Executive Summary Blog

Executive Summary Blog

Legal developments affecting professional liability insurers

Category Archives: Bad faith/duty to settle

Subscribe to Bad faith/duty to settle RSS Feed

Insured Fails to Allege Bad Faith Damages When Settlement Was Funded by Another Insurer

Posted in Bad faith/duty to settle
A California federal district court has held that an insured did not suffer damages sufficient to support a bad faith claim for failure to indemnify because another excess insurer during a prior policy year had paid for the settlement.  Genesis Ins. Co. v. Magma Design Automation, Inc., No. 2017 WL 4642443 (N.D. Cal. Oct. 16,… Continue Reading

Fifth Circuit Holds that Prior Knowledge Exclusion is Unduly Broad

Posted in Bad faith/duty to settle, Prior Knowledge/Warranty Exclusion, Wrongful Act
The United States Court of Appeals for the Fifth Circuit, applying Texas law, has held that the prior knowledge exclusion contained in a lawyers professional liability policy was unduly broad as written and would be construed to apply to wrongful acts reasonably likely to lead to a malpractice claim.  OneBeacon Ins. Co. v. T. Wade… Continue Reading

Insured’s Settlement Without Regard to Reasonableness Rendered Consent Judgment Unenforceable Against Insurer that Breached Duty to Defend

Posted in Bad faith/duty to settle, Consent to settle/incur defense costs
The United States Court of Appeals for the Eleventh Circuit, applying Florida law, has held that an insurer’s breach of the duty to defend did not render it liable for a consent judgment where the insured did not consider the reasonableness of the settlement amount.  Sidman v. Travelers Cas. & Sur., 2016 WL 6803034 (11th… Continue Reading

Insured Not Prejudiced by Insurer’s Failure to Attend Settlement Meetings; Alaska Law Precluding Recoupment of Defense Costs Preempted by Federal Risk Retention Group Statute

Posted in Bad faith/duty to settle, Defense Costs, Estoppel
The Ninth Circuit Court of Appeals has reversed a district court’s denial of an insurer’s motion for summary judgment and held that the insurer, which was organized as a risk retention group, was entitled to reimbursement of defense costs incurred in defense of a non-covered claim because Alaska’s statutory bar against recoupment conflicts with the… Continue Reading

Insurer that Rejected Exception from Release Language Liable for Bad Faith Failure to Settle Despite Offering Policy Limits

Posted in Bad Faith, Bad faith/duty to settle, Consent to settle/incur defense costs
A California intermediate appellate court has held that an insurer is liable for bad faith failure to settle, even though it had made a timely offer to settle for its full policy limits, where the insurer declined to agree to release terms proposed by the claimants to which the insured refused to agree. Barickman v.… Continue Reading

Montana High Court Rules that Evaluation of Reasonableness of Stipulated Settlement Must Consider the Merits and Value of the Underlying Case

Posted in Bad faith/duty to settle, Consent to settle/incur defense costs
The Montana Supreme Court has held that, even where an insurer breaches its duty to defend and is estopped from denying coverage for a later settlement, the insurer is still entitled to challenge the reasonableness of the settlement, and the court must assess the merits and value of the underlying case in assessing the settlement… Continue Reading

Excess Insurer Can Pursue Statutory and Common Law Bad Faith Claims Against Primary Insurer as Assignee of Insured

Posted in Bad faith/duty to settle
Applying Rhode Island law, the United States District Court for the District of Rhode Island has held that an excess insurer can maintain a cause of action for bad faith failure to settle against a primary insurer. Columbia Cas. Co. v. Ironshore Spec. Ins. Co., 2016 WL 2930927 (D.R.I. May 19, 2016). In addition, the… Continue Reading

Insurer Not Estopped from Denying Coverage for Failing to Send Second Coverage Letter

Posted in Bad faith/duty to settle, Estoppel
Applying Massachusetts law, the United States District Court for the District of Massachusetts has held that an insurer is not estopped from denying coverage for a subsequent claim when it already issued a coverage letter for litigation based on the same facts and involving the same coverage issues. American Guar. & Liab. Ins. Co. v.… Continue Reading

