a survey of recent developments in coverage and bad...
TRANSCRIPT
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4/18/16
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ASurveyofRecentDevelopmentsinCoverageand
BadFaithLi=ga=on
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The evolution in Extra-Contractual & Bad Faith Liability continues and now, more than ever, there is no room for error in managing and defending claims. This NY installment is on pace to be our largest yet and the attendee list already reads like a who's who of industry leaders - make sure that you do not miss out!
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This is the only conference of its kind that brings you the trifecta for a summit on Extra-Contractual & Bad Faith Liability: 1.) The top defense and plaintiff firms VIEW THEM HERE 2.) An unparalleled in-house insurer presence; VIEW THEM HERE; and 3.) Unique insights on:
• Hotbed states including Missouri, Washington, Florida, South Carolina, Georgia • The ever changing duty to defend • Carriers failing to properly investigate claims involving requests for additional insurance coverage • Creative bad faith set ups • Open limits, policy limit demands, and time limit demand letters • Consent judgments: • “Cunningham” agreement nuances • Carrier’s duty to initiate settlement negotiations in the absence of demand • Bad faith discovery given 2015 FRCP amendments • The “claim file” in the digital universe • Increased requests for corporate witness depositions and preparing company witnesses for testimony • Overcoming latest challenges with institutional bad faith claims • Excess coverage/excess policy claims and inter-company bad faith claims • Resolving thorny issues with regard to independent Cumis counsel • Recoupment/reimbursement
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RECENTMISSOURIBADFAITHCASES
ColumbiaCasualtyCompanyv.HIARHoldings
MissouriSupremeCourtAugust13,2013
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ColumbiaCasualtyCompanyv.HIARHoldings
• ColumbiaCasualtyrefusedtodefendHIAR(itsinsured)inTCPAclassac=on
• HIARsuedforsending12,500blastfaxesinSt.Louis• HIARtwicetenderedtoColumbia• Columbiadenieddefensebecauseno“adver=singinjury”or“property
damage”• Classmadepolicylimits($1,000,000/$2,000,000)demanduponHIAR
forwardedpolicylimitsdemandtoColumbia• ColumbiarefusedtoseTle• HIARseTleswithclassfor$5,000,000• HIARassignsitsclaimsagainstColumbiatoclass• ClassgarnishesagainstColumbia
ColumbiaCasualtyCompanyv.HIARHoldings
• Columbiafilesdeclaratoryjudgmentac=on– Garnishmentstayed
• DJ1. ColumbiabreacheddutytodefendHIAR
Classclaimscoveredunder“adver=singinjury”and “propertydamage”
2. Columbiabreacheddutytoindemnify3. Columbiaactedin“badfaith”4. $5,000,000seTlement“reasonable”
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HIARRULING:• Plain=ff’sInterpreta=on:
– AninsurerthatwrongfullyrefusestodefendaninsuredisliableforjudgmentorseTlement“TheInsurerthatwrongfullyrefusestodefendisliablefortheunderlyingjudgmentasdamagesflowingfromitsbreachofitsdutytodefend.”
• Defendant’sInterpreta=on:– BreachofthedutytodefendresultsinliabilityforthecostoftheseTlementor
judgment,uptothepolicylimits.Exposurebeyondpolicylimitsrequiresashowingofbadfaith.“BecauseColumbiawrongfullydeniedcoverageorevenadefenseunderaReserva=onofRights,andalsorefusedtoengageinseTlementnego=a=ons,ColumbiashouldnotavoidliabilityfortheseTlementjudgmententeredinthiscase.”
UNRESOLVEDQUESTION:• DoesHIARmeaninsurerswhowrongfullydeniedadefensetoinsuredare
liableforen=reamountofseTlementorjudgmentabsentafindingofbadfaith?
