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$1 MILLION PUNITIVE DAMAGES FOR BAD FAITH BREACH OF INSURANCE CONTRACT.
In Mazik v. GEICO General Ins. Co., No. B281372, 2019 WL 2150799 (Cal. 2d DCA, Div. 2, May 17, 2019), a California jury awarded $313,508.00 in damages for delayed payment in bad faith of an Uninsured Motorist (UIM) claim. The jury also assessed $4Million in Punitive Damages.
A California trial judge reduced the punitive damages assessment to $1 Million. GEICO appealed only the judgment for punitive damages.
A California appellate court affirmed. In simple and basic terms, the California appellate panel held that the evidence of insurer bad faith conduct in the record of that case was sufficient to support the judgment of bad faith including punitive damages, and the assessment fell within the constitutionally permissible range of punitive damages assessments:
We reject GEICO’s arguments and affirm. There is sufficient evidence in the record to show that GEICO’s managing agent ratified conduct warranting punitive damages. In concluding that Mazik’s claim was worth far less than the policy limits, GEICO disregarded information provided by Mazik showing that he had a permanent, painful injury, and instead selectively relied on portions of medical records that supported GEICO’s position that Mazik had fully recovered. As reduced by the trial court, the $ 1 million in punitive damages (approximately three times the amount of compensatory damages) is within the constitutionally permitted range in view of the degree of reprehensibility of GEICO’s conduct.
Mazik v. GEICO General Ins. Co., No. B281372, 2019 WL 2150799, at *1 (Cal. 2d DCA, Div. 2, May 17, 2019).
In Liang v. Progressive Cas. Ins. Co., 2019 WL 1925954 (N.Y. App. Div., 2d Dep't, Feb. 5, 2019), the appellate court agreed with the trial court that there are "triable issues of fact" on the Underinsured Motorist Claim that Mr. Liang filed as administrator of his mother's estate.
The appellate court also agreed with the trial court that under New York standards of insurer bad faith, "[h]ere, Progressive established, prima facie, that it did not act in bad faith, since its conduct, under the circumstances, did not constitute a gross disregard of Liang's interests."
The appellate court continued:
Progressive conducted an investigation and had an arguable basis for disclaiming coverage (citations omitted). In opposition, the plaintiff's conclusory assertions failed to raise a triable issue of fact as to whether Progressive's conduct constituted a gross disregard of Liang's interests (citations omitted).
The only disagreement between the appellate court and the trial court in this case was that the appellate court ordered that Progressive's motion for summary judgment should have been granted on the bad faith claim, and not simply that the bad faith claim should be dismissed. Liang v. Progressive Cas. Ins. Co., 2019 WL 1925954, at *3 (N.Y. App. Div., 2d Dep't, Feb. 5, 2019).
An underinsured motorist (UIM) policyholder's bad faith claims were not barred by claim preclusion, i.e., by res judicata or estoppel, where the bad faith claims were based on the UIM carrier's alleged conduct after the policyholder had prevailed in arbitration on her claim for the full UIM policy limits. She filed suit to enforce the arbitration award and obtained a judgment in her favor, following which the carrier paid the UIM policy limits and the policyholder dismissed her case. Searcy v. Endurance Ins. Co., 243 F. Supp. 3d 1146 (D. Nev. 2017).
The UIM carrier defended its conduct occurring after the policyholder filed suit to enforce the arbitration award and, in this case, after the judgment confirmed the arbitration award, on the ground that the policyholder's bad faith claims should have been brought before the conduct occurred, in basic and simple terms. The District Judge disagreed. And so, in the end, yet another gamble in Nevada did not pay off.
In Duncan v. GEICO Gen. Ins. Co., No. 8:17-CV-40-T-30TGW, 2017 WL 4574605 (M.D. Fla. October 13, 2017), the Court held that perfection is not required in the handling of an Uninsured Motorist (UM) claim to avoid a bad faith claim in Florida.
But medical expert testimony is required, the same Court held, if the bad faith UM claim is based on the carrier's alleged handling of the policyholder's permanent injury. Since the plaintiff-policyholder did not introduce expert medical evidence into the record that he was permanently injured, the District Judge granted the UM carrier's motion for summary judgment on his bad faith claim.
After bad faith claims were dismissed under Pennsylvania law in this Federal case, amended bad faith claims related to alleged investigation and evaluation of uninsured motorist (UM) claim stated claims upon which relief could be granted, in Meyers v. Protective Ins. Co., NO. 3:16-CV-01821, 2017 WL 4516712 (M.D. Pa. October 10, 2017).
Another Federal case has lined up in favor of abating and not dismissing a statutory bad faith claim in Florida in a case for UM coverage, where coverage has not yet been determined: "The Court, consistent with its past rulings on this issue, considers abatement of the bad faith claim to be the appropriate remedy." Cooper v. Progressive Am. Ins. Co., No: 5:17–cv–70–Oc–30PRL, 2017 WL 784816, at *2 (M.D. Fla. March 1, 2017).
In Nibert v. GEICO Casualty Co., ___ P.3d ___, No. 16CA0322, 2017 WL 710504, 2017 COA 23 (Colo. Ct. App. Div. V February 23, 2017) (STATED NOT RELEASED FOR PUBLICATION IN THE PERMANENT LAW REPORTS UNTIL AFTER REHEARING OR CERTIORARI REVIEW, IF ANY), a policyholder sued her underinsured motorist (UIM) carrier on both a common law bad faith claim, and on a statutory claim of delayed payment of policy benefits. Both claims required proof on the issue of "reasonableness" of the carrier's behavior.
However, more than proof that the UIM claim was "fairly debatable" was required to prove "reasonableness":
Contrary to Geico Casualty's argument, the tendered instruction went beyond the reasonableness of a challenge to a claim that is fairly debatable. Instead, the instruction, as tendered, misstated the law by effectively conflating the reasonableness elements of the common law bad faith claim and the statutory delay claim by inquiring only into whether Nibert's claim was fairly debatable. Colorado law is clear that whether a claim is fairly debatable is not the sole inquiry in a reasonableness analysis.
Nibert v. GEICO Casualty Co., ___ P.3d ___, No. 16CA0322, 2017 WL 710504, AT *2 ¶ 12, 2017 COA 23 (Colo. Ct. App. Div. V February 23, 2017) (STATED NOT FINAL).
The Colorado appellate court affirmed a trial court's judgment entered on jury verdicts in favor of the policyholder on both of her claims against the UIM carrier in this case.
On Halloween, the Third Circuit Court of Appeals affirmed a Rule 12(b)(6) dismissal of claims including bad faith claims in Ensey v. Government Emp's Ins. Co., No. 15-1933, 2016 WL 6407379 (3d Cir. October 31, 2016).
The Third Circuit also took jurisdiction to decide on appeal the District Court's grant of summary judgment to the insurance carrier on the last remaining count of the policyholder's complaint in this case.
The policyholder claimed that among other things the carrier breached its duty of good faith and fair dealing under New Jersey law. The appellate court quoted her allegations in her lawyers' own words:
Ensey alleges that GEICO breached the implied covenant of good faith and fair dealing in four ways: (i) when it “failed to offer insureds ... the option of higher available UM/UIM coverage limits when insureds increased their BIL coverage limits,” (ii) when it used “unlicensed agents to sell such increased BIL coverage limits so the agents would be unaware of their obligation to so advise insureds,” (iii) when it failed “to provide CSFs [coverage selection forms] and Buyer's guides after insureds purchased increased liability limits,” and (iv) when it denied “UM/UIM claims thereafter based on the reduced limits purportedly ‘chosen by the insureds.’ ”
Ensey v. Government Emp's Ins. Co., No. 15-1933, 2016 WL 6407379, at *3 (3d Cir. October 31, 2016).
