was preliminary, that it was not the final word, regardless of the involvement of computer software.

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

IMPLIED GOOD-FAITH DUTY, BUT STATUTORY ALLEGED, DISCOVERY NOT ALLOWED.

A U.S. Magistrate Judge in Colorado was not impressed enough with an alleged breach of good-faith duties to allow discovery into the supervision and incentives for the adjusters involved in investigating the claim.

          In American Ins. Co. v. Pine Terrace Homeowners Ass'n, No. 20-cv-00654-DDD-KMT, 2021 WL  2188707 (D. Colo.  2021) (Tafoya, USMJ) the Court first held that every insurance contract in Colorado has an implied duty of good faith.  Pine Terrace, 2021 WL 2188707, at *2 .  This may be dicta, however.

          The defendant homeowner's association alleged two counterclaims:  Breach of Contract and Statutory Bad Faith.  The homeowner's association in this case did not allege common law bad faith.

          The standard for statutory bad faith in Colorado precluded the discovery requested.  The Court ruled that where the standard for measuring extracontractual liability for statutory bad faith, as in Colorado, is whether the carrier's conduct is "reasonable" and not "why" did they  breach their good-faith duty, discovery was not allowed into the supervision and incentives given to the adjusters who handled the claim at bar.  See Pine Terrace, 2021 WL 2188707, at *3-*4 .

          The implied duty of good faith and fair dealing is recognized in virtually every court that has considered the question, including but not limited in most cases to insurance contracts.  See 1 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 1.01 (West Publishing Co. 3d ed. & 2021 Supplements).

          The question of discovery into alleged bad-faith claims handling is the subject of two Chapters in 1 id., Ch. 8, titled "Discovery From Insurers Concerning Their Handling of Third-Party Claims" addressing discovery from, by, and between insurance carriers in third-party bad faith cases, & 2 id., Ch. 12, titled "Discovery From and By Insurers," discussing the same issues addressed by the courts in first-party insurance bad faith cases.

Please see the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

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.

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

DISCLOSING YOUR HORSE BARN REQUIRED NONDISCLOSURE AGREEMENTS, NO CONFIDENTIAL BREACH.

(Photo via Wikipedia)

In an unpublished opinion in Barron v. Great Am. Assur. Co., 2020 IL App (1st) 182353-U, Nos. 1-18-23531-19-0656 cons., 2020 WL  7121448 (Ill. 4th DCA December 4, 2020), an Illinois appellate court upheld a trial court's orders dismissing the plaintiff's case and refusing to reconsider the ruling.

The plaintiff sued Great American over the conduct of the carrier's employees relative to the plaintiff's equine insurance policy.  Ms. Barron boarded a horse, and received other equine services, at a stable.  While the horse was at the stable, it suffered from multiple fractures of one of its legs and the horse was euthanized.

For some reason which does not specifically appear in the appellate opinion, and is perhaps vague in plaintiff's complaint, she allegedly gave the carrier confidential information.

The confidential information in question allegedly included her disclosure of the fact that the stable required nondisclosure agreements from its employees.  Barron, 2020 WL 7121448, at *2, ¶ 10.

The plaintiff apparently gave the carrier this information before she sued the stable and the stable's owner.  After that suit, she sued the carrier alleging breach of contract, bad faith due to improper claims handling prohibited by various Illinois statutes, breach of the implied covenant of good faith and fair dealing, and breach of an Illinois statute by virtue of the carrier's alleged disclosure of alleged confidential and privileged information, among other alleged causes of action.

As noted the appellate court affirmed the trial court's dismissal of these claims and also affirmed the trial court's refusal to reconsider.  In a somewhat lengthy opinion that covers some 11 pages of the Westlaw report, the appellate court pointed out in basic and simple terms that the plaintiff's allegations and claims were not specific enough to withstand the carrier's motion to dismiss.

Specifically with regard to the claim alleged for breach of confidential and privileged information in violation of an Illinois statute, the appellate court point out that the statute in question does not apply to equine insurance which, again as noted, was the type of insurance involved in this case.

Please read the disclaimer.  ©2020 Dennis J. Wall.  All rights reserved.

 

THE CASE OF THE STOLEN GIFT CARD INFORMATION.