ColumbiaCasualtyCompanyv.HIARHoldings
EXCESSCANSUEPRIMARYFORBADFAITHFAILURETOSETTLE
Sco9sdaleInsurancev.AddisonInsurance,SC93792(MO2014)
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ScoTsdaleInsurancev.AddisonInsurance,SC93792(MO2014)
• Facts– Primaryv.Excesscarriercasewhichrecognizedexcesscarrier’srightto
pursueprimarycarrierforbadfaithfailuretoseTle– Thefamilyofamotoristkilledina2007accidentwithatruckoperatedby
WellsTruckingstatedaclaimagainstWellsTrucking– Thestatepoliceinves=ga=ondeterminedthattheWellsTruckingdriver
wasatfault– WellsTrucking’sprimarycarrier($1millionpolicy)wasUnitedFire
(AddisonIns.Co.)– WellsTruckingformallydemandedthatUnitedFireseTlethecasewithin
thelimits– TherewasevidencethatthesuitcouldhavebeenseTledwithinthe
primarylimits– UnitedFiremadeseveraloffersthatWellsTruckingwouldlater
characterizeas“lowandunreasonable”
ScoTsdaleInsurancev.AddisonInsurance,SC93792(MO2014)
• Facts– Thefamilygrewfrustratedandfiledawrongfuldeathsuit– Theexcesscarrier,ScoTsdale,wasputonno=ce– ScoTsdaledemandedthatUnitedFireaTempttoseTlewithinthe
primarylimits“whileits=llhadtheopportunitytodoso”– Shortlytherealer,thefamilymadeanotherdemandof$1million– UnitedFirerejectedthatdemandandthefamilyraisedtheirdemand
to$3million– Thecaseresolvedatmedia=onfor$2million;$1millionfromUnited
Fire,and$1millionfromScoTsdale
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ScoTsdaleInsurancev.AddisonInsurance,SC93792(MO2014)
• Facts– WellsTruckingassigneditsrightstoScoTsdale,andScoTsdalefileda
badfaithac=onagainstUnitedFire– ThetrialcourtgrantedUnitedFire’smo=onforsummaryjudgment:
“anexcessinsurercannotrecoverfromaprimaryinsurerunderaclaimofbadfaithrefusaltoseTleandthatbadfaithrefusaltoseTlecouldnotbeprovenbecauseUnitedFireseTledtheclaimagainstWellsTruckingand paid its policy limits andWells Trucking did not suffer an excessjudgment.”
ScoTsdaleInsurancev.AddisonInsurance,SC93792(MO2014)
• Holding– Onappeal,theSupremeCourtofMissourireversedholdingthat“an
insurer’sul=mateseTlementforitspolicylimitsdoesnotnegatetheinsurer’searlierbadfaithrefusaltoseTleandthatanexcessjudgmentisnotessen=altoabadfaithrefusaltoseTleac=on.”
– Theexcesscarriercanestablishabadfaithclaimwheretheprimary(1) ReservestheexclusiverighttocontestorseTleanyclaim;(2) Prohibitstheinsuredfromvoluntarilyassuminganyliabilityor
seTlinganyclaimswithoutconsent;and(3) IsguiltyoffraudorbadfaithinrefusingtoseTleaclaimwithin
thelimitsofthepolicy
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AmericanFamilyv.Parnell
MissouriCourtofAppeals,WesternDistrictOctober27,2015
AmericanFamilyv.ParnellMissouriCourtofAppeals,WesternDistrict
October27,2015
• Parnell’soperatedadaycarebusiness• Parnell’s11-year-oldsonhadsexualcontactwith7-year-oldatdaycare• Vic=m’sfamilysuesParnell’sfornegligentsupervisionofvic=m• Parnell’stendertoAmericanfamilyfordefenseandindemnity• Americanfamilyfilesdeclaratoryjudgmentac=on
– Abuseexclusion–wedon’tcoverforinjuryordamageresul=ngfromsexualabuse– Inten=onalinjury–wedon’tcoverforinjuryordamageexpectedorintendedbyany
insured– 11-year-oldsonan“insured”bydefini=on
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AmericanFamilyv.Parnell
• Holding:– Parnell’snegligentsupervisionofvic=mwasa“concurrentproximatecause”ofvic=m’s
injuries.So,evenifexclusionsapply,Parnell’snegligentsupervisionwasa“separateanddis=nctcause”ofherinjuriesforwhichcoveragewasprovided.
