WHAT IS IT, HOW TO DEAL WITH IT, AND WHERE IS IT GOING?
First Party
First Party
Hull Claims
Third Partyy
Passenger Liability Claims vs Pilot/Owner
Completed Ops and Products Liability Claims Premises Liability
Effect of Aviation Liability Policy Limits: Past
Florida 1938 origin to 1962 first application:
Florida 1938 origin to 1962 first application:
Auto Mut. Indemnity Co. v Shaw, 184 So. 852 (Fla.
1938) – Recognized concept of bad faith excess action based upon specific policy provision, but reversed jury verdict, finding no bad faith as a matter of law where insured approved claims handling. Key pp g y
rationale: Liability policies had replaced indemnity policies giving insurers control of defense
A i Fi & C C D i 146 S 2d 615 (Fl
California:
California:
Comunale v Traders & General Ins. Co., 328 P.2d 198 (Cal. 1958) – Recognizes insured’s bad faith claim for excess damages where insurer wrongfully
refuses to defend and rejects offer of settlement within limits; permits assignment of that claim to ; p g third party.
Florida:
California:
California:
Royal Globe Ins. Co. v Superior Court, 592 P.2d 329 (Cal. 1979) – recognized private cause of action by third parties directly against insurer for violation of unfair claims settlement statute.
Florida:
Florida:
Boston Old Colony Ins. Co. v Gutierrez, 386 So.2d 783 (Fla. 1980) – frequently cited case for third party bad
( ) q y p y
faith claims in Florida.
1982: Florida Statute 624.155 authorized first party bad faith claims; requires 60 days written notice and bad faith claims; requires 60 days written notice and opportunity to cure. Third parties may proceed
California
California
Moradi-Shalal v. Fireman
’
s Fund Ins. Co., 758 P.2d 58 (Cal. 1988) overturned Royal Globe asmisinterpretation of statute.
According to 2001 Rand Institute Study, Royal Globe had resulted in sharp increases in severity and
had resulted in sharp increases in severity and
frequency of bodily injury claims in California, and after Moradi-Shalal, those claims fell back to national averages.
West Virginia
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Study, Office of Insurance Commissioner, Feb. 2005 Recommended elimination of Third Party bad faith
l i fi di claims, finding:
Claimants pursuing weak claims more vigorously
Insurers settling for higher amounts due to threat Parties retaining lawyers in more claims
Increased insurance fraud due to insurer’s quick settlements
Rising premiums causing consumers to go without insuranceRising premiums causing consumers to go without insurance 2006 statute eliminated private causes of action for third
party bad faith, providing for administrative remedies l W V C d ti 33 11 4
Florida: leading jurisdiction for third party claimants
Powell v. Prudential Prop. & Cas. Ins. Co., 584 So,.2d 12 (Fla. 3rd
DCA 1991) – No demand required for bad faith claim.
Farinas v Fla Farm Bureau Gen Ins Co 850 So 2d 555 (Fla 4th Farinas v. Fla. Farm Bureau Gen. Ins. Co., 850 So.2d 555 (Fla. 4th
DCA 2003) – No safe harbor with multiple claimants.
Berges v Infinity Ins. Co., 896 So.2d 665 (Fla. 2005) – Bad faith g f y , ( )
now always a jury question.
Mendez v Unitrin Direct Prop & Cas, 622 F.Supp.2d 1233
(M D Fla 2007) Claimant did not respond to multiple (M.D.Fla. 2007) – Claimant did not respond to multiple
attempts to settle; applying Berges federal judge held it was a question for the jury
Levine v United Auto. Ins. Co., 2011 WL 11355318 (Fla. 3d DCA
2011 Florida Legislature
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SB 1592/HB 1187: died in committee
Would have replaced common law claims
Standard: “gross disregard of insured’s interests” Standard: gross disregard of insured s interests
Prerequisites: A good faith detailed written demand within limits; claimant documentation of claim.
Only insured could bring suit Only insured could bring suit.
2012 Florida Legislature
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Identical bills SB1224/HB 427 have been filed
Written notice required, identifying duty breached and amount demanded.
Florida Standard Jury Instruction: “Failing to
Florida Standard Jury Instruction: Failing to
settle a claim when, under all circumstances, it
could have and should have done so, had it
acted fairly and honestly toward its insured
and with due regard for his/her interests.”
h d h h d k
What does it mean? What are the yardsticks?
Pennsylvania standard – insurer breaches duty
when it denies a claim without a reasonable
when it denies a claim without a reasonable
basis and when insurer knows or recklessly
disregards the lack of a reasonable basis
Dodson Int
’
l Parts v. Nat’
l Union, 332 S.W.3d 139 (Mo.A 2010) App. 2010)
Bad faith found even where policy was ambiguous Insurer relied too heavily on underlying allegations
I d d ti tt ’ f
Insured recovered coverage action attorneys’ fees
Advice of counsel defense did not defeat bad faith claim
Trishan Air Inc v Federal Ins Co 635 F 3d 422 (9th Cir Trishan Air, Inc. v. Federal Ins. Co., 635 F.3d 422 (9th Cir.
2011)
No bad faith if no coverage owed in first instance
Court required strict compliance with unambiguous warranty Court required strict compliance with unambiguous warranty
High damages, low limits, and liability clear
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What if late notice or coverage questions?
High damages, low limits, but liability unclear
What does insured say? What is basis for claim?What does insured say? What is basis for claim?
Low limits, liability clear, but unknown damages
with short time demand
Potential for fraud settle in haste? Potential for fraud, settle in haste?
No demand, no point of contact - wait for
response?
C
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i h d
d
di i
Compliance with demand conditions
Time limited, tender, release, liens, Medicare, financial affidavits, ambiguous terms
N f h i i l i
Be mindful of where you file
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Provide insurer with all pro-coverage facts,
even if outside of the complaint
Check insurance company’s prior positions
Avail yourself of broader discovery permitted
i b d f ith it ti ( l i
l “ th
in bad faith situation (claims manuals, “other
policyholder” claims)
Consider using an expert on industry custom
Consider using an expert on industry custom
and practice
Do not wait for demands when liability is clear and
d l l d li i
damages clearly exceed limits
Do not offer less than policy limits without insured’s informed
approval of strategy
Confer with insured especially with multiple Confer with insured, especially with multiple
claimants or weak liability, to develop settlement strategy and goals, obtain written agreement
Consider retaining excess counsel to advise him so his consent Consider retaining excess counsel to advise him so his consent
is informed
Must inform insured of personal exposure for excess, give him
opportunity to contribute to any demands
Consider escrowing policy proceeds with counsel
Consider trial of bad faith case first: Cunningham v. Std.
Gty. Ins. Co., 630 So.2d 179 (Fla. 1994).
Do not make demands, do not respond to
,
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offers: they only help insurer meet obligations
Do not identify points of contact so as to lower
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l i
f
k
ff
obstacles insurer faces to make offers
Postpone appointment of guardians and
personal representatives to create uncertainty
personal representatives to create uncertainty
and potential grounds for voiding releases
If contacted, make policy limit demand
,
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y
requiring tender of check by date certain
Do not inform insurer of deficiencies in
Insurance policies are not ordinary “contracts”
Insurance policies are not ordinary contracts
Insufficient incentive for insurers to pay claims
in a timely manner if only remedy is
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contractual
Unfair trade practice statutes insufficient to
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Is the duty of good faith a two-way street?
Is the duty of good faith a two way street?
May plaintiff attorneys utilize
misrepresentations in bad faith effort to delay
p
y
insurer action?