Insurance Bad Faith Report – Insurance Laws and Products – United States

Dykema’s well-known insurance practice publishes quarterly reports analyzing landmark religious decisions handed down by state and federal courts across the country. These reports, along with full copies of audited polls, are available online for access at any time.

Delaware Supreme Court Finds No Action at Trial, But Allows Bad Faith Claims Related to Breach of Good Faith to Go Forward.

MPM Holdings Inc. v. Fed. Ins. Co., no. N20C-07-014 MMJ CCLD, 2022 Del. Super. LEXIS 102 (Del. Super. Ct. Mar. 17, 2022).

The merger of MPM Holdings Inc. closed on May 15, 2019, resulting in 220 pre-closing, triple action, and actions by a group of shareholders. The audit activity and the owner’s group sales were combined and modified to include breach of trust claims. Federally insured directors and officers. The government accepted the demand for 220 and initially agreed to the coverage of the group in question, but later refused coverage because none of the defendants was an insured person under the policy. The federal government also refused to provide for the inspection services. MPM sued, and Federal agreed to defend the group’s actions under copyright. The Delaware Supreme Court initially found that the Federal denial of the review was valid because it did not allege “misconduct.” However, the court was unable to determine how the class would be affected due to issues related to the application of the “Larger Settlement Rule.” The court also found that genuine questions remained regarding bad faith, as it was unclear whether the initial refusal of the Federal class was without “good cause.” Read the book election.

Montana Supreme Court Rejects Possibility of Safe Harbor from Bad Faith Claims

Opinions of the company UMIA Ins., Inc. Arguelles, no. CV 20-177-BLG-TJC, 2022 US Dist. LEXIS 48670 (D. Mont. Mar. 18, 2022).

A healthcare provider and its president requested coverage from UMIA Insurance, Inc. in several lawsuits alleging that the provider misdiagnosed rheumatoid arthritis and provided unnecessary treatment. As a result of the lawsuit, the charity and its president were also subpoenaed by the US Department of Justice and the Department of Health and Human Services. The service provider and its president sought the help of UMIA, which defended the incident under a confidentiality clause but refused to serve on various subpoenas. UMIA then issued the declaration. The service provider and its president sued, alleging, among other things, breach of contract (including breach of fiduciary duty) and violation of Montana’s Unfair Trade Practices Act. UMIA argued that because it had accepted the defense by retaining the right and submitting the judgment as the Montana Supreme Court had said, it could not claim anything related to the breach of duty. The district court disagreed, stating that although the Montana Supreme Court advised insurers to “prudently” act and provide a default judgment in such cases, there is no indication “that the Montana Court intended to give insurers a safe harbor, and leave insurers without compensation for breach of duty.” other insurances under the insurance contract.” As for unfair trade practices, the district court could not determine the “reasonableness” of the insurer’s decisions based on the documents. Read the book election.

Eleventh Circuit Holds Consent Judgment Entered After Settlement Qualifies as “Excessive Judgment” for Bad Faith Claims Under Florida Law

McNamara v. Gov’t Emps. Ins. Co.30 F.4th 1055 (11th Cir. Apr. 5, 2022).

The owner of the insured vehicle and the driver of the vehicle sued the insurer for failure to settle within the legal limits of the settlement agreement and the resulting consent decrees. After dismissing the lawsuit, the insurer moved for summary judgment, and the district court granted the motion, pending. Cawthorne v. Auto-Owners Insurance Co., 791 F. App’x 60 (11th Cir. 2019), which held that the only judgment following a trial and the outcome of a conviction should be a “continuing judgment” on bad faith grounds under Florida law. Follow up Cawthorn, the district court here held that consent decrees did not qualify for “continuing judgments,” and that the insurers could not prove their bad faith. The insurers appealed, and the Eleventh Circuit reversed. The Eleventh Circuit stated that if the statutory judgments that resulted from the statutory settlement instead of the judgments were void, and because of the subsequent judgments given to the insurers, they could prove their wrongdoing. By refusing to comply Cawthorn, the Eleventh Circuit held that the case was an unpublished, unshakable decision, and presented an erroneous analysis of Florida’s misdemeanor statute. Read the book election.

District Court Enforces Argument of Bad Faith Claims Under Colorado Law

San Juan Constr., Inc. v. WR Berkley Syndicate Mgmt. Ltd., no. 21-cv-03317-CMA-SKC, 2022 US Dist. LEXIS 83600 (D. Colo. May 9, 2022).

After suffering a construction accident at a US military base in the Marshall Islands, the insured sued the insurance group for breach of contract, bad faith, violation of Colorado’s insurance laws, and affirmative action. The insurers were forced to negotiate in accordance with the arbitration agreement. Applying Colorado law in accordance with the rules of procedure, the district court found that the conflict was both unreasonable and valid. In granting the insurer’s motion, the court rejected the insurer’s claims that its bad faith claim “would be substantially reduced if considered,” that it “would not be able to recover attorneys’ fees,” and that it could not “completely defend its bad faith claim due to the limitations on availability.” The court did not find any of these facts to be grounds for invalidating the policy agreement. Read the book election.

Eleventh Circuit Finds Contingency Insurance Payments to Lawyers for Damages Under Florida’s Bad Faith Law

Levesque v. Gov’t Emps. Ins. co., no. 21-12257, 2022 US App. LEXIS 12131 (11th Cir. May 5, 2022).

After the insurer accepted its claim because of its limitations to eliminate interest, the insurers brought another lawsuit alleging bad faith. The jury found that the insurer had acted in bad faith and offered a monetary settlement, which the district court reduced to zero due to collateral damage. On appeal again, the Eleventh Circuit found that because the insurer was forced to pay their attorneys’ fees to obtain a successful judgment disclosed, the insurer can recover the fees for “damages” under Fla. Stat. §§ 627.727(10), 624.155(8) as a direct consequence of the insurer’s bad faith. However, the court also stated that insurers cannot recover any damages under the other reimbursement clause in the insurance contract with their attorneys, noting that insurers cannot reimburse their attorneys for time and money beyond the long-term amount that the attorneys agreed that the insurers would pay them. Read the book election.

Applying the “Fairly Debatable” Bad Faith Standard, an Iowa District Court Granted Summary Judgment for an Insurance Claim Where the Insurer Had One Reasonable Reason to Deny Coverage.

Lemon v. State Farm Fire & Cas. Co., no. C20-3018-LTS, 2022 US Dist. LEXIS 115142 (ND Iowa June 28, 2022).

After the insurance company denied the first party’s claims, he sued the insurance company for breach of contract and failure to provide benefits. The insurer filed for summary judgment, arguing that it had reasonable cause to deny the insurer’s claim on six grounds. Rejecting the insurer’s argument that the reasons were insufficient to “manage the costs” in favor of the insured’s actions being properly negotiated, the district court held that, under Iowa law, the burden is on the insurer to show that “no single cause of action exists.” Because the court found that the insurer met its burden of showing that a reasonable mind could reasonably conclude that the insured had no right to be covered, it held that the insurer was “fairly negotiable” and thus rejected the insurer’s bad faith claim. Read the book
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