The policyholder apparently argued her insurance bad faith claim in terms of New Jersey's law of the covenant of good faith and fair dealing which is implied in all contracts. At any rate, that is how the Third Circuit addressed her fact allegations about UM/UIM coverage options which, it said, were legally insufficient to support a claim of bad faith here.
She argued that the implied covenant is breached when the defendant either acted in bad faith or demonstrated some other kind of inequitable conduct in the course of performing a contractual obligation. The Third Circuit agreed with this statement of New Jersey law, but held that the policyholder's fact allegations were legally insufficient to meet that legal standard. Accordingly, the Third Circuit affirmed the dismissal of her bad faith claims against the carrier in this case. Ensey v. Government Emp's Ins. Co., No. 15-1933, 2016 WL 6407379, at *3-*4 (3d Cir. October 31, 2016).
In Hackler v. State Farm Mut. Auto. Ins. Co., No. 3:14-cv-00531-MMD-VPC, 2016 WL 5402743 (D. Nev. September 26, 2016), the policyholder's underinsured motorist (UIM) claim was at issue. The insurance carrier took a long time to decide whether it would, or would not, pay the claim. The insurance carrier argued that its failure to deny the UIM claim was actually a defense to a bad faith claim. Undisputed evidence of this delay prevented the entry of summary judgment in the carrier's favor on the policyholder's claim for bad faith, however:
State Farm argues at length that Hackler cannot show bad faith because she cannot show a decision to deny benefits. (See ECF No. 55 at 4-5.) However, as courts in this district and elsewhere have recognized, sitting on a claim for an extended period is functionally equivalent to a denial. (Citations omitted.) As such, the Court finds State Farm's understanding of the requirements of showing bad faith needlessly narrow.
Hackler v. State Farm Mut. Auto. Ins. Co., No. 3:14-cv-00531-MMD-VPC, 2016 WL 5402743, at *4 (D. Nev. September 26, 2016).
In Spearman v. Progressive Classic Ins. Co., 276 Or.App. 114, 127-28, 366 P.3d 821, 828 (Or. Ct. App. 2016), the appellate court held en banc that by disputing the types of damages alleged by the plaintiff, the defendant U.M. carrier was not disputing U.M. "coverage" so as to entitle the insured to attorney's fees in Oregon even though the dispute could include a contention that the insured was not entitled to a certain type of damages at all:
Our determination that “damages due the insured” is a reference to the amount of damages (if any) that the insured would be entitled to recover from the uninsured motorist provides a clear answer to the remaining question. Although we agree with plaintiff that defendant's pleadings were enough to put at issue the possibility that plaintiff would recover no benefit in the UM action, the allegations raised issues only as to the damages that the insured would be entitled to recover from the uninsured motorist.
In its answer, in response to plaintiff's allegation that he sustained noneconomic damages, defendant admitted that plaintiff sustained “some” injury in the collision with the uninsured motorist but disputed “the nature and extent of [p]laintiff's alleged injuries.” On its face, that allegation disputes only the amount of plaintiff's damages. Although plaintiff contends the allegation could have permitted a determination that plaintiff is entitled to zero noneconomic damages, ORS 742.061(3) does not preclude disputes about individual categories of damages. A dispute about whether plaintiff sustained economic damages would still be a dispute regarding the amount of the damages due the insured as a result of the collision.
Next, in response to plaintiff's allegation of economic damages for medical expenses, defendant's answer disputed “the reasonableness and necessity of some of [p]laintiff's accident-related medical expenses.” In response to two of plaintiff's requests for admissions, defendant similarly disputed some, but not all, of plaintiff's alleged injuries: “Admit that Plaintiff sustained ‘some’ injury as a result of the accident alleged in the Complaint; however, Defendant denies the nature and extent of Plaintiff's injuries” and “Admit that some of the treatment was necessary; Defendant denies the reasonableness, necessity, relatedness and extent of some of Plaintiff's treatment.” Again, facially, those allegations dispute only the amount of plaintiff's damages.
In Johnson v. State Farm Mut. Auto. Ins. Co., No: 6:15–cv–1942–Orl–31TBS, 2016 WL 1127748 (M.D. Fla. March 21, 2016) (Presnell, J.), the plaintiff in State Court received a jury verdict in excess of policy limits on a UM claim. She then asked for and received leave to amend to allege a bad faith claim. The Florida State Court Judge left entry of the judgment open, however.
The UM carrier removed the case to Federal Court. The Federal Judge denied the plaintiff's motion to remand the case to State Court. The UM carrier then asked the Federal Judge to dismiss the bad faith claim. As there was no final determination of damages in the UM case because there was no final, appealable judgment, the Federal Court granted relief but refused to dismiss. Instead, the Federal Judge abated the UM bad faith claim "pending entry of judgment and any appeal taken by State Farm." Johnson v. State Farm Mut. Auto. Ins. Co., No: 6:15–cv–1942–Orl–31TBS, 2016 WL 1127748, at *2 (M.D. Fla. March 21, 2016) (Presnell, J.).
The Federal Judge did not say so, but his reasoning was apparent that the State Judge retained jurisdiction over the UM case for at least the purpose of entering judgment on the jury verdict.
In the first-party bad faith case of Batchelor v. GEICO Casualty Co., 2014 WL 3906312 (M.D. Fla. June 9, 2014), GEICO contended that it would be deprived of due process if it could not get answers to its damages interrogatories.
The interrogatories certainly appear to be standard, form interrogatories used in U.M. cases. They inquire into the plaintiff's damages sustained in the given accident, what physicians she has seen, what injuries she claims, what effects the accident had on her employment history and capacities, and so on.
The interrogatories were served in a bad faith case.
Ms. Donna Batchelor is GEICO's insured. She was injured in an auto accident. She had U.M. coverage of $30,000.00 under a policy issued by GEICO. After GEICO refused to pay the U.M. coverage, Donna Batchelor sued GEICO and a jury in a Florida State Court determined her damages at $1.8 Million.
The U.M. trial court granted GEICO's motion to reduce the verdict to the U.M. policy limit of $30,000.00. GEICO appealed the result (except, certainly, the trial court's ruling limiting the plaintiff's recoverable damages to the U.M. policy limits). Florida's Fifth District Court of Appeal affirmed.
GEICO served its U.M. interrogatories in the instant first-party bad faith lawsuit. A motion to compel filed on behalf of GEICO presented the argument that GEICO would be denied due process in the bad faith lawsuit if it were not allowed to serve U.M. interrogatories inquiring into the plaintiff's damages from the accident. This argument was based on a State District Court of Appeal Judge's concurring opinion in a case, which was followed by two U.S. District Judges in two later cases.
The due process argument was successful in front of a U.S. Magistrate Judge in the bad faith case, who granted the motion to compel the plaintiff to answer interrogatories about what damages she incurred in the auto accident, until the argument reached a third U.S. District Judge, in the Middle District of Florida.
As the District Judge pointed out, the due process argument which originated in a State DCA Judge's concurring opinion and "which is wholly unsupported by authority--is contrary to Florida law and, indeed, to the ... majority opinion itself."
GEICO's position might have been made stronger if the interrogatories in question were written to ask what damages Ms. Batchelor claimed in this bad faith lawsuit. Instead, the interrogatories are a form used in U.M. cases directed to the issue of damages sustained in the underlying automobile accident. So, GEICO's position here was that due process would be denied if a U.M. carrier could not send out another set of U.M. interrogatories to ask about damages already fixed by a verdict, reduced in a judgment to U.M. policy limits by motion, and affirmed on appeal to a State District Court of Appeal.
