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

Bad Faith Archives


Recently the 7th Circuit Court of Appeals held, interpreting Illinois law, that to establish a bad faith failure to settle case under Illinois law, the claimant must prove both reasonable probability of liability and reasonable probability of damages in excess of the policy limits. In Surgery Center at 900 North Michigan Avenue, LLC v. American Physicians Assurance Corp., 922 F.3d, 778 (7th Cir. 2019), the Court found that Illinois law required there to be both a reasonable probability regarding a liability finding, as well as a reasonable probability that a damages award would exceed the policy limits in order to establish a bad faith failure to settle case.


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.

Corroborating UIM Claims

Under South Carolina law, insureds can receive the benefit of uninsured motorist coverage for injuries that are caused by a phantom driver, provided that the insured can establish three conditions set forth in S.C. Code Anno. §38-77-170. One of the three conditions requires that there either be physical contact with the unknown phantom vehicle or that the accident was witnessed by someone other than the owner or operator of the insured vehicle.

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.

Oregon Court Finds That Insurer Bad Faith Is Not Elder Abuse

The Oregon Supreme Court, answering a certified question by the 9th Circuit Court of Appeals, held that bad faith delay or denial of payment of an insurance claim did not state a claim under Oregon's Financial Elder Abuse Statute. In Bates v. Bankers Life and Casualty Co., 362 Or. 337, 408 P.3d 1081 (Or. 2018), the Oregon Supreme Court held that an insurance company's alleged bad faith did not simultaneously constitute a violation of Oregon's elder abuse statute. In this case, the plaintiffs were senior citizens who had purchased long-term healthcare insurance policies issued by Bankers Life. The seniors sued Bankers, alleging that Bankers had developed onerous procedures to delay and deny insurance claims that were submitted by seniors. The seniors brought an elder abuse claim against Bankers under ORS §124.110. However, the Federal District Court dismissed the claim, finding that the Elder Abuse Statute only applied in "bailment or trust scenarios expressly referenced in the statutory language." The dismissal was appealed to the 9th Circuit Court of Appeals. In turn, the 9th Circuit certified a question to the Oregon Supreme Court on the issue.

Refining Florida's Bad Faith Law

In order to bring a bad faith claim in Florida, the following three elements need to be established: (1) the insurer's liability for coverage needs to be determined; (2) the extent of the insured's damages needs to be determined; and (3) it must be established that the insured placed the insurance company on notice. See Florida Statute §624.155(a). This statute provides a civil remedy in cases where the insurance company fails to settle its policyholder's claim in good faith or where the insurer commits any one of the several unfair claims handling practices identified in Florida Statute §626.9541(1)(I).

Covenant Judgment Settlements In Washington Do Not Automatically Constitute A Waiver Of Attorney-Client Privilege And Work Product Protection When The Insured's Claims For Bad Faith Against The Insurer Are Assigned To The Adverse Party

In Steel v. Philadelphia Indemnity Co., 381 P.3d 111 (2016), a daycare center employee was convicted of child rape and child molestation while working at a daycare center. The parents brought a negligence action against the center. The daycare center had $1 million in coverage. Plaintiffs offered to settle for $4 million, which was rejected by Philadelphia. As trial approached, the insureds entered into a $25 million covenant judgment settlement with the plaintiffs. As part of the settlement the insureds received a covenant not to execute and the plaintiffs received an assignment of the insured's bad faith claims.

Timely Offering Policy Limits Does Not Immunize Insurer From Bad Faith Exposure

The California Supreme Court in Barickman v. Mercury Casualty Co., 2 Cal. App. 5th 508 (2nd Dist. 2016) held that the insurance carrier was liable for bad faith failure to settle, notwithstanding the fact that the carrier offered its policy limits to the claimants in a timely manner in exchange for a full release of civil liability. The court found that the insurer's failure to do "all within its power to effect a settlement" could constitute bad faith, notwithstanding the fact that the insurance company offered its policy limits to the injured claimants in exchange for a full release of liability. The insurance company had refused to consent to additional language in the release designed to preserve the claimant's rights to receive criminal restitution from the insured tortfeasor.

California Court of Appeals Fixes Punitive Damage Ratio and Bad Faith Cases

Historically the United States Supreme Court has admonished trial courts with the high court's observation that "few awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process." State Farm Mut Automobile Ins. Co. v. Campbell, 538 U.S. 408, 424 (2003). The California Supreme Court has taken a different view of what the proper ratio of punitive to compensatory damages should be. In Simon v. Sao Paolo U.S. Holding, Inc.. 35 Cal. 4th 1159 (2005) the California Supreme Court upheld a ten-to-one ratio. The California Supreme Court observed that the one-to-one ratio of the Campbell decision would not be applied, with the court suggesting that a ratio of nine or ten-to-one would be the point in California where a punitive damage award became constitutionally suspect and required special justification. Simon, 35 Cal. 4th at 1182.


The South Dakota Supreme Court in Mordhorst v. Dakota Truck Underwriters and Risk Administrative Services 886 N.W.2d 322 (S.D 2016) recently found that a rule 12-B6 motion to dismiss was not appropriate in a worker's compensation bad faith case notwithstanding the insurer's reliance upon an IME report finding that the injured employee was not injured.

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