(Photo by the author)

The case of Maritz Holdings Inc. v. Certain Underwriters at Lloyd's London, No. 4:18-CV-00825 SEP, 2020 WL 7023952 (E.D. Mo. Nov. 30, 2020), came about in this way.  Maritz allegedly experienced cyber-security breaches.  At this time of the year in particular, gift cards are on our minds.  In the Maritz case, the cyber-security breaches endured by Maritz occurred because of gift cards.

Gift card information was allegedly stolen from Maritz.  It claimed coverage under insurance policies issued by Lloyds of London.  "Underwriters issued breach-response insurance coverage to Maritz[.]"  Maritz, 2020 WL 7023952, at *1.

Underwriters filed a motion to dismiss directed to Maritz's claim that the Underwriters' refusal to pay was vexatious and so actionable under Missouri "bad-faith" or vexatious refusal statute.  (Maritz also asked the Court to treat its motion as a motion for judgment on the pleadings.  The Court said the same standard would apply to measure the motion.)  In pertinent part, Underwriters argued that the vexatious-refusal-to-pay claim brought under the Statutes of Missouri should be dismissed because a choice-of-laws provision in the insurance policy required New York law to apply here, not Missouri law.

The Court disagreed with Underwriter and agreed with Maritz in this regard, that Missouri public policy mandates that Missouri law be applied when the protection of Missouri citizens is at stake:

 Maritz argues that an insurer should not be allowed to achieve that same end via a choice-of-law provision that works to strip Missouri insureds of the protections afforded by the vexatious refusal statute. The Court agrees.

Maritz, 2020 WL 7023952, at *3.

After announcing the public policy of Missouri, the Court upheld Maritz's vexatious refusal claim and denied Underwriters' motion to dismiss. 

Please read the disclaimer.  ©2020 Dennis J. Wall.  All rights reserved.

WHEN A COVERAGE DEFENSE 'RESIDENCE' IS FAIRLY DEBATABLE.

The short answer is:  when it is a complicated endeavor.

(Image courtesy of NASA)

In Bloxham v. Allstate Ins. Co., No. 3:19-CV-004812020, WL 6710427 (M.D. Pa. Nov. 16, 2020) (Mehalchick, USMJ), a homeowner's insurance carrier denied coverage for a fire loss.  The carrier's coverage denial was premised on two related grounds:  that the claimant did not "reside" on the covered property and that there were "material misrepresentations" that he did.

The carrier's motion for summary judgment was denied including on a statutory claim of insurer bad faith.  The Court's announced reason after reviewing all the evidence on the question of the insured's "residence" in that particular case was this:  "Defining and determining the term 'reside' is a complicated endeavor."  Bloxham, 2020 WL 6710427, at *8.

The Court did not say so in this case but clearly it came to the conclusion after reviewing all the evidence that this coverage question was fairly or reasonably debatable.

That is the real reason that the carrier's motion for summary judgment based on that coverage question was denied.

Please read the disclaimer.  ©2020 Dennis J. Wall.  All rights reserved.

ABOUT THAT CIVIL REMEDY NOTICE, SPECIFICALLY ....

(Gridview imagefull / Florida Department of Consumer and Agricultural Services)

In the case of Julien v. United Prop. & Cas. Ins. Co., ___ So. 3d ___, No. 4D19-2763, 2020 WL 5652364 (Fla. 4th DCA Sept. 23, 2020) (STATED NOT YET RELEASED FOR PERMANENT LAW REPORTS), Junior Julien sued his homeowner's carrier on account of his fire loss.  Since he was suing in Florida, Julien had to send the carrier a Civil Remedy Notice of Insurer Violation to comply with a statutory condition precedent to his bad faith lawsuit.

    Florida, like many States, requires a Civil Remedy Notice or CRN in connection with a bad faith lawsuit; in Florida, unlike many States, first-party insurance bad faith is strictly a statutory cause of action, making compliance with the Florida statute all the more significant in Florida first-party bad faith actions.

    Parenthetically, this first-party case is not limited to first-party cases.  Its holding concerns the legal sufficiency of a CRN.  That includes the issue of legal sufficiency of CRN's in third-party cases too, of course.

    Mr. Julien's strategy might be analogized to "flooding the zone."  In his case, Julien opted to provide the carrier with a notice that listed most of the provisions in his insurance policy and all of the statutory provisions that the carrier might have violated in handling his claim.  "Julien's civil remedy notice, it seems, listed every statutory provision and every policy provision available to him as the insured."  Julien, 2020 WL 5642364, at *2.

