Steven Plitt, Expert Witness Steven Plitt, Expert Witness
Insurance Bad Faith Claim Handling Expert Serving Clients Nationwide

Phoenix Insurance Law Blog

AN INSURANCE COMPANY CAN AFFIRMATIVELY CREATE A NEW AND INDEPENDENT TORT TO A CLAIMANT AS A RESULT OF THE INSURER'S CLAIM HANDLING ACTIVITIES SAYS THE ALASKA SUPREME COURT

In Burnett v. GEICO, 389 P.3d 27 (2017) the Alaska Supreme Court, as a matter of first impression, held that a liability insurer can owe a tort duty to a third-party claimant when the insurer's claims handling actions affirmatively create a new and independent duty to the claimant. In Burnett, GEICO's insured crashed into a cabin which caused, in part, a fuel leak. The fuel leak was required to be remediated environmentally in accordance with the Alaska Department of Environmental Conservation (DEC) standards. GEICO hired a contractor to perform an environmental site assessment and to coordinate the necessary clean-up of the spill. However, GEICO delayed in the remediation effort. As a result, the fuel spill spread underneath the cabin itself. Because of this, the cabin owner sued not only the GEICO insured for the accident, but also GEICO for its negligent activities in timely cleaning up the environmental spill.

COLORADO COURT OF APPEALS ISSUES A SIGNIFICANT OPINION ON DAMAGES UNDER COLORADO'S UNREASONABLE DELAY STATUTE

The Colorado Court of Appeals in Nybert v. GEICO Casualty Co., 2017 WL 710504 (Colo. Ct. App. February 23, 2017) issued two significant rulings regarding Colorado's Unreasonable Delay Statute, Section 10-3-1116. In the first ruling, the Court held that the trial court was permitted under the statute to award the insured twice the amount of the delayed benefit in addition to the actual policy benefit that was delayed. In the second opinion, the Court found that an award of statutory attorney's fees to the insured could be made without regard to the period from when the benefit was first delayed to the date when it was actually paid and without regard to whether the fee award concerned a contractual claim.

OREGON SUPREME COURT RULES THAT UNDER ORS §742.061 AN INSURER'S VOLUNTARY PAYMENTS TO THE INSURED AFTER THE INSURED FILED SUIT AND THE APPRAISERS ISSUED AN AWARD WHICH ALSO WAS PAID WAS A "RECOVERY" ENTITLING THE INSURED TO AN AWARD OF ATTORNEYS' FEES

Under ORS §742.061 insurance companies are required to pay their insured's attorneys fees if, in the insured's lawsuit against the insurer, the insured obtains a "recovery" that exceeds the amount of any tender made by the insured within six months from the date that the insured first filed a proof of loss. In Long v. Farmers Insurance Company of Oregon, 360 Or. 791, 388 P.3d 312 (2017), the Oregon Supreme Court held that when an insured files an action against an insurer to recover sums owing on the insurance policy and the insurer subsequently pays the insured more than the amount of any tender made within six months from the insured's proof of loss, the insured obtains a "recovery" that entitles the insured to an award of reasonable attorney's fees notwithstanding the voluntary nature of the insurance company's payment. In essence, the court found that the term "recovery" included any kind of restoration of the loss, including a voluntary payment of a claim made after an action on the insurance policy had been filed. In determining whether a qualifying "recovery" has taken place for purposes of ORS §742.061, all that matters is that, after filing an action on an insurance policy, the insured obtains more from the insurer-irrespective of whether through judgment, settlement, voluntary payment or some other means-than the insurer tendered in the first six months after proof of loss, an award of attorney's fees is appropriate under the statute. The Court found that in the context of the statute, "recovery" was not limited to a money judgment rendered in the action in which attorney's fees were sought. The insured was not required to obtain a money judgment that exceeded any tender within the first six months after the insured submitted the proof of loss.

MAINE SUPREME COURT WEIGHS IN ON APROTIONING DAMAGES

The Maine Supreme Court in Harlor v. Amica Mutual Ins. Co., 2016 WL 6518589 (ME November 3, 2016) held that when an insurance company refuses to defend its insured on a mixed complaint containing allegations of both potentially covered and uncovered claims the insurer would be liable only for that portion of the settlement between its insured and the claimants representing payment for covered claims.

In Harlor the insurance company concluded that the multi-count complaint filed against it's insured, did not alleged covered damages. When the insurance company declined the defense of it's insured the insured enter into a settlement agreement with the claimant, completely settling the claim on all counts. The insured than sued the insurance company alleging breach of contract. The Court concluded that the insurance company breached its duty to defend because at least one count of the complaint was potentially covered. The insured then argued that because the insurance company breached its duty to defend, the insurance company was liable for the entirety of the settlement that the insured entered into with the claimant. The Maine Supreme Court rejected this approach.