The District Court rejected the due process argument on these facts:
This Court cannot discern any due process violation from this procedural posture. Defendant fully litigated the issue of the extent of Plaintiff's damages, argued that issue on appeal, and obtained a ruling from the appellate court. It has received all of the process to which it is due.
Batchelor v. GEICO Casualty Co., 2014 WL 3906312 *3 (M.D. Fla. June 9, 2014).
GEICO's position may yet prevail. One of the U.S. District Court cases mentioned as accepting this argument on certain facts, is the subject of a pending appeal in the U.S. Eleventh Circuit Court of Appeals. The Batchelor opinion may be one District Judge's comment on that pending issue.
GEICO also argued that the underlying jury verdict was not a determination of bad faith damages. This contention appears to be contrary to the language of Florida's "Bad Faith Statute," Fla. Stat. § 624.155(8), which provides that "[t]he damages recoverable pursuant to this section ... may include an award or judgment in an amount that exceeds the policy limits." The District Judge in this case disposed of this argument as follows:
Defendant's position would improperly read the words "award or" out of the statute. If the legislature intended only for the amount of a judgment to establish the damages, those words would be superfluous.
Batchelor v. GEICO Casualty Co., 2014 WL 3906312 *4 (M.D. Fla. June 9, 2014). [Emphasis by the Court.]
I was going to include the interrogatories for you to see, so I copied them from the motion to compel from the electronic court file on PACER. They are not quoted in the Court's opinion, although the Court's decision in Batchelor becomes clearer on reading the defendant's interrogatories and the plaintiff's answers and objections. When I copied them from the Court File, however, the copy came with a formatting command embedded in the motion to number the paragraphs, so the formatting started over again at paragraph number 1 instead of beginning with paragraph number 5 and ending with paragraph number 15. Renumbering some eleven paragraphs is more work than I anticipated, and so I intend to post the interrogatories separately later.
In the case of Wilt v. Depositors Insurance Co., 2013 WL 6195768 (M.D. Fla. November 26, 2013), a U.S. Magistrate Judge recommended that a plaintiff's motion for remand in an insurance case be denied. The U.S. District Judge "adopted, confirmed, and approved" the report "in all respects," but added a thought of her own.
The District Judge added to the observation of the Magistrate Judge that settlement demand letters ordinarily do not, standing alone, establish that the amount in controversy is in excess of $75,000 for federal jurisdiction to attach in diversity cases. However, in this case the District Judge added the thought that the settlement demand letters in this case "provide sufficient information to support the notion that Plaintiff is seeking in excess of the jurisdictional minimum." Wilt v. Depositors Insurance Co., 2013 WL 6195768 *1 n.1 (M.D. Fla. November 26, 2013).
To put this in context, the Magistrate Judge's report and the District Judge's "adoption, confirmation and approval" of that report "in all respects," were based on three (3) independent reasons for ruling.
First, this is an uninsured/underinsured motorist coverage case in which the plaintiff-policyholder is seeking the remaining UM limits of $275,000.00 out of a policy limit of $300,000.00. She alleged in her complaint that the UM policy limit of $300,000.00 was not enough to compensate her for the injuries she sustained in an automobile accident caused by an underinsured motorist. That alone was sufficient for the Magistrate Judge to recommend that the plaintiff's motion for remand be denied as to the required $75,000+ amount in controversy, Wilt v. Depositors Insurance Co., 2013 WL 6195768 *7 (M.D. Fla. November 26, 2013), and for the District Judge to agree. Wilt v. Depositors Insurance Co., 2013 WL 6195768 *1 (M.D. Fla. November 26, 2013).
Second, in a second count in addition to the coverage count, the plaintiff in this case alleged a claim for insurer bad faith. She accordingly attached a copy of her Florida Civil Remedy Notice of Insurer Violation to her complaint. In the CRN, the plaintiff-policyholder's attorney wrote that "'her claim has a value well in excess of the remaining available [UM/UIM] policy limits of $275,000.00'". Wilt v. Depositors Insurance Co., 2013 WL 6195768 *3, *4 (M.D. Fla. November 26, 2013). This, too, was an independent basis for the Magistrate Judge's recommendation that the plaintiff's motion to remand be denied in this case. She, the Magistrate Judge, wrote that "[t]he Civil Remedy Notice attached to [the] Complaint also supports a finding that the amount in controversy exceeds $75,000.00. This is further evidence from which it can be reasonably inferred that the amount in controversy exceeds $75,000.00." Wilt v. Depositors Insurance Co., 2013 WL 6195768 *7 (M.D. Fla. November 26, 2013). The District Judge again agreed. Wilt v. Depositors Insurance Co., 2013 WL 6195768 *1 (M.D. Fla. November 26, 2013).
The Magistrate Judge and the District Judge seemed to part company on the District Judge's third ground for approving the report, however, namely on whether the settlement demand letters in this particular case could be a basis for denying remand. The Magistrate Judge took the view that she had already recommended for two good and sufficient reasons that the plaintiff's remand motion be denied. To the Magistrate Judge, then, "it is not necessary to consider the letter memorializing the $300,000 settlement offer [i.e., plaintiff's settlement demand] to conclude that the amount in controversy is satisfied." Wilt v. Depositors Insurance Co., 2013 WL 6195768 *7 (M.D. Fla. November 26, 2013).
However, the District Judge's take was a little different. To her, the "settlement demand letters here" were a part of the "reasonable deductions, reasonable inferences and reasonable expectations" which a Federal Court is permitted to draw or to take into account, as the case may be, from a complaint and its exhibits in considering a motion to remand. Wilt v. Depositors Insurance Co., 2013 WL 6195768 *1 * n.1 (M.D. Fla. November 26, 2013).
So, there you have it, the context of what one U.S. District Judge meant when she wrote that settlement demand letter supports the "notion" of $75,000+.
Elizabeth Caserta was walking with her boyfriend along a roadside at night. An unknown driver of a car hit them both. Ms. Caserta's boyfriend, Edward Carcarey, died from his injuries. Ms. Caserta "suffered minor injuries and subsequent emotional distress." Caserta v. GEICO General Insurance Co., 2012 WL 6604613 *1 (3d Cir. December 19, 2012)(case involved Pennsylvania substantive law).
Mr. Carcarey's mother "had an automobile insurance policy with GEICO that included uninsured motorist coverage." Edward Carcarey was clearly an "insured." Ms. Caserta contended that she, too, is an insured and sued GEICO for alleged breach of the insurance contract and for Bad Faith. Caserta v. GEICO General Insurance Co., 2012 WL 6604613 *1 (3d Cir. December 19, 2012).
Neither the Trial Court nor the Third Circuit panel decided whether Ms. Caserta is GEICO's "insured" in this situation. In fact, the appellate panel carefully pointed this out in a footnote. Caserta v. GEICO General Insurance Co., 2012 WL 6604613 *2 n.1 (3d Cir. December 19, 2012). Rather, despite Pennsylvania State Trial Court decisions to the contrary, the Federal Appellate panel like the Federal District Judge, determined that there is no Coverage because there is no legally recognized tort in Pennsylvania:
Our task, as a federal court sitting in diversity, is “to apply state law and not to form it.” Coviello, 233 F.3d at 716 (3d Cir.2000). For purposes of bystander liability under Pennsylvania law, Caserta is not “closely related” to Edward Carcarey, her boyfriend. As a result, we conclude that her claim fails as a matter of law, and she cannot recover under Suzanne Carcarey's GEICO policy.