• Key– dothe“coveredcause”and“excludedcause”dependuponeachothertoestablishthe
necessaryelementsofeachclaim?– If“coveredcause”couldoccurwithoutthe“excludedcause”,thencausesare
independentanddis=nctandconcurrentproximatecauseruleapplies.
AmericanFamilyv.Parnell
• ConclusionSinceclaimfornegligentsupervisionofaminorisunrelatedtoandcanoccurwithoutintenDonalinjuryorsexualabuse,itisindependentanddisDnct• QuesDonDoesconcurrentproximatecauseruleeffecDvelyvoidexclusionsinpolicies?
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TRENDSACROSSTHECOUNTRY
BreachofDutytoDefendRevisitedK2InvestmentGroup,LLCv.AmericanGuarantee&Liability,6N.E.3d1117,
983N.Y.S.2d761(Feb.18,2014)
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K2InvestmentGroup,LLCv.AmericanGuarantee&Liability,6N.E.3d1117,983N.Y.S.2d761(Feb.18,2014)
• Facts– Insurerallowedtoassertpolicydefensesandsummaryjudgmentagainst
insurerreversedbasedontheexistenceofaques=onoffactastowhetherpolicyexclusionapplied
– Insurerwrongfullyrefusedtodefendinsured– Insured’sassigneearguedthatinsurercouldnotrelyonpolicydefensesto
defeatliabilityordefaultjudgmentagainstinsured
• Holding– InfirstK2case,weheldthataninsurerwhobreacheddutytodefendmaynot
assertdefensestoimmunity
– FirstK2caseconflictedwithanotherdecision,ServidoneConstr.Corp.v.SecurityIns.Co.ofHarEord,64N.Y.2d419,488N.Y.S.2d139,477N.E.2d441(1985)
K2InvestmentGroup,LLCv.AmericanGuarantee&Liability,6N.E.3d1117,983N.Y.S.2d761(Feb.18,2014)
• Holding– ThecourtfollowedServidone– Insurerallowedtoassertpolicydefensesandsummaryjudgment
againstinsurerreversedbasedontheexistenceofaques=onoffactastowhetherpolicyexclusionapplied
– NClaw:Insurerwhobreachesdutytodefendisestoppedtodenycoverage
– Majorityrule:followsServidone
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PRIORITYOFEXCESS/OCIPCertainUnderwritersv.IllinoisNat.Ins.Co.,No.09Civ.04418
(S.D.N.Y.March13,2015)
CertainUnderwritersv.IllinoisNat.Ins.Co.,No.09Civ.04418(S.D.N.Y.March13,2015)
• Facts– Truckingaccidentonconstruc=onsite– Twocompe=ng,virtuallyiden=cal“otherinsurance”clauses– PoliciesincorporatedintoanOwnerControlledInsuranceProgram(“OCIP”)
– OCIPlistedUnderwriters’policyasanexcesspolicyintheprogram– OCIPdidnotincludecoveragefortruckers,driversandhaulers,
includingCon=nental’sinsured– Con=nentalandUWpoliciesbothpurportedtobeexcessoverother
insurance
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CertainUnderwritersv.IllinoisNat.Ins.Co.,No.09Civ.04418(S.D.N.Y.March13,2015)
• Facts– Con=nental’sargumentthatUWpolicyisexcessoverCon=nental
policybecauseUWpolicywasissuedpertheOCIPwhichwas…• a“contract”that“specificallyrequiresthat[theUWpolicy]beprimaryandcontributory,”
• therebymakingtheUWpolicyprimaryunderanexcep=ontotheUW“OtherInsurance”clause
• Holding– “BecauseOCIPcons=tutesneitheranexpressnoranimpliedcontract
triggeringthatexcep=on,both‘otherinsurance’clausesremainineffectandaremutuallyrepugnantontheirfaces”
– Bothpoliciesprovidepro-rataexcesscoverage
“OCCURRENCE”ANDEXCLUSIONS
INASEXUALASSAULTCASEGonzalezv.FireIns.Exch.,etal.,234Cal.App.4th1220(2015)
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Gonzalezv.FireIns.Exch.,etal.,234Cal.App.4th1220(2015)
• Facts– GonzalezsuedRebaglia=andnineothermembersoftheDeAnza
Collegebaseballteamalerasexualassault– Rebaglia=soughtcoverageunderhisparents’homeowner’s(FireIns.
