Bad faith/duty to settle

The U.S. Court of Appeals for the Ninth Circuit, applying California law, affirmed a district court’s ruling that an insurer did not act in bad faith by failing to defend its insureds and settle a claim where there was a “genuine issue” as to the insurer’s liability.  Sharp v. Evanston Ins. Co., 2020 WL 2569694 (9th Cir. May 21, 2020).  However, the court concluded that the insurer’s denial of coverage was incorrect because various policy exclusions requiring malice and California Insurance Code Section 533 did not apply to bar coverage for the insureds’ alleged negligent mishandling of fiduciary funds.

Continue Reading Ninth Circuit Holds That Alleged Misappropriation of Client Funds Triggers E&O Coverage, But No Bad Faith Where Insurer’s Denial Was Reasonable

The Massachusetts Supreme Judicial Court has held that consent-to-settle clauses in professional liability policies that give the insured absolute discretion regarding settlement do not inherently conflict with the state’s unfair insurance settlement practices statute, Mass. G.L. ch. 176D § 3(9)(f).  Rawan v. Continental Casualty Company, 136 N.E.3d 327 (Mass. Dec. 16, 2019).  The case had attracted considerable attention from amici concerned about potential disruption of the professional liability insurance market in Massachusetts if such consent-to-settle clauses were deemed impermissible.

Continue Reading Massachusetts SJC: E&O Insurers May Allow Insureds to Veto Settlement, But Settlement-Related Duties to Claimants Remain

Applying Delaware law, a Delaware state trial court has held that insurers did not act in bad faith by denying coverage for underlying settlements when they had reasonable grounds for their position and promptly sought a declaratory judgment as to their indemnification responsibilities.  Arch Ins. Co. v.  Murdock., 2019 WL 1932536 (Del. Super. Ct. May 1, 2019).

Continue Reading Dole Insurers Did Not Act in Bad Faith

Applying Colorado law, the United States District Court for the District of Colorado has held that a medical professional liability insurer was entitled to reimbursement of a settlement payment made on behalf of an insured to settle a dispute with a former patient.   Evanston Ins. Co. v. Aminokit Labs., Inc., 2019 WL 479204 (D. Colo. Feb. 7, 2019).

Continue Reading Court Holds Under Colorado Law Insurer is Entitled to Reimbursement of Settlement Payment From Insured

The Supreme Court of Delaware has held that under Delaware law, the three-year statute of limitations period applicable to a statutory bad faith action governed by Louisiana law commences when the insured could plead a prima facie case and was therefore barred.  Homeland Ins. Co. of New York v. Corvel Corp., 2018 WL 6061261 (Del. Nov. 20, 2018).

Continue Reading Statute of Limitations Period Begins When Insured Can Plead Prima Facie Elements of Bad Faith Case

The United States District Court for the Northern District of Alabama has held that alleged constitutional due process violations under 42 U.S.C. § 1983 do not constitute professional services “caused by the negligence” of an insured.  Madison County v. Evanston Ins. Co., 2018 WL 4680213 (N.D. Ala. Sept. 28, 2018).

Continue Reading Alleged 42 U.S.C. § 1983 Violations Not Professional Services Caused by “Negligence”

The United States District Court for the Northern District of Illinois, applying New York law, has held that a real estate service firm’s professional liability insurance policies cover four claims regarding the firm’s allegedly improper use of a certain appraisal methodology because neither the prior knowledge exclusion nor an exclusion regarding investment activity applied.  Cushman & Wakefield, Inc. v. Illinois Nat’l Ins. Co., 2018 WL 1898339 (Apr. 20, 2018).  In doing so, the court determined that the four claims were related and thus all properly treated under the same policy period and, therefore, the primary insurer for that policy period is entitled to recoup all amounts paid in excess of its limit for that policy.  The court also granted summary judgment for the first excess insurer on the insured’s bad faith claim.

Continue Reading Four Claims Regarding Same Appraisal Methodology Are Covered but Related and Therefore Confined to One Policy Year

Applying Minnesota law, the United States District Court for the District of Minnesota has held that, while an insured’s breach of contract claim was adequately pled, the insured could not pursue a cause of action for bad faith or seek relief in the form of extra-contractual damages.  Lunde v. Cincinnati Ins. Co., 2018 WL 1972475 (D. Minn. Apr. 26, 2018).

Continue Reading Insured Fails to State a Claim for Bad Faith and Cannot Pursue Extra-Contractual Damages Without Independent Tort

A Colorado appeals court has held that Colorado law does not recognize an independent equitable subrogation claim by an excess insurer against a primary insurer to recover a settlement paid by the excess insurer.  Preferred Prof’l Ins. Co. v. The Doctors Co., 2018 WL 1633269 (Colo. App. Apr. 5, 2018).  Rather, an excess insurer’s rights under such circumstances are derivative of the insured’s rights under the insurance policy, and therefore the excess insurer must prove that the primary insurer acted in bad faith by refusing to settle.

Continue Reading Excess Insurer Standing in Shoes of Insured for Equitable Subrogation Claim against Primary Insurer Must Prove Bad Faith