INSURANCE COMPANY RELIANCE UPON IME REPORT TO SUPPORT RULE 12 B6 MOTION TO DISMISS IN BAD FAITH CASE DID NOT REQUIRE DISMISSAL

The South Dakota Supreme Court in Mordhorst v. Dakota Truck Underwriters and Risk Administrative Services 886 N.W.2d 322 (S.D 2016) recently found that a rule 12-B6 motion to dismiss was not appropriate in a worker's compensation bad faith case notwithstanding the insurer's reliance upon an IME report finding that the injured employee was not injured.

INSURANCE SUBBROKER HELD TO NOT OWE DUTY TO WARN OF AN INSURANCE COMPANY FRAUD DURING THE PLACEMENT OF INSURANCE

Under Illinois statutory and common law an insurance broker owes a duty only to the named insured who has purchased insurance from the broker. Recently, the question arose under Illinois law regarding whether a sub broker, who played an administrative role in the placement of a large and complex risk involving a chain of brokers and subcontractors, but did not place any insurance on the behalf of the named insured or received commissions from the placement owed any type of duty to warn the named insured of potential "red flags" suggesting that the insurance company under which the program was placed was untrustworthy and that its polices issued might be worthless.

INDIANA COURT OF APPEALS HOLDS THAT POLICY SIR EXHAUSTION REQUIREMENT APPLIES TO ADDITIONAL INSURED AND NOT JUST THE NAMED INSURED

The Indiana Court of Appeals in Walsh Construction Co. v. Zurich American Insurance Co. 2017 WL 1151033 (IN Ct App March 28th 2017) acknowledged that under Indiana law in situations that arise between the insurer and the named insured, the insurer's responsibility is to defend and indemnify the named insured only after the SIR has been satisfied and exhausted. However, the question of whether a SIR endorsement applied only to the insurers relationship to the named insured or whether it also applied to an additional insured was resolved in the Walsh case as a question of first impression.

A 10-to-1 RATIO OF COMPENSATORY DAMAGES TO PUNITIVE DAMAGES WAS RECENTLY PERMITTED BY THE CALIFORNIA COURT OF APPEALS IN AN INSURANCE BAD FAITH CASE

The California court of appeals in Nickerson v. Stonebridge Insurance Co. 5 Cal App, 5th 1,209 Cal Rptr. 3d 690 (2d Dist., November 3, 2016) recently found that the Court was constrained by case law in California and the California constitution from allowing a punitive damage award to be more than 10 times greater than the compensatory damage award. In calculating the compensatory damage award within the ratios denominator, the trail court properly excluded and the court of appeals held that it was proper to excluded contract damages and potential damages to others from the equation. However, the court found that the award of attorney fees in favor of the insured and compelling the insurer to pay contract benefits (so called Brandt fees) should be included in the ratios denominator.

CALIFONIA COURT FINDS THAT SPECULATION UPON HOW AN EMPLOYEE WAS INJURED DID NOT GIVE RISE TO A POTEINTIAL FOR COVERAGE AS AN ADDITIONAL INSURED

The issue of whether a general contractor qualified as an additional insured under a sub contactor excess policy for a work related injury turned on whether there was evidence that the sub-contractor caused the claimants injuries according to the recent case of Advent Inc. v. National Union Fire Insurance Co. 6Cal AP 5th 443, 2016 WL7100489(6th Dist., December 6th 2016)

In Advent, the insurance company, National Union, issued both primary and excess liability insurance to Johnson Western Gunite, a subcontractor on the Aspen family village construction project in California. Topa Insurance Company (Topa) issued an excess policy to the project general contractor, Advent. A subcontractor employee, Jerry Kielty, was injured when he fell down an unguarded stairway shaft on the project sight. At the time of the fall, Kielty was retrieving a piece of plywood at the request of the sub-contractors' foreman. Kielty did not need to enter the building where the unguarded stairway shaft was in order to retrieve the plywood. No one knew why Kielty enter the building and Kielty could not remember, himself, how he was injured.

MAINE SUPREME COURT WAYS IN ON APROTIONING DAMAGES

The Maine Supreme Court in Harlor v. Amica Mutual Ins. Co., 2016 WL 6518589 (ME November 3, 2016) held that when an insurance company refuses to defend its insured on a mixed complaint containing allegations of both potentially covered and uncovered claims the insurer would be liable only for that portion of the settlement between its insured and the claimants representing payment for covered claims.

FindLaw Network

Contact Steven Plitt

Bold labels are required.

Contact Information
disclaimer.

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

close

Privacy Policy

Phone: 602-322-4038