Key Developments In Coverage Litigation 2009: Bad Faith

Author:Ms Kendall Hayden, Aleksandr Pinkhas, Kathryn M. Rutigliano and Josh Springer
Profession:Cozen O'Connor

Insurer's Participation In Settlements

Trinity Outdoor, LLC v. Central Mut. Ins. Co., 285 Ga. 583 (2009).

In Trinity Outdoor, on a certified question of law from the Northern District of Georgia, the Georgia Supreme Court found that, prior to bringing a claim against the insurer for negligent or bad faith failure to settle a case, a judgment must be entered against the insured in excess of the policy limits. Central Mutual Insurance Company insured Trinity Outdoor, LLC, and provided Trinity with a defense in a suit brought against Trinity when Trinity's billboard fell and killed two men. The decedents' family sued Trinity, and offered to settle for policy limits. During the court-ordered mediation, Trinity settled for Central's agreed-upon contribution, and Trinity also agreed to provide an additional amount without Central's permission. The insuring agreement provided that the insurer would only pay sums the insurer was legally obligated to pay, which did not include Trinity's voluntary payments. The Georgia Supreme Court found that Trinity could not bring an action for bad faith against Central for failure to settle in the absence of an excess verdict or an agreed-upon settlement.

Allstate Ins. Co. v. Miller, 212 P.3d 318 (Nev. 2009).

Miller, the insured, sued Allstate under three theories of bad faith liability: (1) failing to file an interpleader complaint; (2) refusing to agree to a stipulated judgment in excess of the policy limits; and (3) failing to adequately inform Miller of a settlement offer. Allstate argued that it could not be liable for bad faith because it offered to pay the policy limits within 13 days of the insured's accident, and issued a check with the claimant and lienholders' names. The court agreed with the insurer on the first two issues, holding that an insurer does not have a duty to file an interpleader for its insured or to agree to a stipulated judgment that is beyond the policy's limits. However, it held for the insured regarding the third issue, finding that submission of the bad faith claim to the jury was not in error because bad faith can result from more than just an insurer's denial or delay in paying a claim, and can include the failure to adequately inform an insured of a settlement offer. Because Allstate could be liable for bad faith for its failure to adequately inform its insured of the settlement offer, the case was remanded for a new trial.

Presumption Of Death Relevant In Bad Faith Decisions

Malone v. Reliastar Life Ins. Co., 558 F.3d 683 (7th Cir. 2009)

Indiana law provides that a person is presumed dead after missing for seven years. In Malone, the insurer declined to pay benefits, because the insurer argued that the insured could not be "presumed dead" for...

To continue reading