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WHAT IS IT, HOW TO DEAL WITH IT, AND WHERE IS IT GOING?

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WHAT IS IT, HOW TO DEAL WITH IT, AND WHERE IS IT GOING?

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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

(3)

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

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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:

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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

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California

California

Moradi-Shalal v. Fireman

s Fund Ins. Co., 758 P.2d 58 (Cal. 1988) overturned Royal Globe as

misinterpretation 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.

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West Virginia

g

 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

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 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

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2011 Florida Legislature

g

 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

g

 Identical bills SB1224/HB 427 have been filed

 Written notice required, identifying duty breached and amount demanded.

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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

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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

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High damages, low limits, and liability clear

g

g

y

 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

li

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

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Be mindful of where you file

y

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

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 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).

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Do not make demands, do not respond to

,

p

offers: they only help insurer meet obligations

Do not identify points of contact so as to lower

b

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

,

p

y

requiring tender of check by date certain

Do not inform insurer of deficiencies in

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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

y

y

y

contractual

Unfair trade practice statutes insufficient to

p

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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?

Bad Faith law constrains and punishes insurer

p

References

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