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

April 2017 Archives

CALIFORNIA COURT OF APPEALS FINDS THAT AN EXCESS INSURER CAN SUE A PRIMARY INSURER FOR BAD FAITH FAILURE TO SETTLE UNDER AN EQUITABLE CONTRIBUTION THEORY TO RECOVER THE EXCESS INSURER'S CONTRIBUTION TO SETTLEMENT OF A CLAIM AGAINST THE INSURED

The California Court of Appeals recently held that an excess judgment was not a necessary element to an equitable subrogation claim brought by an excess insurer against a primary insurer when the primary insurer failed to settle the underlying case. In ACE American Ins. Co. v. Fireman's Fund, 2 Cal.App.5th 159, 206 Cal.Rptr.3d 176 (2d Dist. 2016), the Court held that the excess insurer could sue the underlying primary insurer for bad faith failure to settle under equitable contribution when the excess insurer contributed to a settlement of the claim against its insured. In this case, the Court held that the absence of a litigated judgment did not preclude the excess insurer from establishing the damages element of a claim for bad faith failure to settle under an equitable subrogation theory. The Court held that an excess insurer, when faced with a primary insurer's unreasonable refusal to pay a settlement demand within policy limits could contribute to the settlement on behalf of its insured and then sue the primary insurer to recover the amount of the settlement.

THE 10TH CIRCUIT COURT OF APPEALS FINDS THAT COLORADO'S "FAIRLY DEBATABLE" DEFENSE IS NOT ABSOLUTE

In The Home Loan Investment Co. v. St. Paul Mercury Ins. Co., 827 F.3d 1256 (10th Cir. 2016), the Tenth Circuit Court of Appeals held that a property insurance company's denial of a fairly debatable claim was not per se reasonable. The insurer, St. Paul Mercury Ins. Co., argued that because its coverage decision was "fairly debatable," it was, as a matter of law, not unreasonable. St. Paul argued that a claim's fair debatability was outcome determinative because, under Colorado law, an insurance company could not act unreasonably in denying a fairly debatable claim. In response, the insured argued that a claim's "fair debatability" was merely one factor in the overall analysis of whether the insurer acted reasonably in delaying or denying coverage. The Tenth Circuit rejected St. Paul's argument.

INSURANCE COMPANIES HAGGLING OVER RELEASE LANGUAGE CAN RESULT IN BAD FAITH LIABILITY

In Barickman v. Mercury Cas. Co., 2 Cal.App.5th 508, 206 Cal.Rptr.3d 699 (2d Dist. 2016), an insurance company's refusal to consent to additional release language which was designed to preserve the claimant's rights to receive criminal restitution from the insured tortfeasor caused the case not to settle and, as a result, it was found that the insurance company breached the implied covenant of good faith and fair dealing by not doing all that it could do within its power to effectuate the settlement.

THE MONTANA SUPREME COURT FINDS THAT A POLICY'S EARTH MOVEMENT EXCLUSION WAS NOT LIMITED TO DAMAGES CAUSED BY SOIL MOVEMENT AND FINDING THAT DAMAGE CAUSED BY A FALLING BOULDER WAS EXCLUDED

In Parker v. Safeco Ins. Co. of America, 384 Mont. 126, 376 P.3d 114 (Mont. 2016), the Montana Supreme Court affirmed the trial court's grant of summary judgment for the insurance company that denied coverage for "earth movement" when the insured's cabin was damaged by a boulder falling down a hillside. The Court found that there was nothing in the language of the exclusion to indicate that there was a basis for separating rock from soil when considering an "earth movement" within the purview of the exclusion. The policy set forth examples of earth movement including landslides and lava flows but did not mention soil. The Montana Supreme Court agreed with the trial court's observation that a common understanding of the term landslide in the context of the exclusion necessarily include the large boulder that came down the hill and crashed into the insured's cabin.

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