Caserta v. GEICO General Insurance Co., 2012 WL 6604613 *3 (3d Cir. December 19, 2012). The appellate panel accordingly affirmed the lower court's Judgment on the Pleadings in favor of GEICO in this case. Parenthetically, although the panel did not mention it, apparently the Judges were of the prevailing view that where there is no Coverage, there is no Bad Faith either. See December 20, 2012 article posted here on Insurance Claims and Bad Faith Law Blog.
If there had been Pennsylvania State Court decisions denying the existence of the tort under the circumstances alleged by Ms. Caserta, the decision would probably make sense. However, by reaching a decision that despite case law to the contrary, several Federal Judges decide that State law should not and would not recognize the legal existence of a tort here, the panel actually did what it said it would not do, which in the panel's own quoted words, is to form State law and not to apply it.
Merry Christmas and Happy Holidaysto Allin 2012, and a Happy New Year to All in the year to come!
In a First-Party Bad Faith Case in Florida, a Federal Court was confronted with a Plaintiff's-Policyholder's First Motion in Limine to Limit Evidence at Trial to the Relevant Time Period.
The case is Alexander v. GEICO, 2012 WL 5382051 (M.D. Fla. November 1, 2012). The Plaintiff, Randolph Alexander, was caught in an automobile accident involving four vehicles in 2005. He made a claim for Coverage under his GEICO Uninsured/Underinsured Motorist Policy. It has limits of $50,000/$100,000. Mr. Alexander filed suit against GEICO for his "UM benefits" in 2007. Alexander v. GEICO, 2012 WL 5382051 *1 (M.D. Fla. November 1, 2012).
After he filed his UM benefits lawsuit, Mr. Alexander filed two Civil Remedy Notices of Insurer Violation ("CRNs") outlining GEICO's failure to pay, in essence. The first CRN was filed in 2008, and the second in 2009.
Thereafter, Mr. Alexander obtained a verdict, apparently in the UM case against GEICO, and apparently for the damages caused to him by the other parties in the automobile accident. The verdict amount was entered into a Judgment after the amount was reduced by setoffs to $212,356.95.
The District Judge did not reveal when Mr. Alexander's Bad Faith Claim or Claims was or were alleged in a lawsuit, but his Florida First-Party Bad Faith Claims could only have been alleged under Florida Statute Sections 627.727(10), Florida's UM Statute, and 624.155, Florida's Bad-Faith Statute. Following the Verdict and Judgment, "Alexander seeks to collect the balance of the verdict from GEICO based upon its alleged bad faith failure to settle within the $50,000 policy limits." Alexander v. GEICO, 2012 WL 5382051 *1 (M.D. Fla. November 1, 2012). Parenthetically, the Federal Court did not explain whether or in what way GEICO had a duty in the first place to settle Mr. Alexander's claims, if any, against the other parties involved in the four-vehicle automobile accident.
Instead, this decision revolves around only Mr. Alexander's First Motion in Limine to Evidence at Trial to the Relevant Time Period. In that motion, Mr. Alexander asserted that the relevant time period for any and all evidence on the Bad Faith Claims ended when the time period for responding to his second CRN ended. His argument ran to the effect that his filing of a CRN is a condition precedent to First-Party Bad Faith Claims like his and, that being so, "the improper conduct alleged must necessarily pre-date the expiration of the CRN." Alexander v. GEICO, 2012 WL 5382051 *1 (M.D. Fla. November 1, 2012).
The Federal Judge decided this open question of Florida law in favor of the Plaintiff-Policyholder in this case. The Court appears to have observed that Mr. Alexander's Bad Faith Claims are based at least in part on the Florida Bad-Faith Statute, and although there is no other authority on the issue, in the Court's opinion the structure of the Statute required the Court to grant Mr. Alexander's motion:
[S]ection 624.155(3)(b) requires the CRN to “state [ ] with specificity ... the facts and circumstances giving rise to the violation,” which leads to the logical conclusion that the conduct constituting the alleged bad faith must have occurred prior to the plaintiff filing the CRN.
Although the parties have not cited Florida case law directly on point—and the Court is unable to locate any—this conclusion also appears in alignment with related Florida bad faith case law.
* * *
Thus, evidence of GEICO's actions taken after the expiration of the second CRN is not relevant to the issue of bad faith and will not be admissible at trial.
Alexander v. GEICO, 2012 WL 5382051 *3 (M.D. Fla. November 1, 2012).
Not content to rest on this decision which "the Court believes ... to be legally correct," the Federal Court also noted in a footnote "that the facts appear to be that GEICO was on notice of the pertinent facts well before the expiration of the second CRN." Alexander v. GEICO, 2012 WL 5382051 *3 & n.1 (M.D. Fla. November 1, 2012). [Emphasis added.]
It is well settled in Florida that a statutory First-Party Bad Faith action is premature until two conditions have been satisfied: First, the First-Party Insurance Company raises no defense which would defeat Coverage including but not limited to situations where the Coverage Defense has been raised and adjudicated against the Insurance Company by a Florida Court of competent jurisdiction; and, Second, the actual extent of the Insured's loss has been finally determined, meaning that a recognized determination has been made as to liability and the extent of damages.
Recognizing these twin conditions, a Florida Appellate Court has recently held that an Appraisal Award can qualify as a required "final determination". Trafalgar at Greenacres, Ltd. v. Zurich American Insurance Co., 2012 WL 3822215 *2 (Fla. 4th DCA September 5, 2012). This decision appears to resolve an open question of Florida law as to whether an Appraisal Award can ever qualify as a final determination of the Insured's loss, meaning both liability and the extent of damages, for purposes of Florida's Bad Faith Statute, Fla. Stat. § 624.155. See 2 Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith § 11:24 (2012 Supplement, 3d Edition West Publishing Company).
It has also been recently held, although not deciding an open question in Florida law, that a Policyholder pursuing a statutory First-Party Bad Faith cause of action cannot allege that there has been a final determination of liability where the Policyholder's Breach of Contract case is still pending. Lime Bay Condominium, Inc. v. State Farm Florida Insurance. Co., 94 So. 3d 698, 699 (Fla. 3d DCA 2012). See, in addition, Maraist v. State Farm Mut. Auto. Ins. Co., 2012 WL 3536759 *1 (N.D. Fla. 2012)(granting Underinsured Motorist Carrier's Motion to Dismiss its Insured's Bad-Faith Claim because Florida law "requires not an allegation but a determination" of liability and the extent of the Insured's damages [emphasis added]).
In another recent case, a Federal Court effectively held that under Florida law, a First-Party Insurance Carrier cannot close its eyes to the extent of information it could obtain about its Insured's damages where the available information indicated an investigation of the Claim was called for. In the case of King v. GEICO, 2012 WL 4052271 *4 (M.D. Fla. September 13, 2012), GEICO's Insured filed a First-Party Bad Faith lawsuit against GEICO based in part on these allegations concerning a claim as to which GEICO did not conduct any additional investigation into the extent of its Insured's, Mr. King's, injuries after it received its Insured's Settlement Offer nor after GEICO received the Insured's Civil Remedy Notice of Insurer Violation of Florida's Bad-Faith Statute:
Although having the right to do so during the sixty-day window following the filing of the CRN, GEICO never attempted to obtain a statement under oath from King, to receive medical authorization allowing access to King's medical providers and treating physicians, or to conduct a compulsory medical examination of King to ascertain the severity of his damages. Nor did GEICO seek review of King's medical records by a physician or an opinion from an outside attorney as to the value of King's claim. In sum, GEICO made no efforts to investigate the claim beyond review of the demand package, either at the time of the initial settlement offer or upon receipt of the CRN.
