On Behalf of | Jan 22, 2021 | Bad Faith

In Lock v. American Family Insurance Co., 460 P.3d 683 (Wash. App. Div. 1 2020) the Washington court found defending against the insured’s bad faith lawsuit was not a claim denial, nor was it bad faith.

The underlying case involved UIM and PIP claims under American Family’s auto policy.  Generally, American Family paid the insured’s medical bills, paid additional benefits under PIP, and acknowledged that the insured might need additional treatment due to a second accident.  The insurer’s settlement offer was rejected.  The insured brought suit against American Family thereafter for statutory and common law bad faith and consumer protection violations.  In defending the bad faith claim, American Family removed the case to Federal District Court on two occasions, but the Federal District Court remanded the case, scolding American Family’s attempts to remove.  At trial in the bad faith case, the trial court granted American Family’s motion to exclude evidence of its litigation conduct, including any emotional distress the insured suffered after the filing of the lawsuit.  The jury found in favor of the insured on two of the three bad faith claims.  However, the trial court granted American Family’s Motion for JNOV on the bad faith claim.  On appeal, the Washington Court of Appeals found that American Family’s aggressive defense of the bad faith lawsuit was categorically inadmissible, noting that litigation is an adversarial proceeding and not an insurance claim.  The remedy for improper litigation conduct was in in the form of judicially imposed sanctions.  The Court also granted the JNOV on the extracontractual claims, finding that there was only a value dispute regarding the UIM claim, which was not a coverage denial.