Executive Summary Blog

Executive Summary Blog

Legal developments affecting professional liability insurers

Category Archives: Bad faith/duty to settle

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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

Bad Faith Claim Fails Absent Breach of Contract or Failure to Settle

Posted in Bad faith/duty to settle, Related Claims and associated exclusions
In an unpublished decision applying Illinois law, a federal court has held that a bad faith claim must be dismissed where the complaint alleged neither a breach of the insurance policy nor a failure to negotiate settlement in good faith. Cushman & Wakefield, Inc. v. Illinois Nat’l Ins. Co., 2015 WL 2259647 (N.D. Ill. May… Continue Reading

Louisiana Supreme Court Holds Settlement Demand Not Prerequisite for Bad Faith Failure-to-Settle Liability

Posted in Bad faith/duty to settle
The Supreme Court of Louisiana has ruled that an insurer can be found liable for a bad faith failure-to-settle claim even absent a firm settlement demand. Kelly v. State Farm Fire & Cas. Co., No. 2014-CQ-1921 (La. May 5, 2015). The court stated, however, that its holding did not impose a bright-line rule requiring insurers… Continue Reading

Indiana High Court Holds Settlement of Managed Care Organization Multi-District Litigation Is Covered under E&O Policies

Posted in Bad faith/duty to settle, Dishonesty Exclusion, Loss, Professional Services, Public Policy prohibition on insurance
The Indiana Supreme Court, applying Indiana law, has held that the settlement of a multi-district litigation, which alleged that the insured managed care organization had engaged in a scheme of systematically failing to pay claims by medical providers in full and in a timely manner, fell within the insuring agreement of the organization’s E&O policy… Continue Reading

Prejudice Irrelevant to Late Notice Where Timely Notice Is Condition Precedent

Posted in Bad faith/duty to settle, Notice of Claim
Applying Minnesota law, the Court of Appeals of Minnesota has held that, where timely notice is a condition precedent for coverage under a claims-made-and-reported policy, an insurer need not demonstrate actual prejudice to disclaim coverage. Michaels v. First USA Title, LLC, 2015 WL 1514018 (Minn. Ct. App. Apr. 6, 2015).… Continue Reading

Georgia Supreme Court Unanimously Holds That Insured Cannot Sue Insurer for Amounts Paid to Settle Claim Without Insurer’s Consent

Posted in Bad faith/duty to settle, Consent to settle/incur defense costs, Cooperation, Loss
The Supreme Court of Georgia has held unanimously that an insured’s complaint against its insurer seeking coverage for amounts paid to settle an underlying lawsuit and alleging bad faith was properly dismissed because the insured settled the underlying lawsuit without its insurer’s consent. Piedmont Office Realty Trust, Inc. v. XL Spec. Ins. Co., No. S15Q0418… Continue Reading

Insurer Not Liable for Bad Faith in Absence of Special Relationship with Insured or Unreasonable Denial of Coverage

Posted in Bad faith/duty to settle, Insured v. Insured Exclusion
Applying Oregon law that allows bad faith tort claims “only if the insurer is subject to a standard of care that is independent of the insurance policy itself,” an Oregon federal court has granted summary judgment to an insurer, holding that there was no special relationship between the insurer and the insured where the insurer… Continue Reading

Contract Exclusion Does Not Bar Coverage for Intentional Misrepresentations During Pre-Contract Negotiations

Posted in Allocation, Bad faith/duty to settle, Breach of Contract – coverage for amounts due pursuant to contract, exclusions, Dishonesty Exclusion
The United States District Court for the District of Rhode Island, applying Rhode Island law, has held that a contract exclusion did not bar coverage for a jury verdict holding in part that the insured’s intentional misrepresentations had induced the claimant to enter into a disputed contract.  TranSched Sys. Ltd. v. Fed. Ins. Co., 2014… Continue Reading

Criminal Indictment Constitutes Related Claim to Letter from State Attorney General

Posted in “Claim”, Bad faith/duty to settle, Related Claims and associated exclusions
Applying New York law, the United States District Court for the Eastern District of New York has held that a criminal indictment constituted a related claim to a letter from a state attorney general to the insured.  Weaver v. AXIS Ins. Co., 2014 WL 5500667 (E.D.N.Y. Oct. 30, 2014).  In addition, the court held that… Continue Reading

Broadly Worded Securities Exclusion Does Not Unambiguously Bar Coverage for ERISA Lawsuits

Posted in Bad faith/duty to settle, Fiduciary Liability/ERISA
Applying Nevada law, a federal district court has held that a broadly worded securities exclusion does not unambiguously bar coverage for underlying Employee Retirement Income Security Act (ERISA) lawsuits alleging that the insured company breached its fiduciary duties by failing to explain the risks associated with investing in the company via an employee retirement plan. … Continue Reading

Primary Insurer’s Bad Faith Refusal to Settle Within Primary Limits Not Actionable Where Excess Insurer Could Not Prove It Would Have Accepted the Offer

Posted in Bad faith/duty to settle, Excess insurance/exhaustion
The U.S. Court of Appeals for the Eleventh Circuit, applying Florida law, has held that an excess insurer could not prevail against a primary insurer for bad faith failure to settle when there was no evidence that the excess insurer would have agreed to the proposed settlement.  Westchester Fire Ins. Co. v. Mid-Continent Cas. Co.,… Continue Reading

Podcast: What Insurers Should Know About Bad Faith Claims in Florida

Posted in “Claim”, Bad faith/duty to settle
“The most troubling claims of bad faith in Florida tend to involve allegations that the insurer failed to settle a claim against its insured when a reasonably prudent insurer who was acting in the best interest of the insured would have done so,” Charlie Lemley, partner in Wiley Rein’s Insurance Practice. I recently had the opportunity… Continue Reading

No Summary Judgment for Insurer Regarding Claims for Punitive Damages and Emotional Distress Arising After Insureds’ Initial Claim

Posted in Bad faith/duty to settle
A West Virginia federal court, applying West Virginia law, has held that triable issues of fact existed with respect to insureds’ claims for punitive damages and emotional distress after an insurer admitted that it had intentionally ignored the insureds’ claim for coverage and failed to take necessary steps in handling that claim.  Bordas v. ALPS Corp.,… Continue Reading