The Court held that GEICO "presents a strong argument that it acted in good faith" at the time it received the CRN from its Insured, by pointing to its lack of actual knowledge of facts developed later which would show that its Insured's injuries were severe. Nonetheless, GEICO's Motion for Summary Judgment on this record was denied "because a reasonable jury could find that, under the totality of the circumstances, GEICO's failure to further investigate King's claim at the time it received the CRN amounted to bad faith". King v. GEICO, 2012 WL 4052271 *4 (M.D. Fla. September 13, 2012). [Emphasis added.]
The Court further held that the Civil Remedy Notice at issue in that case was sufficiently specific to satisfy Florida law, in part because "[g]iven the settlement letter detailing King's medical expenses and prognosis received by GEICO just two months prior to the CRN, common sense dictates how GEICO might have responded given the information provided." King v. GEICO, 2012 WL 4052271 *8 (M.D. Fla. September 13, 2012).
In Ardrey v. USAA Casualty Insurance Co., 2012 WL 831620 (M.D. Fla. March 12, 2012), Download Ardrey v. USAA Casualty Ins. Co. (M.D. Fla. Case No. 8.12cv08, Order Filed March 12, 2012) PUBLIC ACCESS, a Federal District Court considered a Motion to Dismiss a Bad Faith Claim under Florida's Bad-Faith Statute. USAA based its Motion to Dismiss in part on an alleged failure of a USAA Uninsured Motorist Policyholder to comply with a statutory condition precedent of completing a legally sufficient Civil Remedy Notice form.
As reported by the Court in this case, USAA argued that certain specific Bad Faith claims alleged by the Plaintiff must be dismissed for failure to comply with the statutory condition precedent:
Because none of these specific violations were identified in the CRNs, USAA argues that Plaintiff's unfair settlement practices claim based on these alleged violations must be dismissed.
Id.at *3.
Plaintiff opposed the Motion to Dismiss in this regard on the ground that she went to the website of the Florida Office of Insurance Regulation (formerly the Florida Department of Insurance), and there she filled out a form Civil Remedy Notice or "CRN" which she printed and sent to USAA. She contended that "she cannot be faulted for failing to list the specific statutory subsections in the CRNs, because the CRN form was provided online by the Department and she was required to select the statute that was violated from a drop-down menu. Thus, Plaintiff contends that she did not have the option to identify the specific subsections that USAA violated. Id.
The Federal Judge did not address this contention directly. However, the Federal Judge granted USAA's Motion to Dismiss in this regard, holding:
Furthermore, given the complete lack of any information in the CRN regarding the specific ways in which Plaintiff believed that USAA engaged in unfair settlement practices, the Court finds that the CRNs did not provide USAA with sufficient notice of her unfair settlement practices claim.
Id.
Two things come immediately to mind as a result of this decision. First, the OIR may need to provide statutory-compliant options as a part of its online Civil Remedy Notice form.
Second, after this case, at least, it will do Policyholders no good to rely on the OIR's online CRN form rather than on what the Florida Statute requires.
The UIM carrier, GEICO, raised Florida's Bad Faith Statute, Fla. Stat. § 624.155, as a defense to the Bad Faith Claim. Its Affirmative Defense on this ground already having been stricken once, GEICO re-alleged it in a half-dozen paragraphs as follows:
As its Second Affirmative Defense, GEICO states that the Plaintiff's claim is governed by § 624.155, Florida Statutes, and that GEICO is entitled to the following protections afforded to GEICO by that statute:
a. To the extent that Plaintiff's Civil Remedy Notice failed to comply with the requirements of Florida Statute § 624.155, Plaintiff failed to fulfill a condition precedent to the present action.
b. To the extent that the allegations set forth in Plaintiff's Amended Complaint are broader than the allegations set forth in Plaintiff's Civil Remedy Notice, Plaintiff fails to fulfill a condition precedent to the present action.
c. The provisions of Florida Statute § 624.155 regarding punitive damages apply to the present action. There is no basis for punitive damages to be sought or awarded.
d. To the extent that Plaintiff's allegations do not constitute bad faith as defined by Florida Statute § 624.155 and Florida law, Plaintiff's Amended Complaint fails to state a cause of action.
e. To the extent that Plaintiff alleges damages in her Amended Complaint that are not allowed by Florida Statute § 624.155, Plaintiff's Amended Complaint fails to state a cause of action.
Id. at *1, quoting GEICO's Second Affirmative Defense in this case.
The Plaintiff-Policyholder again filed a motion to strike this Affirmative Defense as legally insufficient. The United States Magistrate Judge agreed and granted the motion to strike. The Court based its ruling on four grounds:
This was a legal argument, not an Affirmative Defense which must be based on allegations of fact under the Federal Rules of Civil Procedure. In particular, "subparagraphs 'c' and 'e'" were stricken as "statements of law; [they are] not affirmative defenses."
It is "devoid of any factual allegations to support its legal conclusions." As such, this alleged Affirmative Defense "fails to give Plaintiff notice of the grounds of the defense and is likely to lead to surprise and undue prejudice."
The Court noted that "each subpart" of this alleged Affirmative Defense begins with the words, "[t]o the extent." "Absent specifics, which GEICO has not supplied, it is impossible to know whetherany part of the second affirmative defense applies in this case." [Emphasis added.] To put it another way, it is not enough to know how many angels can dance on the head of a pin; the knowledge required is specific to the facts of this case, whether or not it applies to the facts in other cases pending or yet to be filed.
Finally, GEICO attempted to allege what once was called "a general denial" of the Plaintiff's compliance with a supposed condition precedent. Under Federal Rule of Civil Procedure 9(b), however, and under most Rules of Civil Procedure extant in 2012, a denial of compliance with a condition precedent must be alleged with particularity.
Id. at *2.
The Court nonetheless granted GEICO further leave to file and serve another Amended Affirmative Defense, but only "if, consistent with counsels' obligations" under Federal Rule of Civil Procedure 11, GEICO can allege "specific failures" by Plaintiff to comply with Fla. Stat. § 624.155, "which put at issue relevant legal and factual matters." Id. at *3. [Emphasis added.]
In Florida, First-Party Bad Faith Cases may be filed under a Statute, Section 624.155. One of the statutory conditions precedent to filing a Section 624.155 lawsuit is a Civil Remedy Notice of Insurer Violation. The complainant sends the original to the Florida Office of Insurance Regulation (formerly the Florida Department of Insurance), and sends a copy to the affected Insurer which has a certain amount of time to "cure" the alleged Bad Faith.
State Farm was Ms. Betty Bollinger's Uninsured/Underinsured Motorist carrier. She was injured in an automobile accident with a third-party tortfeasor and State Farm gave her permission to settle with the tortfeasor for the tortfeasor's liability policy limits. Ms. Bollinger then demanded the $10,000 UM/UIM Policy Limits on her own State Farm Policy on the ground that her Damages exceeded the liability policy limits of the tortfeasor and her UM/UIM Coverage should compensate her for her uninsured loss. State Farm at first declined. Id.at *1.
Ms. Bollinger then sued State Farm in Florida State Court, apparently for alleged First-Party Bad Faith in addition to her UM/UIM Policy Limits. State Farm reconsidered its position on offering the UM/UIM Policy Limits to her, and decided to offer the limits after Ms. Bollinger filed suit. This time, she did the declination. Her lawsuit proceeded to Trial and a Jury awarded Ms. Bollinger $410,000.00. It was then that State Farm removed the lawsuit to Federal Court. Id.
However, no-one filed or served a Civil Remedy Notice before Ms. Bollinger's lawsuit was filed in the first place. Id.at *2. The Federal Court held that the lack of a statutorily required Civil Remedy Notice was sufficient grounds for dismissal in and of itself.