    The Florida statute has required in the past, and continues to require, that a plaintiff in a first-party bad faith insurance case identify "with specificity" the statutory provision "which the authorized insurer allegedly violated" and refer to "specific policy language that is relevant to the violation, if any."  Fla. Stat. § 624.155(3)(b).   The trial court eventually dismissed Mr. Julien's complaint with prejudice because Julien's civil remedy notice, while citing "thirty-five statutory provisions and list[ing] nearly every provision in the insurance policy," did not meet the statutory requirement of specificity in a Civil Remedy Notice.  Julien, 2020 WL 5652364, at *1.

    The appellate court affirmed the trial court's ruling.  The appellate court held:  "We agree with the circuit court that the notice failed to specify the statutory and policy provisions at issue."   Julien, 2020 WL 5652364, at *1.  That is their succinct holding, although the Court's opinion went on for a couple of pages after that demonstrating the statute's specificity requirements and contrasting Julien's notice document.

    "Specify the statutory and policy provisions at issue."  That is the crux of the sufficiency of a Civil Remedy Notice of insurer bad faith under Florida's statute.

The various requirements for Civil Remedy Notices across the United States, including Florida, are examined in third-party cases in 1 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 3:30, "Legal Bases of Liability in Settlement -- Statutory Requirement of Notice of Violation" (Thomson Reuters West 3d ed. & 2020 Supps), and in first-party cases in id., Volume 2, § 9:21, "Common Law and Statutory Regulation of Civil Remedy Notice to Act in Good Faith."

            Defenses raised by failure to comply with CRN requirements are also discussed in third-party insurance bad faith actions in id., Volume 1, § 5:57, and in first-party insurance bad faith actions in id., Volume 2, § 11:24.   

Please read the disclaimer.  ©2020 Dennis J. Wall.  All rights reserved.

"Injury in Fact" Under the Pennsylvania Bad Faith Statute?

There may be a conflict brewing in the Eastern District of Pennsylvania.

           It is subtle.  It is quiet.  But it seems real.

           In one case, a federal district judge in the Eastern District of Pennsylvania held that a claim under the Pennsylvania bad faith statute survived a motion to dismiss, even though the statutory claim in that case was based on allegations that went far beyond the niche of alleged 'insurance claims handling' that the Pennsylvania statute seems to address:

    This insurance coverage dispute arises out of the “collapse of the housing market” in 2008. (Compl. ¶ 4.)

* * *

    In its 37-page Complaint, Nationstar alleges that Radian denied, rescinded and curtailed coverage and refused to reimburse overpayments for 5,246 mortgages under Radian's pool, bulk and flow policies.

* * *

    Nationstar contends that Radian acted in bad faith when it denied, rescinded, and curtailed coverage for valid claims and refused to reimburse Nationstar for premium overpayments. (Compl. ¶ 120.) Nationstar alleges that Radian knew and understood that if it wrongfully rescinded, denied and/or curtailed claims that third parties would seek to have Nationstar repurchase these loans. (Id. at ¶ 113). Moreover, Nationstar's Complaint is replete with allegations arguing that Radian lacked a reasonable basis for its coverage decisions. See (id. at ¶¶ 54, 65, 69, 72, 113, 114).

    Accepting the factual allegations as true, Nationstar has adequately plead both requirements to show bad faith under 42 Pa. Cons. Stat. § 8371.

Nationstar Mort. LLC v. Radian Guar. Inc., No. 18-03798, 2019 WL 1318541, at *1, *2, and *6 (E.D. Pa. March 22, 2019).

    In another case, decided nearly five months after Nationstar Mortgage, the Court quoted from the earlier case and cited to it in a footnote.   The claim in that case was also based on the Pennsylvania bad faith statute, 42 Pa. Cons. Stat. § 8371.

    In the later case, a different federal district judge in the Eastern District of Pennsylvania seems to have reached a different and succinct conclusion from the judge who ruled on the motion to dismiss the statutory bad faith claim in the Nationstar Mortgage case:  "We cannot recognize a bad faith claim for actions unrelated to the handling or denial of benefits."  Boring v. State Farm Fire & Cas. Co., No. 19-1833, 2019 WL 3774191, at *6 (E.D. Pa. August 9, 2019). 

    The separate holdings in these two cases seem to stand apart.  On the facts alleged in the two cases, the rulings appear to conflict on their face.  Whether the judges of the Eastern District are actually in conflict will be determined in Pennsylvania, if at all.