Exch.)andpersonalumbrella(TruckIns.Exch.)policies– Bothdeniedcoverage– Rebaglia=seTledandassignedrightstoGonzalez– Gonzalezallegedbreachofcontractandbadfaith– Trialcourtgrantedinsurers’mo=onsforsummaryjudgment– Gonzalezappealed
Gonzalezv.FireIns.Exch.,etal.,234Cal.App.4th1220(2015)
• Holding– Affirmedastotheprimarypolicy;nooccurrence– Reversedastoumbrella;thedefini=onof“personalinjuries”didnot
requirethecoveredeventstobe“accidental”– Umbrellacarrieralsofailedtomeetburdenofproofforseveral
exclusions– Sexualmolesta=onexclusion
• Nocoverageiftheinsuredpar=cipated,butpleadinginthedisjunc=ve(“and/ortheotherdefendants”)lelopenpossibilitythatinsureddidnotpar=cipate
• Evidencelearnedpost-tenderoftheclaimisirrelevanttodutytodefend;Rebaglia=admiTedtopar=cipa=onalerinsurershadalreadyrejectedtheclaim
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Gonzalezv.FireIns.Exch.,etal.,234Cal.App.4th1220(2015)
• ExpectedorIntendedexclusion– Exclusionfordamagesthatare“[e]itherexpectedorintendedfromthe
standpointoftheinsured”– Rebaglia=haddeniedpar=cipa=onat=meoftendersohecouldhave
beenliablefor“damagesincurredbyGonzalezduetohisnegligenceincrea=ngthecondi=onsthatledtoherfalseimprisonmentintheroom.”
– “Atortsuchasfalseimprisonmentmayresultfrominten=onalconductandisthereforenonaccidental,butasubjec=veintentorexpecta=onthatharmwouldoccuronthepartoftheinsuredisnotrequiredforliability.”
• CriminalActsexclusion– Noevidencethatinsured“consentedtoorra=fiedtheseacts”
WORTHAMENTION
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EXPANDINGTHE“FOURCORNERS”OFTHEPOLICY
Inre:DeepwaterHorizon,Relator,No.13-0670(TX2015)
Inre:DeepwaterHorizon,Relator,No.13-0670(TX2015)
• Facts– ClaimsforenvironmentaldamagearisingoutoftheApril2010
explosionandsinkingoftheDeepwaterHorizonoil-drillingrigintheGulfofMexico
– BPwastheoilfielddeveloper– Transoceanwasthedrillingrigown– DrillingContractbetweenTransoceanandBP– TransoceanagreedtoindemnifyBPforsurfacepollu=on– BPagreedtoindemnifyTransoceanforsubsurfacepollu=on
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Inre:DeepwaterHorizon,Relator,No.13-0670(TX2015)
• Facts– DrillingContractrequiredTransoceantonameBPasaddi=onal
insuredonprimaryGLandfourlayersofexcess($700millionincoverage)
– Addi=onalinsuredprovisionrequiredAIstatusfor“liabili=esassumedby[Transocean]underthetermsofthiscontract.”