For that reason alone, the Federal Court held, there was no basis for Federal Jurisdiction. The Federal Court accordingly dismissed Ms. Bollinger's lawsuit on the ground of lack of Federal Jurisdiction, specifically, on the ground that Ms. Bollinger's First-Party Bad Faith Claim was not yet "ripe". Id.at *3.
The glaring absence of a Civil Remedy Notice can be fatal to any action for Florida First-Party Bad Faith. In this recent decision under Florida Statute Section 624.155, the Court held that where there is no Civil Remedy Notice, there is no Federal Case.
Lee S. Haramis, Sr., sued Allstate's Insured in Florida State Court. Allstate settled that lawsuit. Mr. Haramis executed "a Complete Release of All Claims and Agreement to Hold Harmless and Indemnify". The only insurance policy limits referenced in that Release, according to a highly respected Federal Judge now on senior status, were policy limits for Bodily Injury and Property Damage Liability Coverages. See Haramis v. Allstate Property & Casualty Insurance Co., 2011 WL 5510730 *1-*2 (M.D. Fla. November 10, 2011), Download Haramis v. Allstate Property and Casualty Insurance Co. (M.D. Fla. Case No. 3.11cv455, Order Filed Nov. 10, 2011) PUBLIC ACCESS.
Mr. Haramis then sued Allstate as personal representative of his daughter's Estate, seeking Uninsured Motorist benefits. Allstate defended itself by raising the Release in the earlier lawsuit.
The Federal Judge held that the earlier Release did not entitle Allstate to Summary Judgment in the U.M. lawsuit. Instead, the Release is "ambiguous," the Court held, denying Allstate's Motion for Summary Judgment. In pertinent part, although the Release of the first lawsuit recited on its face that it was for policy limits, "[t]he Court notes that the only policy limits referenced in the Release are those for bodily injury coverage and property damage liability coverage. The release is silent as to uninsured motorist coverage limits." Id. at *3. [Emphasis added.]
Parenthetically, the Release in the first lawsuit was drafted to include an express Release "'from any claims whatsoever arising from allegations of bad faith dealing, breach of insurance contract, negligent claims adjustment or otherwise actionable conduct by [Defendant] in its claims defense activities ....'" In addition, although the Court did not dwell on the fact, the earlier Release expressly applied to certain claims and not others. It reached claims "'of any kind or nature (other than claims for first-party insurance, medical, or governmental benefits from other entities not named herein)....'" Id. at *2.
The 22nd Annual Bad Faith Litigation Conference of the American Conference Institute is being held in 2011 in Orlando, Florida on November 30 and December 1, 2011. The author will be speaking on two panels.Here is a link to the American Conference Institute Website Page which features this Conference including registration. If you or someone you know would like to attend, the ACI is offering a discount to the readers of this weblog. If you would like to explore the ACI discount offer, contact:
Priority Code: TM-MGN
Marc Gerstein Delegate Coordinator Office: 1-212-352-3220 x5432
The parties' Joint Stipulation and Motion presented the parties' request to the Court in this Underinsured Motorist Insurance Bad Faith Case "to stay the liability portion of Plaintiff's bad faith claim until the actual damages Plaintiff suffered have been determined." Id.
The Federal Judge granted this stipulated Motion. The Court offered two grounds: (1) Under Florida Statutory First-Party Bad Faith Law, the Insured's underlying damages first have to be determined before any Bad Faith Claim will lie, and (2) simultaneous discovery on Coverage and Bad Faith issues, the parties in this case stipulated, could cause "'improper production of the claim file and other work product discovery before the determination of damages.'" Id. at *2.
Although this ruling came in response to a Stipulated Joint Motion, the concepts it offers are very much worthwhile putting before the Courts for their consideration, i.e., presenting these arguments, certainly from the Defendant Insurance Companies' point of view in all Bad Faith cases. This is particularly true where the Damages to be determined are not simply underlying Damages but the extracontractual or Bad Faith Damages, the determination of which may prejudice the simultaneous determination of Bad Faith Liability.
In cases in which a damages determination of underlying damages as distinct from extracontractual or Bad Faith Damages is a condition precedent to a Bad Faith Claim, and in which discovery is likely to be stayed anyway as a result until underlying damages are determined, Policyholders too have an interest in saving time and expense through a vehicle such as the Stipulated Joint Motion in this case.
Mark S. Shapiro, Esquire is listed on Pacer, the Federal Courts' Online Docket, as a Counsel of Record for the Defendant in the Ross case. Together, the author of this post and Mr. Shapiro will present the Florida Workshop at the American Conference Institute on Bad Faith Litigation in Orlando, Florida which will be held November 30 - December 1, 2011.
In Download Brethorst v. Allstate Property & Casualty Insurance Co. (Wis. Opinion Filed June 14, 2011) PUBLIC ACCESS, also published as 2011 WI 41, 798 N.W.2d 467 (2011)(authorized password required to access Westlaw), the Supreme Court of Wisconsin addressed a case of first impression. The question in the case, as framed by the Supreme Court, was whether discovery could proceed in a case where the only claim against the Uninsured Motorist Carrier Defendant was an alleged common law Bad Faith Claim, and there was no Breach of Contract Claim. Allstate requested bifurcation of all Contract-Coverage Issues from the Bad Faith Issues even though there was only one Claim alleged, and that one Claim was alleged for Bad Faith. Alternatively, Allstate requested a stay of all discovery until the Plaintiff proved that her claim to coverage was wrongly denied.
The Wisconsin Supreme Court held that the Plaintiff-Policyholder in this First-Party Bad Faith case bore the Burden of Proof that she had a Covered Claim, as a part of proving her Bad Faith Claim. Brethorst v. Allstate Property & Casualty Insurance Co., 798 N.W.2d at ¶ 78, p. 484. This holding is squarely in accord with the nearly unanimous holdings in other cases in other jurisdictions by Courts across the nation. See generally Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" §§ 9:17-9:18, 11:17 (West Third Edition scheduled for pubilcation in July, 2011).
In the end, the Supreme Court affirmed the Trial Court's ruling denying Allstate's motion for bifurcation and denying Allstate's motion for a stay of discovery until breach of contract was proven in this case. The Plaintiff-Policyholder would be required to adduce evidence, which was in the record of this case according to the Supreme Court, that the Plaintiff would be likely to prove a breach of contract, i.e., that the Defendant denied a covered claim. (In all such cases, the Defendant Insurance Company would then be free not only to file a responsive pleading denying any breach of contract, but also to file a "motion," i.e., to "show" that the Plaintiff is not likely to prove denial of a covered claim.) Once the Plaintiff in such a case makes this preliminary showing, the Plaintiff will be entitled to take discovery on a Bad Faith Claim even though there is no accompanying Claim for Breach of Contract, as in this case, the Supreme Court held. Id. at ¶¶ 76 & 77, pp. 483-84.
Following a tragic accident which resulted in the death of one Justin Dumpert, there was a prior settlement for $850,000.00, an amount less than the tortfeasor's $1,100,000.00 Liability limits. Then and thereafter Mr. Dumpert's parents sued State Farm which had issued their son a UIM Policy. Counsel representing the Plaintiffs-parents refused to allow Deposition questions asking why the underlying settlement was for an amount less than the tortfeasor's Liability limits.
The Policyholder-Plaintiff alleged Claims for Insurance Bad Faith (under Colorado and Arizona Law) and Statutory Claims for alleged wrongful Denial of Coverage by the UIM Carrier Defendant. Among other things, the UIM Carrier's Counsel argued that Summary Judgment of Dismissal on this record was warranted on the extracontractual claims "because the plaintiffs have failed to show any basis for contending that the denial of the claim in excess of the settlement amount was unreasonable or in bad faith." Dumpert v. State Farm Fire & Casualty Co., 2011 WL 2581398 at *2.