Court Dismisses Coverage Action Where Claims Were Made Before Policy Period and Barred by Prior and Pending Litigation Exclusion

Posted in Bad faith/duty to settle, Related Claims and associated exclusions
A California federal court has held that a professional liability policy does not afford coverage for claims against an insured individual, who was serving as executor of his father’s estate, by his stepmother because those claims related to earlier claims by the stepmother before the policy period. Cove Partners, LLC v. XL Specialty Ins. Co.,… Continue Reading

Pre-Tender Defense Costs are Uncovered Voluntary Payments

Posted in Bad faith/duty to settle, Consent to settle/incur defense costs, Defense Costs
A federal district court, applying California law, has held that a “no voluntary payment” provision precluded coverage for defense expenses voluntarily incurred by an insured pursuant to its agreement to indemnify its directors and officers prior to providing notice to the insurer of its indemnity obligation. Corthera, Inc. v. Scottsdale Ins. Co., 2016 WL 270951… Continue Reading

Court Holds Insurer Can Allocate Settlements

Posted in Allocation, Bad faith/duty to settle, Breach of Contract – coverage for amounts due pursuant to contract, exclusions, Loss
A federal district court in Pennsylvania has upheld an insurer’s right to allocate settlements between covered and non-covered amounts and affirmed the insurer’s substantive allocation of two settlements. United Nat’l Ins. Co. v. Indian Harbor Ins. Co., No. 14-6425 (E.D. Pa.). Wiley Rein represented the insurer.… Continue Reading

Insurer Could Face Bad Faith Liability Even Though It Has No Duty To Defend

Posted in Bad faith/duty to settle, Defense Costs
Applying Utah law, the United States District Court for the District of Utah held that an insurer could potentially face bad faith liability even though the insurer had no duty to defend the insured against an underlying lawsuit. Travelers Prop. Cas. Co. of Am. v. Fed. Recovery Serv., Inc., 2016 WL 156453 (D. Utah Jan.… Continue Reading

No Coverage, No Estoppel, No Duty to Settle; Prior Knowledge Exclusion Bars Coverage for Insured’s Malpractice Claim

Posted in Bad faith/duty to settle, Defense Costs, Prior Knowledge/Warranty Exclusion
The Kansas Court of Appeals has held that an insurer owed no duty to defend or settle a malpractice lawsuit against its insured because the attorney had knowledge of acts reasonably giving rise to the claim before the policy period began. Becker v. Bar Plan Mutual Ins. Co., 2015 WL 9459771 (Kan. Ct. App. Dec.… Continue Reading

Specific Litigation Exclusion Bars Coverage for Condo Owners’ Second Lawsuit against Condo Association

Posted in Bad faith/duty to settle, Related Claims and associated exclusions
Applying New Jersey law, a New Jersey federal court held that a specific litigation exclusion barred coverage for a second lawsuit brought against a condominium association by the same condominium owners. The One James Plaza Condo. Assoc., Inc. v. RSUI Group, Inc., 2015 WL 7760179 (D.N.J. Dec. 2, 2015). In addition, the court held that… Continue Reading

No Coverage for Claims Arising from Failure to Appeal Adverse Decision

Posted in Bad faith/duty to settle, Prior Knowledge/Warranty Exclusion, Professional Services, Related Claims and associated exclusions
Applying Massachusetts law, a Massachusetts federal court has held that no coverage was available under two claims-made policies because the insured knew before policy inception that a client would bring a claim when the insured failed to perfect an appeal of an adverse zoning decision. Gandor v. Torus Nat’l Ins. Co., 2015 WL 6043621 (D.… Continue Reading

Second Circuit Affirms Applicability of Lower Limit on Liability Pursuant to Endorsement; No Bad Faith Claim

Posted in Bad faith/duty to settle, Burden of proof
Applying New York law, the United States Court of Appeals for the Second Circuit has held that a claim against a broker-dealer was subject to a $1 million limit on liability, rejecting the insured’s argument that the claim was subject to a $7.5 million limit. Catlin Spec. Ins. Co. v. QA3 Fin. Corp., 2015 WL… Continue Reading

