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

December 2018 Archives

Supreme Court Finds That a Policyholder's Arbitration Agreement With tts Insurer Does Not Apply to Disputes Between the Policyholder and the Insurance Agent

In Jody James Farms, J.V. v. Altman Group, Inc., 547 S.W.3d 624 (Tex. 2018), the insurance agent failed to timely submit a hail and rain claim on behalf of the insured to the insurance company. The agent was then sued by the policyholder, alleging breach of fiduciary duty and deceptive trade practices. The insurance agency moved to compel arbitration, which was granted by the Texas District Court. The case then proceeded through arbitration and resulted in a panel finding in favor of the agency. The trial court then affirmed the arbitration award. However, the Texas Supreme Court reversed the trial court's ruling.

Binding the Insurer to Relevant Facts Through a Consent Settlement

Recently the Missouri Supreme Court in Allen v. Bryers, 512 S.W.3d 17 (Mo. 2016), as modified (Apr. 4, 2017), reh'g denied (Apr. 4, 2017), cert. denied sub nom. Atain Specialty Ins. Co. v. Allen, 138 S. Ct. 212, 199 L. Ed. 2d 118 (2017) held that an insurance company's wrongful refusal to defend its insured bound the insurer to the findings made in the underlying tort action. The court found that when the insurer improperly refused a defense to its insured, the insured was entitled to enter into a consent judgment which bound the insurer to findings of fact that were made in the underlying tort action. In this case, the insured failed to pursue a declaratory judgment action, failed to appeal the denial of a motion to intervene in the tort action, and subsequently made an untimely motion to intervene. However, the court did find that the insurance company was not liable for damages in excess of the policy limits where there had been no finding that the insurer engaged in bad faith when it denied coverage.

Settling into Bad Faith

Under Florida Insurance Code §624.155, in order to bring a bad faith action there must be a favorable determination of liability against the insurer as a prerequisite to maintaining a bad faith action. In Barton v. Capitol Preferred Ins. Co., Inc., 208 So. 3d 239 (Fla. Dist. Ct. App. 2016), a property insurer settled the insured's breach of contract claim relating to sinkhole damages for an amount less than the available policy limits. The insured alleged that the insurance company had failed to perform a complete, statutorily-compliant sinkhole/subsidence investigation prior to it summarily denying the claim for coverage. After the lawsuit was filed, the insurer proposed settling the claim for $65,000 in order to dismiss the breach of contract action. After the dismissal of the breach of contract action, the insureds brought a bad faith lawsuit. The insurance company moved for summary judgment on the bad faith claim, arguing that under the statute, the insured had failed to prove that the underlying breach of contract claim had been resolved in favor of the insured and that there had been a determination of the actual extent of the loss. Summary judgment was granted in favor of the insured. On appeal, however, the summary judgment grant was reversed. The Florida Court of Appeals found that while the insured may obtain a determination of liability and a determination of the full extent of damages through trial, there were other acceptable means for establishing the predicate for a bad faith lawsuit, including settlement, arbitration results, and stipulation. The court then found that the insurer's payment of $65,000 was a favorable resolution of the claim and the fact that the claim was settled for less than the policy limits or the amount initially demanded by the insured, was irrelevant. The court found that §624.155 did not condition the right to bring a bad faith lawsuit on the insured's recovery of the claimed policy limits or an amount that was greater than the insureds had demanded for the resolution of the claim.

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