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