The Nationstar Mortgage and Boring cases are discussed along with many other first-party insurance cases addressing "Injury in Fact":  What Happens to Bad Faith Statutes?, in 2 Dennis J. Wall, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 9:14.50 (3d Edition Thomson Reuters and 2020 Supplements.  "Injury in Fact" issues affecting Bad Faith Statutes in third-party cases are discussed in 1 id., § 3:28.50, which is republished on the Works page at  https://www.dennisjwall.com.

Please read the disclaimer.  This blog article ©2020 Dennis J. Wall.  All rights reserved.

WHO RUNS THE RISK OF LIABILITY FOR INSURER BAD FAITH?

This question was addressed in a federal case in the Southern District of Georgia in Simmons v. Harleysville Insurance Co., No. 4:18-cv-55, 2019 WL 1922048 (S.D. Ga. February 19, 2019).   Specifically, the Court in that case addressed a Georgia statute titled "Liability of Insurers for Damages and Attorney's Fees on Bad Faith Refusal to Pay Claims."   The statute is OCGA § 33-4-6.

    Because the statute applies on its face to "insurers," the Court held that the Georgia statute simply does not apply to a third-party administrator for an insurance company on surety bonds:

Taking these allegations as true—namely that Defendant was the third-party claims administrator which denied, in bad faith, Plaintiff's reasonable claim for the surety bond—Plaintiff fails to state an actionable bad faith claim under Georgia law.

    O.C.G.A. § 33-4-6 provides a cause of action against insurers when they refuse to pay a covered loss in bad faith.  Upon the bad faith “refusal of the insurer” to pay a timely demand, “the insurer shall be liable to pay [the policy] holder, in addition to the [covered] loss, not more than 50 percent of the liability of the insurer for the loss ... and all reasonable attorney's fees for the prosecution of the action against the insurer.” O.C.G.A. § 33-4-6(a) (emphasis added). “[B]y its express terms [this provision] applies only to insurers.”

Simmons, 2019 WL 1922048, at *4 (emphasis by the Court).

The Simmons v. Harleysville Insurance Co. case is discussed along with many other first-party insurance cases addressing Express Statutory Causes of Action, in 2 Dennis J. Wall, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 9:14 (3d Edition Thomson Reuters and 2020 Supplements).

Please read the disclaimer.  ©2020 Dennis J. Wall.  All rights reserved.

WHAT IS A "GENERAL BUSINESS PRACTICE" ACTIONABLE UNDER INSURANCE STATUTES?

In 2019, the highest court in New York State held that at least one thing is not a recognized "general business practice": "On this appeal, we conclude that a general business practice of failing to promptly disclose coverage within the meaning of Insurance Law § 2601(a)(6) does not include violations of the timely liability disclaimer requirement of Insurance Law § 3420(d)(2)." Nadkos, Inc. v. Preferred Contractors Ins. Co. Risk Retention Grp. LLC, 34 N.Y.3d 1, 4, 132 N.E.3d 568, 569, 108 N.Y.S.3d 375, 376 (2019).

The issue of the Legal Bases of Statutory Liability in Settlement are discussed based on the decided case law including the Nadkos decision, in Section 3:28 in 1 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH (Thomson Reuters West, 3d Edition, forthcoming 2020 Supplement).

Please read the disclaimer. ©2020 Dennis J. Wall. All rights reserved.

From the manuscript of the 2020 Supplement of LITIGATION AND PREVENTION OF INSURER BAD FAITH, which I am writing right now:

    In 2019, a federal court decided the question of whether an "injury in fact" was alleged in an action involving a consumer protection statute in New York State, N.Y. General Business Law § 349. The ruling came on a motion to dismiss. The Court equated plausibility of stating a substantive claim under the New York statute with plausibility of stating a claim of concrete and particularized injury for standing purposes, at least in a case of alleged "economic injury," namely, overpaying based on the defendant's affirmative misrepresentations.¹

¹ See Cummings v. FCA US LLC, 401 F. Supp. 3d 288, 304, 307 (N.D.N.Y. 2019).

 

The 2019 Supplement on "Injury in Fact:  What Happens to Bad Faith Statutes," is available courtesy of Thomson Reuters West and the author, at:

https://www.dennisjwall.com/attachments/dennis_j._wall__litigation_and_prevention_of_insurer_bad_faith

_section_3.28.50_(2019_supp.)_2.pdf

Please read the disclaimer. ©2020 Dennis J. Wall.  All rights reserved.