The Federal Senior District Judge agreed. The Court in this case dismissed the Claims for alleged Insurer Bad Faith under Colorado or Arizona Law both, and also dismissed the Statutory Claim for Denial of Coverage under a Colorado Statute.
The Federal Judge did not overlook the Plaintiffs' refusal to answer questions about their underlying settlement for less than the tortfeasor's Liability Limits. The Court ruled that "the plaintiffs will not be permitted to explain their acceptance of that amount on the grounds stated in the scheduling order [which declared the Plaintiffs' representation that their underlying settlement reflected their assessment of the emotional toll of going through Trial and moreover their lawyer in the underlying case did not advise them of the Statute of Limitations] ...." Id.
The Court dealt a blow to the practice of Trial Courts entering "contingent judgments" and of Florida Appellate Courts approving them -- although the Second District had previously approved the practice and in this case, did not define exactly what it had in mind when it wrote about "contingent judgments". It is clear from the context of the decision, however, that what the Court had in mind in this case was the practice by which Trial Courts have entered Judgment for Insurance Policy Limits, reserved jurisdiction to determine attorney's fees and costs at a later time, and proceed thereafter to "conduct a hearing on attorneys' fees" even though there was no determination of "bad faith and there was no legal basis at the time of the judgment for an award of fees." Id. at *2. [Emphasis added.] Apparently the "contingency" of the attorney's fees Judgment was that the Plaintiffs would prevail on a claim that would entitle them to attorney's fees. See id.
In this UIM Case, the Court had previously affirmed a Judgment entered, not for actual damages sustained, but for the amount of the UIM Policy Limits, i.e., "based on the $25,000 in insurance coverage." Id. at *1. Since there was no denial of the Insurance Coverage, and since the proposal of settlement was in an amount greater than the judgment obtained and on appeal, the original Second District panel denied the Plaintiffs'-Appellees' motion for appellate attorney's fees. Id. at *1.
In the course of the underlying case, the Plaintiffs had "each made a proposal for settlement in the amount of $100,000." Id. The Plaintiffs argued that the Second District should allow the entry of a "contingent judgment" for appellate attorney's fees if they should later prove entitlement to them.
The Second District, well, demurred. It certainly declined to agree with the Plaintiffs' position but it left open the possibility that the Trial Court might award appellate attorney's fees if the Trial Court determined that they were recoverable damages in an action for Bad Faith. The Court held:
In sum and in substance, the en banc Second District Court of Appeal (1) disapproved the entry of judgments in an amount certain, contingent on the party seeking attorney's fees later proving that it is entitled to attorney's fees and (2) held that only Fla. Stat. § 627.727(10) governs the awardability of attorney's fees if the Plaintiff prevails in a Bad Faith action, not Fla. Stat. § 768.79, the settlement proposal/offer of judgment statute. The whole of the en banc panel agreed with these legal conclusions, withheld its approval of any "contingent judgment" for the appellate fees in this case, granted rehearing to the extent of the above substituted holding, and denied the Plaintiffs'-Appellees' motion for appellate attorney's fees. Id.
Among the terms is of course the universally followed rule of Underinsured Motorist Coverage that the Underinsured Tortfeasor must in fact be "underinsured" in relation to the Policyholders' Damages. Based on the Damages information submitted to Progressive in this case, the Federal Court concluded that Progressive could reasonably conclude that the likely Damages did not invade UIM Coverage at all, id. at *4, even assuming that "liability and causation issues" were to be determined in the Policyholders' favor. However, the UIM Tortfeasor's Liability Insurer, Allstate, settled with Progressives' Policyholders for $131,567.82 or $31,567.82 above the $100,000.00 limit on Allstate's Liability Policy. "Of this amount, $31,567.82 is described as costs and fees." Id. at *7.
Under the circumstances of this case, the Federal Court in Pennsylvania granted Progressive's Motion for Summary Judgment on the Bad Faith Claim. That Claim was brought under the Pennsylvania Bad Faith Statute, 42 Pa. C.S.A. § 8371 because in Pennsylvania there is no Bad Faith Cause of Action in a case like this UIM case, unless that statute applies.
The Federal Court's opinion in this case reads like a primer on Pennsylvania Statutory Bad Faith Claims. It is significant to potential parties and to practitioners outside of Pennsylvania to note that many of the points summarized by the Federal Court are generally held applicable in other jurisdictions in cases of Third-Party or Liability Insurance Company "Bad Faith" Claims. The Court summarized that Pennsylvania Statutory Bad Faith Claims have the following features:
The Insurance Company in Pennsylvania "'assumes a fiduciary status by virtue of the policy's provisions which give the insurer the right to handle claims and control settlement.'"
"'Bad faith' ... is any frivolous or unfounded refusal to pay proceeds of a policy; it is not necessary that such refusal be fraudulent.'"
To constitute actionable Bad Faith, the Insurance Company's conduct must show "'a dishonest purpose,'" "self-interest or ill will; mere negligence or bad judgment is not bad faith.'"
Bad Faith can be shown when the Insurance Company "'did not have a reasonable basis for denying benefits under the policy and ... the insurer knew of or recklessly disregarded its lack of reasonable basis in denying the claim.'"
Bad Faith can include the Insurance Company's investigation.
Moreover, "conduct that violates the Unfair Insurance Practices Act may rise to the level of bad faith."
The Insurance Company's duties of Good Faith continue "during the pendency of the litigation."
And, finally, "[t]he plaintiff must prove bad faith by clear and convincing evidence."
Id. at *9-*10.
In this case, the evidence showed the District Judge that "Progressive continued its investigation in an objectively reasonable manner, even if it did not move as quickly as [its Policyholder] would have liked." Id. at *10. The available proof on damages led to an objectively verifiable conclusion that the likely damages would not exceed the UIM Tortfeasor's available Liability Coverage in this case, even if in fact the damages settlement did exceed that limit: "However, considering the lack of evidence that Rossi's injuries would exceed the amount covered by McGroarty's [the UIM Tortfeasor's] policy, the pace and scope of Progressive's investigation does not suggest bad faith." Id. at *11.
The CRN in question apparently had one box checked on the Form supplied by the Florida Office of Insurance Regulation (Department of Insurance), followed by a few words of explanation. The checked box was for "Unsatisfactory Settlement Offer". Next to it was the explanation that GEICO allegedly "'has failed to attempt to resolve this claim despite evidence that the claim exceeds the available coverage.'" Id. at *4. (The claim at issue with GEICO was an Uninsured Motorist claim for which there had previously been a demand for GEICO's UM Policy Limits.) GEICO raised an issue that "this allegation in the CRN" was insufficiently specific to allow GEICO in essence to cure the alleged bad faith behavior. The Federal Court rejected this argument, and denied GEICO's Motion for Summary Judgment in this regard, ruling:
A fair reading of the CRN gives Defendant notice of the specific wrongful conduct at issue -- Defendant's failure to settle Plaintiff's claim due to an unsatisfactory settlement offer. Furthermore, common sense suggests that the action Defendant could have taken to cure the alleged violation would be to increase the amount offered to settle Plaintiff's claim. Plaintiff is not required to delineate in the CRN the specific amount necessary to settle her claim. [Citations omitted.] Additionally, the Court notes that there is no evidence before the Court that the Department of Insurance returned the notice for lack of specificity.
There are important holdings on Bad Faith Claims filed against an Uninsured Motorist/Uninsured Motorist ("U.M.") Insurance Company in Nevada. Two of them are posted here.
