Bad Faith

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On the heels of last year’s special session on Florida’s property insurance crisis, which, among other things, eliminated one-way fee shifting in property insurance cases, the Florida Legislature has now passed even more aggressive pro-insurer legislation as part of a broader tort reform bill aimed at addressing “frivolous” litigation. House Bill 837 is not limited to property insurance issues, and instead includes various measures aimed at protecting insurance companies from liability for bad faith conduct and prevailing party attorney fees across all kinds of coverage disputes. HB 837 raises several important issues for policyholders and insurance litigation overall going forward. We discuss some of these issues below.

Fee-shifting allowed only in certain declaratory judgment actions

First, HB 837 appears to extend last year’s fee-shifting repeals to all lines and types of insurance coverage disputes, not just property insurance disputes, while creating a new limited fee-shifting statute for certain kinds of insurance disputes brought as declaratory judgment actions. This would allow for fee-shifting in declaratory judgment actions brought after an insurer has made a “total coverage denial.” The phrase “total coverage denial” is not defined, but according to the bill, would not include situations where a liability insurer provides a defense under a reservation of rights. The bill does not say whether an insurer who also claims a right to reimbursement for defense costs paid on the insured’s behalf effectively seeks a total denial of coverage.Continue Reading Key issues for policyholders under Florida’s new tort reform bill 

As a general rule, if a policyholder reasonably attempts to settle a case for an amount at or within the limits of its insurance policy, the insurance company must put the policyholder’s interests above its own. Typically, if the insurance company does not accept a reasonable settlement within limits, then it may be responsible for a judgment amount in excess of the policy limits if the insurance company’s refusal to settle was unreasonable. The insurance company’s failure to settle may result in a bad faith claim. But what if the insurance company refuses to settle and the policyholder prevails at trial? According to a federal district court in New Jersey, if the insurance company’s decision not to settle was unreasonable, it may still be liable for bad faith.

Summary of recent New Jersey federal court decision

BrightView Enterprise Solutions, LLC v. Farm Family Casualty Insurance Company, No. 20cv7915 (EP) (AME), 2023 U.S. Dist. LEXIS 20764 (D.N.J. Feb. 7, 2023) is not your typical bad faith “failure to settle” case. It involved three different companies that were insured under a single commercial general liability insurance policy issued by Farm Family. The three companies were involved in a project to overhaul an irrigation system at a Bank of America branch in New Jersey. A Bank of America employee “slipped and fell” on a puddle of water and hit her head. The injured employee filed suit against all three companies, alleging that her “slip and fall” caused a permanent disability. Farm Family agreed to defend and provide coverage for all three defendants up to its $1 million policy limit.Continue Reading An insurance company’s refusal to settle can be bad faith, even if the policyholder ultimately prevails at trial

The Supreme Court of Appeals of West Virginia has made it harder for policyholders to prevail on claims of common law bad faith against insurers in that state. In State of West Virginia ex rel. State Auto Property Insurance Companies v. Stucky, No. 17-0257, 2017 WL 4582607 (W. Va. Oct. 10, 2017), West Virginia’s highest court held that an insurance company cannot be held liable for bad faith regardless of its dilatory conduct, so long as it ultimately defends and indemnifies its policyholder.  As the dissent in Stucky observed, however, “[t]his over-simplified approach is myopic.”

In Stucky, the policyholder was a construction company that allegedly damaged a couple’s home.  The construction company, though, believed it “was insured for the damage to the … property under a commercial general liability policy ….”

Although the company’s insurer initially agreed “that it would handle the claim,” the insurer nevertheless allegedly “conducted a series of inspections and investigations, thereby delaying a potential settlement of the plaintiffs’ lawsuit, increasing the amount of the plaintiffs’ property damage, and resulting in the lawsuit filed against [the construction company] by the plaintiffs.”Continue Reading “Myopic” ruling limits policyholders’ ability to recover for common law bad faith in West Virginia

One year ago today, the Pennsylvania Supreme Court issued the first two of four important insurance-coverage law opinions that it would hand down in 2014 and 2015. Those four decisions – which address a number of topics including insurer bad faith, trigger of coverage, policy exclusions, and settlements and reservations of rights – significantly impacted the legal landscape in the commonwealth.

While much has already been written about the specific holding in each of those cases, policyholders can still learn more from each of the decisions. Now – 365 days later – is a good time to reflect on those lessons:Continue Reading 365 Days Later: Lessons Learned from the Pennsylvania Supreme Court

This week, in a 5-1 decision resolving a certified question from the U.S. Court of Appeals for the Third Circuit, the Pennsylvania Supreme Court adopted the positions advanced by Reed Smith LLP on behalf of United Policyholders, concluding that policyholders are permitted to settle claims against them by assigning to plaintiffs and other claimants their rights to both statutory and common law-based bad faith claims against their insurance companies.
Continue Reading You Can Assign Your Bad Faith Claims in Pennsylvania