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

August 2016 Archives

Robocalls Are Covered By CGL Policy According To Florida Court

The Florida Court of Appeals in Old Dominion Ins. Co. v. Stellar Concepts & Design, Inc., 189 So.3d 293 (Fla. App. 2016) held that a CGL policy covered liability for the insured's placing robocalls in violation of state law. The Court found that the policy's expected or intended injury exclusion did not apply where the evidence demonstrated that the insured did not intend to harm the recipients of the robocalls even though the insured understood that the calls would cause the recipients to lose the use of the phone lines for the duration of the call.

The California Supreme Court Finds That In Determining Whether A Punitive Damage Award Is Unconstitutionally Excessive, The Court Could Take Into Consideration As The Compensatory Damage Component In An Insurance Bad Faith Case The Award Of Attorney's Fee

In a well-reasoned decision, the California Supreme Court held in Nickerson v. Stonebridge Life Ins. Co., 63 Cal.4th 363, 203 Cal.Rptr.3d 23, 371 P.3d 242, (2016), that a trial court could give consideration to an award of attorney's fees in favor of the insured, in a bad faith action, in calculating the constitutionally permissible ratio of compensatory damages to punitive damages in insurance bad faith cases. In question was the award of attorney's fees in favor of the insured under Brandt v. Superior Court, 37 Cal.3d 813, 210 Cal.Rptr. 211, 693 P.2d 796 (1985).

Arizona Court Finds That A Public Works Payment Bond Surety Cannot Be Held Liable For Bad Faith Failure To Investigate Because The Surety's Duties And Obligations Are Limited To Those Which Are Enumerated In Arizona's Public Works Bonding Act.

In S&S Paving and Constr., Inc. v. Berkley Regional Ins. Co., 239 Ariz. 512, 372 P.3d 1036 (Ct. App. 2016) , the Arizona Court of Appeals considered whether a surety could be sued by a subcontractor for bad faith failure to investigate when the surety issued a public works payment bond. This case involved a lawsuit brought by an unpaid subcontractor (S&S) for work done on a municipal construction project. S&S filed a claim against the payment bond issued by Berkley Regional Ins. Co. The bond had been issued in conformity with Arizona's Public Works Bonding Act, A.R.S. §§ 34-222-223. Although Berkley acknowledged receipt of the claim and requested more information, Berkley advised S&S that its initiation of an investigation would not toll the running of any statute of limitations period. After 13 months, S&S sued Berkley for breach of contract and bad faith. In turn, Berkley raised the one year statute of limitations on public payment bonds under A.R.S. § 34-223(B). The trial court dismissed both claims. The Arizona Court of Appeals affirmed the dismissal of the bad faith claim. In doing so, the Arizona Court of Appeals noted that S&S's attempt "to graft a common law remedy onto a statutory scheme that includes within its ambit both the availability of complete relief and specific conditions precedent to recovery" should be rejected. The Court found Arizona's Public Works Bonding Act was comprehensive regarding liability, remedies, and conditions for recovery. Therefore, allowing a common law remedy for bad faith conduct would be inconsistent with the express language of the statute which contained a provision stating that "all liabilities on this bond shall be determined in accordance with the provisions, conditions and limitations of [the Act]."

When Things Change, Re-Evaluate

In a fact intensive decision, the United States Eighth Circuit Court of Appeals in Bamford, Inc. v. Regent Ins. Co., 822 F.3d 403 (8th Cir. 2016), held that a fact question existed as to the insurance company's failure to settle a claim notwithstanding that the insurance company relied upon multiple efforts to settle, continuously increased its reserves and offers in the settlement process, followed the advice and valuations of two outside counsel and two mediators, discussed the claim value in roundtable meetings with senior management, and reasonably relied upon the state of Nebraska's reputation as a conservative jury verdict jurisdiction. The trial court had entered a ruling eliminating a key defense which the Eighth Circuit observed required the insurance company to drastically re-evaluate its position which it did not do notwithstanding its previous efforts to evaluate the claim fairly. While interesting on its facts, the Bamford case is so fact-intensive that it provides no procedural value in terms of black letter law. However, it is an interesting case to read because of all the efforts engaged in by the insurance company to try and fairly evaluate the case value which were all for naught when the trial court entered a ruling on one of several defenses.

Limiting the Scope of Ambiguity

Recently the Colorado Supreme Court in American Family Mutual Ins. Co. v. Hansen, 2016 WL 3398507 (Colo., filed 6/20/16) considered whether an extrinsic document, separate and apart from the insurance policy, could be used to create a policy ambiguity. The Court held that the trial court and the Colorado Court of Appeals erred when it considered the extrinsic document to create a coverage ambiguity. The Colorado Supreme Court held that the discrepancy in an extrinsic document did not create an ambiguity in the policy because the ambiguity doctrine can only be used to determine whether an ambiguity exists within the four corners of the insurance policy itself and cannot be created by an extrinsic document that was not part of that policy.

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