1. Failure to Pay Undisputed Covered Parts of the Insured's Coverage Claim.
A growing number of Courts is holding that failure or refusal to pay undisputed covered amounts under First-Party Insurance Policies can be the basis of a Claim for Bad Faith. The Bad Faith Claims may come at Common Law or under Statutes. See generally Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" § 9:26 "Insurer's Payment of Undisputed Covered Amounts: Introducing the Concept -- Part Payment of Non-Property, First-Party Claims, And of Claims Generally" (West Publishing Company 2010 Supplement). A Federal District Court in Nevada has now held that Bad Faith Claims in such cases can be based on a U.M. Insurer's failure to follow its own Claims Manual.
In Download Storlie v. State Farm Mutual Auto. Insurance Co. (D. Nev. Case No. 2.09cv02205, Order Filed January 13, 2011) PUBLIC ACCESS,also published as 2011 WL 116881 (D. Nev. Order Filed January 13, 2011)(authorized password required to access Westlaw), a Federal Court held in effect that the complete absence of case law in Nevada "indicating that an insurer must advance the undisputed portion of an UM policy," id. at *6, did not prevent a Bad Faith Claim from accruing. First, provisions of the Defendant's "Auto Claim Manual" suggested to the Court that at least in some cases, the Defendant U.M. Carrier "does instruct its employees to advance the undisputed portions of an insured's UM policy benefits prior to the final settlement of an insured's claim." Id.
Further, refusal or other failure to pay undisputed covered partial amounts of Uninsured/Underinsured Motorist Claims could violate a statutory duty in Nevada "to effectuate prompt, fair, and equitable settlements of claims in which liability of the insurer had become reasonably clear." Id. at *8. The Federal Court wrote:
In this case, a reasonable trier of fact could conclude that Defendant's failure to tender any offer during the ten month span of time between when Defendant initially received notice that Plaintiff might be pursuing an UM cause of action and the time at which Plaintiff filed this lawsuit -- January to October -- demonstrated a failure on Defendant's part to effectuate the sort of prompt, fair, and equitable settlement contemplated in [Nevada's] Unfair Claims Practices Act [Nev. Rev. Stat. § 686A.310(1)(e)], particularly when coupled with Defendant's failure to pay the undisputed portion of Plaintiff's medical bills even after receiving notification that they had been sold to a collections agency.
Storlie v. State Farm Mutual Auto. Insurance Co., 2010 WL 116881 *8 (D. Nev. Order Filed January 13, 2011). (Link here to Chapter 686A of the Nevada Statutes.) Although the Federal District Court's decision does not refer to them, other States' Statutes have similar Unfair Claims Practices provisions.
2. Punitive Damages.
"Under Nevada law, in order to recover punitive damages a plaintiff must show by clear and convincing evidence that the defendant acted with oppression, fraud, or malice. [Citation omitted.] Oppression is a conscious disregard for the rights of others constituting cruel and unjust hardship. [Citation omitted.] Malice is present in conduct that is intended to injure a person or despicable conduct that is engaged in with a conscious disregard of the rights and safety of others." Storlie v. State Farm Mutual Auto. Insurance Co., 2010 WL 116881 *9 (D. Nev. Order Filed January 13, 2011).
In Storlie, the Plaintiff raised a genuine and material issue of fact in the eyes of the Federal Judge "particularly because over $9,000 of the policy was not in dispute and Plaintiff's medical bills had been submitted to collections." Put on notice that part of Plaintiff's medical bills were being submitted to a collections agency, "Defendant's actions look particularly arbitrary and callous," wrote the District Court. Id. The Plaintiff's Punitive Damages Claim survived the Defendant's Motion for Summary Judgment in that case accordingly. "Thus, summary judgment will be denied as to Plaintiff's request for punitive damages." Id.
In Download Raschke v. Allstate Prop. & Cas. Ins. Co. (D. Nev. Order Filed January 10, 2011) PUBLIC ACCESS,also published as 2010 WL 86580 (D. Nev., Order Filed January 10, 2011)(authorized password required to access Westlaw), Ms. Sandy Raschke sued Allstate as a result of injuries she received in an auto accident. She claimed medical expenses alone in excess of $54,000.00. However, she received Insurance proceeds from the alleged tortfeasor and from a Worker's Compensation Carrier in the total amount of $34,895.70. Ms. Raschke sued for the $15,000.00 Uninsured/Underinsured Motorist Limits of her Allstate Policy. Her Claims included Bad Faith and Unfair Dealing, and statutory Unfair Claims Practices. She sought:
1. "[G]eneral damages in excess of $10,000.00";
2. Punitive Damages, on her Bad Faith Claim, "in excess of $10,000.00"; and
3. Her attorney's fees, in an amount which the Court did not specifically state nor apparently did Ms. Raschke. (She was not required to, in any case.)
The issue in this decision was whether the Federal Courts' $75,000.00 "amount in controversy" jurisdictional requirement was met. If not, the Federal Court would reject the Defendant's removal of the lawsuit and remand the case back to State Court.
The Federal Court held that the Defendant did not meet its burden of proof that it was "more likely than not" that the jurisdictional amount would be met. The Federal Court characterized the Defendant's argument as "mere speculation" that an assessment of Punitive Damages for example could exceed $75,000.00. The Federal Court granted the Plaintiff's Motion to Remand. Raschke, 2010 WL 86580 at *1 - *2.
In contrast, in another recent Bad Faith case a Federal Court refused to remand: Download Barnes v. Allstate Insurance Co. (M.D. Fla. Order Filed Dec. 28, 2010) PUBLIC ACCESS,also published as 2010 WL 5439754 (M.D. Fla., Order Filed December 28, 2010)(authorized password required to access Westlaw). In Barnes, the Plaintiff likewise sued for Uninsured Motorist Coverage. Ms. Barnes requested leave to amend her State Court Complaint to include allegations of Bad Faith, which the State Court apparently granted but which was abated and was not tried in the State Court. The State Court lawsuit instead proceeded on Ms. Barnes' U.M. Coverage Claim. Her original State Court lawsuit was tried, a verdict was returned in her favor, a Judgment was entered against Allstate and was affirmed on appeal by Florida's Second District Court of Appeal.
Allstate removed the case only after the Florida Appellate Court issued its mandate. The issue was whether the removal was timely in this case. "This was timely because the appellate process must be complete before the cause of action for bad faith insurance practice is ripe." Barnes, 2010 WL 5439754 at *3.
Ms. Raschke was also permitted by the Federal Court to again amend her Complaint. She wanted to include allegations of conduct which she contended had accrued while her original Bad Faith claim was abated. "The Court agrees that Plaintiff should be permitted to amend the bad faith claim to contain additional allegations that were not available to Plaintiff when she originally filed the bad faith claim." Id.
However, in any Bad Faith Case, the facts can be a complete defense. Such was the case, after all, in Sanderson itself in which the Colorado Appellate Court held that "although fair debatability is part of the analysis of a bad faith claim, it is not necessarily sufficient, standing alone, to defeat such a claim. Nonetheless, applying the appropriate standard here, we conclude that no reasonable jury could have found, on the evidence presented, that [the Defendant UIM Carrier] acted in bad faith." Sanderson, 2010 WL 4492375 at *3. [Emphasis added.]
The issues of proving a "Fairly Debatable" Affirmative Defense, and of Proof on Failure to State a Claim or Cause of Action in First-Party Bad Faith Cases, are addressed in § 11:17 by Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" (Shepard's/McGraw-Hill Second Edition; West Publishing Company 2010 Supplement), and these issues are addressed in Third-Party Claims in id., §§ 5:16, 5:26 and 5:51.