Reimbursement of Defense Costs at Panel Rate Does Not Constitute Irreparable Harm for Preliminary Injunctive Relief

Posted in Bad faith/duty to settle, Consent to settle/incur defense costs, Defense Costs
The United States District Court for the Southern District of New York has held that an insurer’s reimbursement of only a portion of the full amount of defense costs sought by an insured under a duty to advance policy does not constitute irreparable harm for purposes of preliminary injunctive relief. Stuckey v. Nat’l Union Fire… Continue Reading

Coverage for DOJ Investigation Not Barred Because No Way to Determine Whether There Was Substantial Overlap with Earlier Lawsuits

Posted in “Claim”, Bad faith/duty to settle, Related Claims and associated exclusions
A federal court in California has held that an investigation did not relate back to earlier lawsuits against the insured, nor was coverage barred by the policy’s prior or pending litigation exclusion, because the investigation was “shrouded in secrecy,” and it was therefore impossible to determine whether the investigation or allegations arose out of or… Continue Reading

Tenth Circuit Holds that Implied Duty to Investigate and Initiate Settlement Negotiations Does Not Extend to Excess Insurer

Posted in Bad faith/duty to settle, Consent to settle/incur defense costs, Excess insurance/exhaustion
The United States Court of Appeals for the Tenth Circuit has held that while a primary insurer may owe its insured a duty to initiate settlement discussions under Oklahoma law, that duty does not extend to an excess insurer prior to exhaustion of the underlying coverage. SRM, Inc. v. Great Am. Ins. Co., No. 5:11-CV-01090-F… Continue Reading

Pennsylvania Supreme Court Adopts “Reasonableness” Standard for Enforcing Cooperation Provision When Insurer Breaches its “Duty to Settle”

Posted in Bad faith/duty to settle, Consent to settle/incur defense costs, Cooperation, Loss
The Pennsylvania Supreme Court has held that a group of insureds could recover from their insurers for a settlement that was “fair, reasonable and non-collusive” regardless of whether the insureds obtained the insurers’ consent as required by the policies and regardless of whether the insureds failed to show that the insurers acted in bad faith.… Continue Reading

Bad Faith Action To Go To Jury

Posted in Bad faith/duty to settle
A California federal court has denied cross-motions for summary judgment and held that issues of material fact remained as to whether an insurer should have settled a case for less than its policy limit and as to whether it filed an interpleader action in bad faith. Doublevision Entm’t, LLC v. Navigators Spec. Ins. Co., 2015… Continue Reading

Insurer Waived Right to Rescind Where Its Agents Knew of Facts that ‘Distinctly Implied’ Information on Policy Application Was Incorrect

Posted in Bad faith/duty to settle, Rescission
A federal district court has held that an insurer waived its right to rescind a policy based on material misrepresentations because at the time of the application for coverage, the insurer’s agents knew of facts that “distinctly implied” that the information provided by the insured was false or inaccurate.  Star Ins. Co. v. Sunwest Metals,… Continue Reading

Demand Within Limits Not Required for California Bad Faith Failure-to-Settle Liability

Posted in Bad faith/duty to settle, Consent to settle/incur defense costs
A federal court in California has denied an insurer’s motion to dismiss an insured’s bad faith failure-to-settle claim, holding that a demand within limits or other settlement opportunity within limits is not a prerequisite to bad faith liability.  Aspen Spec. Ins. Co. v. Willis Allen Real Estate, 2015 WL 3765008 (S.D. Cal. June 15, 2015).… Continue Reading

Eleventh Circuit Affirms Dismissal of Insured’s Complaint in “Consent to Settle” Case

Posted in Bad faith/duty to settle, Consent to settle/incur defense costs, Cooperation, Loss
The United States Court of Appeals for the Eleventh Circuit ruled in favor of Wiley Rein’s client, an insurer, when it affirmed the dismissal of a complaint filed by an insured seeking coverage for amounts paid to settle an underlying lawsuit and alleging bad faith on the grounds that the insured settled the underlying lawsuit… Continue Reading