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.
The Kentucky Supreme Court in Allstate Insurance Co. v. Smith, 487 S.W.3d 857 (Ky. 2016) held that the insurer had a duty to advise its insured of the availability of underinsured motorist coverage when the policy was initially purchased. However, the insurer had no duty to advise the insured of the availability of UIM coverage after the insured renewed the policy for the first time. Although it was undisputed that the designation of UIM coverage was not listed on the declarations page of the insured's policy, the evidence also showed that Allstate sent a form to the insured with each renewal, notifying the insured about the ability to purchase higher limits for UM and UIM coverage.
The Florida Court of Appeals in Old Dominion Ins. Co. v. Stellar Concepts & Design, Inc., 189 So.3d 293 (Fla. App. 2016) held that a CGL policy covered liability for the insured's placing robocalls in violation of state law. The Court found that the policy's expected or intended injury exclusion did not apply where the evidence demonstrated that the insured did not intend to harm the recipients of the robocalls even though the insured understood that the calls would cause the recipients to lose the use of the phone lines for the duration of the call.
In a well-reasoned decision, the California Supreme Court held in Nickerson v. Stonebridge Life Ins. Co., 63 Cal.4th 363, 203 Cal.Rptr.3d 23, 371 P.3d 242, (2016), that a trial court could give consideration to an award of attorney's fees in favor of the insured, in a bad faith action, in calculating the constitutionally permissible ratio of compensatory damages to punitive damages in insurance bad faith cases. In question was the award of attorney's fees in favor of the insured under Brandt v. Superior Court, 37 Cal.3d 813, 210 Cal.Rptr. 211, 693 P.2d 796 (1985).
In a fact intensive decision, the United States Eighth Circuit Court of Appeals in Bamford, Inc. v. Regent Ins. Co., 822 F.3d 403 (8th Cir. 2016), held that a fact question existed as to the insurance company's failure to settle a claim notwithstanding that the insurance company relied upon multiple efforts to settle, continuously increased its reserves and offers in the settlement process, followed the advice and valuations of two outside counsel and two mediators, discussed the claim value in roundtable meetings with senior management, and reasonably relied upon the state of Nebraska's reputation as a conservative jury verdict jurisdiction. The trial court had entered a ruling eliminating a key defense which the Eighth Circuit observed required the insurance company to drastically re-evaluate its position which it did not do notwithstanding its previous efforts to evaluate the claim fairly. While interesting on its facts, the Bamford case is so fact-intensive that it provides no procedural value in terms of black letter law. However, it is an interesting case to read because of all the efforts engaged in by the insurance company to try and fairly evaluate the case value which were all for naught when the trial court entered a ruling on one of several defenses.
Recently the Colorado Supreme Court in American Family Mutual Ins. Co. v. Hansen, 2016 WL 3398507 (Colo., filed 6/20/16) considered whether an extrinsic document, separate and apart from the insurance policy, could be used to create a policy ambiguity. The Court held that the trial court and the Colorado Court of Appeals erred when it considered the extrinsic document to create a coverage ambiguity. The Colorado Supreme Court held that the discrepancy in an extrinsic document did not create an ambiguity in the policy because the ambiguity doctrine can only be used to determine whether an ambiguity exists within the four corners of the insurance policy itself and cannot be created by an extrinsic document that was not part of that policy.
The Delaware Supreme Court weighs in on when a bad faith claim accrues in a bad faith refusal to settle case. In Connelly v. State Farm Mut. Auto. Ins. Co., 2016 WL 836983 (Del. March 4, 2016), the Intermediate Appellate Court found that the bad faith claim accrued when the insurer refused plaintiff's offer to settle for 35% of the policy limits. The Supreme Court reversed holding that the cause of action accrued when the excess judgment became final. This approach reduced the possibility of a conflict of interest between the insurance company and its insured, protected insurers from bad faith claims for failing to settle even the most frivolous claims and would have the beneficial effect of saving the insured litigation costs that might turn out to be unnecessary if the trial court did not order an excess judgment.
The California Third District Court of Appeals recently required pro rata allocation of defense costs among successive insurers. In Certain Underwriters at Lloyds, London v. Arch Specialty Ins. Co., 246 Cal.App.4th 418, 200 Cal.Rptr.3d 786 2016 WL 1436362 (3rd Dist. 2016), the Court reaffirmed California public policy as prohibiting enforcement of "escape" other insurance clauses inequitable contribution actions between successive primary insurers seeking to allocate the cost of defending construction defect litigation. Under existing law, each insurer was responsible for a pro rata share of defense costs notwithstanding the fact that one insurer's policy contained language in both the insuring agreement and the conditions section both stating that the insurer had a duty to defend only if no other insurance afforded a defense. The Court found that the placement of the escape language in the insuring agreement was not sufficient to differentiate the case from prior California precedent prohibiting the enforcement of escape other insurance clauses which appeared elsewhere in the insurance policy.
Putting a subcontractor's insurer on notice. An interesting case recently came out of New York. In Spoleta Constr., LLC v. Aspen Ins. UK Ltd., 27 N.Y.3d 933, 50 N.E.3d 322 (N.Y. 2016), the Court held that a general contractor's insurance company's letter to a subcontractor requesting that the subcontractor provide a defense and indemnity under the subcontract agreement was adequate notice to the subcontractors insurer of the occurrence taking place.
Florida Appellate Court rules that an insurance policy's anti-assignment clause did not prohibit an insured from assigning policy proceeds to a contractor that the insured hired to repair the insured's property following a loss.