– I.e.,surfacepollu=onbutnotsubsurfacepollu=on– Policieshadan“InsuredContract”provision– Extended“Insured”toincludeanyperson“towhomthe‘Insured’is
obligedbyoralorwriTen‘InsuredContract’…toprovideinsurancesuchasaffordedby[the]Policy.”
– NodisputethattheDrillingContractwasan“InsuredContract”
Inre:DeepwaterHorizon,Relator,No.13-0670(TX2015)
• Facts– BPsubmiTedaclaimtoTransocean’scarriers– Theinsurersfiledadeclaratoryjudgmentac=on:InreDeepwater
Horizon,2011WL5547259(E.D.La.Nov.15,2011)– TheinsurersarguedthatBPwasnoten=tledtocoverageforthe
subsurfaceclaimsbecauseoftheDrillingContract– BParguedthatthepoliciesthemselvesdidnotcontainthislimita=on– Thedistrictcourtruledinfavoroftheinsurers–thetermsofthe
DrillingContractlimitedthecoverageaffordedbythepolicies– TheFilhCircuitreversed:coveragedefinedbythe“fourcorners”of
thepolicies– Theques=onwascer=fiedtotheTexasSupremeCourt
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Inre:DeepwaterHorizon,Relator,No.13-0670(TX2015)
• Holding– Twoapproaches:– 1.Apolicymayincorporateanexternallimitonaddi=onalinsured
coverage(ci=ngUrruJav.Decker,992S.W.2d440(Tex.1999))– 2.“Anamedinsuredmaygratuitouslychoosetosecuremorecoverage
foranaddi=onalinsuredthanitiscontractuallyrequiredtoprovide.”(ci=ngEvanstonIns.Co.v.ATOFINAPetrochemicals,256S.W.3d660(Tex.2008))
– Underfirstapproach,theinsurerswin– Undersecondapproach,BPwins.
Inre:DeepwaterHorizon,Relator,No.13-0670(TX2015)
• Dis=nguishedATOFINA:TheexistenceofacerIficateofinsurancenamingATOFINAasanaddi=onalinsuredmeantthat…therewasnoneedtolooktotheunderlyingservicecontracttoascertainATOFINA’sstatusas[anaddi=onalinsured.]Moreover,sec=onIII.B.6ofthepolicyinATOFINAmadenoreferencetotheservicecontractindeterminingthescopeofaddiIonal-insuredcoverage,whiletheTransoceanpoliciesrefertoan“InsuredContract”thatrequiresTransoceantoprovidetheinsuranceasapredicatetostatusasan“Insured.”
• Inotherwords,hadtherebeenacer=ficateofinsurancesayingBPwasanAIand/ortherewasno“InsuredContract”provision,therewouldhavebeennoneedtolookattheDrillingContract
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Inre:DeepwaterHorizon,Relator,No.13-0670(TX2015)
• “Thelanguageintheinsurancepoliciesprovidingaddi=onal-insuredcoverage‘whererequired’andas‘obliged’requiresustoconsulttheDrillingContract’saddi=onal-insuredclausetodeterminewhetherthestatedcondi=onsexist.…[W]henwedoso,itbecomesapparentthattheonlyreasonableinterpreta=onofthatclauseisthatthepar=esdidnotintendforBPtobenamedasanaddi=onalinsuredforthesubsurfacepollu=onliabili=esBPexpresslyassumedintheDrillingContract.”
• Howisthisunusual?WhywasATOFINAsodifferent?
