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

Phoenix Insurance Law Blog

A Settlement Demand Is Required As A Prerequisite In A Liability Claim To The Insurer's Duty To Settle

The Georgia Supreme Court recently held in First Acceptance Ins. Co. of Georgia, Inc. v. Hughes, 826 S.E.2d 71 (Ga. 2019) that a liability insurance company's duty to settle arose when a valid settlement demand was presented by the injured party that fell within the insured's policy limits. Only under those circumstances did an insurer risk breaching that duty if it rejected a reasonable settlement demand. This case involved a multiple vehicle traffic accident which resulted in one fatality and the injury to five individuals. The insured's policy limits were $25,000 per person/$50,000 per accident and were insufficient to fully compensate all of the injured parties. Because of this, the insurance company sent the injured parties' attorneys a letter proposing a joint settlement conference/mediation to resolve all claims. The Georgia Supreme Court found that as a threshold matter the insurer's duty to settle arose only when the injured party presented a valid offer to settle within the insured's policy limits. As support for its conclusion that "sound" policy supported the making of a written settlement demand as a prerequisite to a liability insurer's duty to settle. The court noted that without an offer within the policy limits, the only evidence of an essential element of the insured's case - that the insurer could have settled the case within the policy limits - would be "after-the-fact testimony of the injured party that he would have settled within the policy limits. Such testimony was unreliable and often self-serving or the product of collusion between the insured and the injured party.


In Summit Insurance Co. v. Stricklett, 199 A.3d 523 (R.I. 2019) the court found that the insurer did not owe a minor child pedestrian who was struck by the insured's vehicle or the child's parents any duty to attempt to settle the child's personal injury claim. The court resoundingly rejected the claimant's argument that the insurance company owed them a duty of good faith and fair dealing in settlement negotiations. In rejecting this assertion, the court discussed how the insurer's duty to settle arose from the contractual fiduciary duty that was owed between the insurer and its insured. In contrast, the relationship between the insurance company and a third party was adversarial, which did not give rise to a fiduciary obligation on the part of the insurance company to the claimant.


The First Circuit U.S. Court of Appeals recently upheld a district court's ruling that an insurance company's claim administrator's handling of a medical malpractice lawsuit was in conformity with Massachusetts statute regarding reasonable settlement.


The Colorado Court of Appeals in Brown v. American Standard Ins. Co. of Wisconsin, 436 P.3d 597 (Colo. App. 2019) recently found that the insurance company's reason for cancelling the policy must be accurate for the cancellation to be effective. The Colorado Court of Appeals, as a matter of first impression, held that when the insurance company provides the reason for its policy cancellation (in this case an automobile policy), the reason given by the insurer must be accurate. If the reason is not accurate, the notice of cancellation is ineffective. In doing so the court rejected the insurance company's argument that the cancellation was effective, irrespective of whether the reason was actually accurate in situations where the insured did not contest the cancellation until after the accident had occurred. However, the Colorado appellate courts had previously held that insureds who received defective notification of cancellation were permitted to sue their insurance company without having previously challenged the cancellation.


The Missouri Supreme Court held in Griffitts v. Old Republic Insurance Co., 2018 WL 3235859 (Mo. 7/3/18) that an intoxicated employee, who had been driving a company vehicle while intoxicated, was a permissive user notwithstanding his violation of company procedure. In a previous decision, the Missouri Supreme Court held that the concept of permissive use applied even if the operator of the vehicle was operating the vehicle in a forbidden manner.


In Alpizar-Fellas v. Favero, 906 F.3d 910 (3rd Cir. 2018) (interpreting New Jersey law) the Court found that an adjuster's alleged fraudulent representations which induced the insured to sign a release that the insured did not understand gave rise to a private right of action under New Jersey's Consumer Fraud Act. 


Delaware has a three-year statute of limitations period for the filing of a bad faith claim. In Homeland Ins. Co. of New York v. CorVel Corp., 197 A.3d 1042 (Del. 2018) the Court held that the limitations period began to run when the insured could plead a bad faith claim and not when the Court ultimately determined contested coverage.


The Colorado Supreme Court in Schultz v. GEICO Casualty Co., 429 P.3d 844 (Colo. 2018) recently held that later-developed evidence was irrelevant to a UIM claim because the denial had taken place prior to the development of that evidence. In this case, the insured, Charissa Schultz, needed multiple knee replacement surgeries after a motor vehicle accident caused by an underinsured motorist. After settling with the tortfeasor's insurer, GEICO paid its UIM policy limits two years after the tortfeasor payment. Schultz then sued GEICO, alleging unreasonable payment delay. During the processing of the UIM claim, GEICO requested an IME, which was objected to by Schultz. Schultz claimed that the request was made too late. However, the trial court ordered the IME to proceed.

9th Circuit Requires That Any Illness or Infirmity Causing or Contributing to Injury For Purposes of Accidental Death and Dismemberment Benefits Had to be a Substantial Cause of the Loss to Avoid Coverage

In Dowdy v. Metro. Life Ins. Co., 890 F.3d 802 (9th Cir. 2018), the insured sought benefits under an accidental death and dismemberment policy for an amputation of his leg resulting from a car accident. The leg was seriously injured as a result of the accident and was then later amputated. The policy provided that a covered loss was a loss that was a direct result of an accidental injury, independent of other causes. In deciding to deny the claim, Met Life relied upon a surgical report stating that due to comorbidities, as well as non-healing wounds and osteomyelitis, the patient had elected to undergo an amputation of the leg. Based upon the surgical report, Met Life concluded that the amputation was contributed to and complicated by the insured's diabetes and that, under the terms of the policy, a loss caused or contributed to by an illness or treatment for that illness was excluded from payment.

How Many Car Accidents Does It Take To Constitute An Occurrence?

An interesting case from the Fifth Circuit Court of Appeals considered the question of how many collisions constitute a single occurrence. In Evanston Ins. Co. v. Mid-Continent Casualty Co., 909 F.3d 143 (5th Cir. 2018) the Fifth Circuit Court of Appeals held that a series of automobile collisions constituted a single occurrence because each collision had a common cause and further, because there was no intervening event that was the immediate cause of damage. According to the Court, there was a single uninterrupted chain of events and therefore one accident.

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