INSURERCANBELIABLEFOR
NEGLIGENCEINCLAIMHANDLINGBrunov.ErieIns.Co.,106A.3d48(Pa.Dec.2014)
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Brunov.ErieIns.Co.,106A.3d48(Pa.Dec.2014)
• Facts– TheBrunosboughtahomein2007andobtainedahomeowners’
policyfromErie– Thepolicycoveredphysicallosstothepropertycausedby“fungi,”
includedinaseparateendorsement– Pursuanttotheendorsement,Eriewouldberequiredtopaythe
Brunosupto$5,000foradirectphysicallosscausedbymold– WhentheBrunosfoundblackmoldintheirbasement,theycontacted
Erie– EriesentRudickForensicEngineeringtoinves=gatethemoldproblem– Rudicksaidthemoldwasharmless– Theclaimwasnotpaid
Brunov.ErieIns.Co.,106A.3d48(Pa.Dec.2014)
• Facts– TheBrunosstayedinthehouseandfoundmoremoldgrowingon
leakingpipes– TheytoldErie,whotestedit,butdidnotdisclosetheresultsofthe
tests– TheBrunofamilysufferedsevererespiratoryailments– ByJanuary2008,theBrunosdecidedtohavethemoldtestedontheir
own– Theydiscoveredthatthemoldwastoxicandhazardoustotheirhealth– TheyagainaskedErieforthefullmoldbenefit,andEriemadethe
$5,000paymenttotheBrunos
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Brunov.ErieIns.Co.,106A.3d48(Pa.Dec.2014)
• Facts– TheBrunoswereforcedtodemolishtheirhouse– Thewife,AngelaBruno,developedesophagealcancerasaresultof
exposuretothetoxicmold– TheBrunosfiledabreachofcontractandbadfaithac=onthatalso
includedanegligenceclaimagainstErieforitsac=onsduringtheclaimhandlingprocess,andtheac=onsofitsagent,Rudick
– Eriefiledpreliminaryobjec=onsastothenegligenceclaimbasedonthegistoftheac=ondoctrine
– Thetrialcourtsustainedthepreliminaryobjec=ons,andtheintermediateappellatecourtaffirmed
Brunov.ErieIns.Co.,106A.3d48(Pa.Dec.2014)
• Holding– Reversed– “Ifthefactsofapar=cularclaimestablishthatthedutybreachedis
onecreatedbythepar=esbythetermsofthecontract(i.e.,aspecificpromisetodosomethingthatapartywouldnotordinarilyhavebeenobligatedtodo,butfortheexistenceofthecontract),thentheclaimistobeviewedasoneforbreachofcontract”
• gistoftheac=onapplies• “if,however,thefactsestablishthattheclaiminvolvesthedefendant’s
viola=onofabroadersocialdutyowedtoallindividualswhichisimposedbythelawoftortsand,hence,existsregardlessofthecontract,thenitmustberegardedasatort”
• gistoftheac=ondoesnotapply
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Brunov.ErieIns.Co.,106A.3d48(Pa.Dec.2014)
• Holding– Aninsurercanbeliablefornegligentactsundertakenduringthe
claimshandlingprocess:“Anegligenceclaimbasedontheac=onsofthecontrac=ngpartyinperformingcontractualobliga=onsisnotviewedasanac=onontheunderlyingcontractitself,sinceitisnotfoundonthebreachofanyspecificexecutorypromisesthatcomprisethecontractInstead,thecontractisregardedmerelyasthevehicleormechanismwhichestablishedtherela=onshipbetweenthepar=esduringwhichthetortofnegligencewascommiTed.”
– So,whileEriehadcontractualobliga=onsunderitspolicytoinves=gatewhethermoldwaspresentandalsopayforallpropertydamagecausedbythemold,thesubstanceoftheclaimisthatErie’sagentswerenegligent“duringthecourseoffulfillingtheseobligaIons”
DEFENSETRENDSINBADFAITHLITIGATION
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Reserva=onofRightsErieIns.Ex.v.Lobenthal,2015WL1668183(Pa.Super.2015)
ErieIns.Ex.v.Lobenthal,2015WL1668183(Pa.Super.2015)
• Facts– Plain=ffsinjuredinacaraccident– Allegedthattheaddi=onalinsured—Ms.Lobenthal—wasliablefor
theaccidentbecausesheprovideddrugsandalcoholtothedriverofthecar
– Eriesentareserva=onofrightsleTer,andthenasecond9monthslater,toMs.Lobenthal’sparentsandheraTorney
– BothleTersonlyreservedtherighttodisclaimcoverageagainsttheparents,andmadenomen=onofMs.Lobenthal
– Indeclaratoryjudgmentac=onthetrialcourtgrantedsummaryjudgmenttoErierulingthatEriehadnodutytodefendorindemnifyLobenthal
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ErieIns.Ex.v.Lobenthal,2015WL1668183(Pa.Super.2015)
• Holding– TheCourtfoundnono=cetoMs.Lobenthal– Eriefirstreferencedthecontrolledsubstancesexclusioninthepolicy
initssecondleTer,sentmorethansevenmonthsalerthecomplaintwasfiled
– Giventheinforma=onavailabletoErie,theleTerwasun=melyandthecourtorderedErietodefendandindemnifyMs.Lobenthal
– Erie’sreserva=onofrightsleTertoanaddi=onalinsuredwasineffec=vewheretheleTerwasun=melyandwasnotaddressedtotheaddi=onalinsuredherself,butrathertoherparents(thenamedinsureds)andheraTorney
– Eriewasrequiredtodefendandindemnifytheaddi=onalinsured
Reserva=onofRightsLeTer
• MoststatesdonotrequireinsuredtoacceptdefenseunderROR
• IfinsuredrejectsROR,insurer’snextdecisioncanhavesignificantconsequences.– Withdrawreserva=onanddefendoutright– Withdrawdefense– Fileadeclaratoryjudgmentac=on
• Construedasdenialofcoverage
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Problemw/Reserva=onofRights
• Dutytodefendisbroaderthandutytoindemnify
• Du=estodefendandindemnifyaretwoseparateanddis=nctdu=esunderthepolicy– Courtsarefindingthatbreachofdutytodefendcreatesliabilityforunderlyingjudgmentasdamagesflowingfromthefailuretodefend
– TheNETeffectisthatdutytoindemnifyisjustasbroadasthedutytodefend
WhatistheSolu=on?• Pickthelesseroftwoevils:
– Weaktortliability,defendandindemnify– Strongcoveragedefenses,fightthegoodfight
• Uncondi=onaldefense– LeTerrecognizestwodu=es:defense&indemnity– Defenseduty:determinedbyallega=onsinsuit– Indemnity:determinedbasedoncaseresolu=on– Concerns:
• SameasROR?• StrictRORrequirement
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WhatistheSolu=on?
• Uncondi=onaldefensewithCumisCounsel– Cumiscounselgivesinsuredrighttocontrolli=ga=on
– Allowspoten=altocreatecoverageatexpenseofinsurer
• Sugges=ons?
BadFaithSetUpDefense
• MissedopportunitytoseTlewithinpolicylimits– Arbitrary=meconstraints
• Suddendeath=metable• SeTlementcondi=onedonpayment
– Ambiguousdemands– Prematuredemand– SeTlementswithunworkablecondi=ons
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BadFaithSetUpDefense
• Recognizesetupearly• Avoiddelay,proceedquicklywithrequestsforinforma=on
• Respond,butbereasonable– YourresponseisExhibitA
• KeepinsuredinformedANDinvolved
ReverseBadFaithClaims
• Contractvs.Tortclaim– Impliedcovenantofgoodfaithandfairdealing– Dutytoactingoodfaithimposedbycommonlaw
• Generallyrequiresspecialrela=onship
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ReverseBadFaithClaim
• FraudorCollusion– Heightenedburden:ClearandConvincing– Agreementbetweentorzeasorandinsuredshouldrequireheightenedscru=ng
– Offsetthestandardstorequireordinaryproof
ReverseBadFaithClaim• Unreasonableness• Misrepresenta=on• Concealment• Secre=veness• Lackofseriousnego=a=onsondamages• ATemptstoaffectinsurancecoverage• Profittotheinsured• ATemptstoharmtheinterestsofinsurer
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Ques=ons?