Lawsuit Against Agent for Inadequate Insurance Limits

 The case of Barrick v. State Farm Mut. Auto. Ins. Co. and Jones, No. M2013-01773-COA-R3-CV (Tenn. Ct. App. June 27, 2014) first begins in 2008, when the Barrick family was sued after their minor son accidentally killed a motorcyclist in a tragic crash while driving his father’s car.  For over 20 years, the Barricks had been insured with State Farm through their insurance agent Thomas Jones. Unfortunately, however, at the time of the crash their policy limits for auto liability coverage was only $100,000 per person. The family of the deceased motorcyclist ultimately settled their lawsuit against the Barricks for a total sum of $200,000, with State Farm paying $100,000 and the Barricks paying the remaining $100,000 in excess of their policy limits.

Thereafter, the Barricks sued State Farm and their insurance agent, Mr. Jones, and asserted claims of negligence, negligent training and supervision (of Mr. Jones by State Farm), assumption of duty (because Mr. Jones had taken additional duties beyond those of an insurance agent by recommending and also selecting the Barricks’ insurance coverage limits), and violation of the Tennessee Consumer Protection Act (“TCPA”).  The trial court eventually dismissed all of the Barricks’ claims by granting State Farm’s and Mr. Jones’ motions for summary judgment, and the Barricks appealed.

On appeal, the Barrick court affirmed dismissal of the negligence claim, based on consideration of two undisputed facts: (1) that the Barricks had procured State Farm insurance through Mr. Jones for over 20 to 25 years, and (2) that the Barricks received copies of their insurance policies, declarations pages, and renewal notices during this time period. Relying on Tennessee precedent from Weiss v. State Farm Fire & Casualty Company, 107 S.W.3d 503, 506 (Tenn. Ct. App. 2001) – which holds that an agent’s duty ends when the agent obtains insurance for plaintiffs and properly provides copies, notices, and declarations – the Barrick court held that State Farm and Mr. Jones did not owe a duty to the Barricks and therefore could not be liable for negligence.

For the assumption of duty claim, the Barricks argued that Mr. Jones, their insurance agent, had assumed responsibility for selecting appropriate insurance coverage for the family by choosing the terms and limits of coverage on all policies during the time the Barricks bought insurance from him. Mr. and Mrs. Barrick each testified that they never selected the coverage or limits on their insurance policies, that they were never advised to increase their limits or to obtain an umbrella policy, and that had they been so advised they would have increased their limits or obtained an umbrella policy. As a result, the Barricks argued that they had a special relationship with Mr. Jones because Mr. Jones had assumed duties beyond those of an ordinary insurance agent thereby obligating him to select appropriate liability insurance and limits.

Significantly, after reviewing the Tennessee Supreme Court’s decision in Bennett v. Trevecca Nazerene Univ., 216 S.W.3d 293 (Tenn. 2007) – which held that “one who assumes to act, even though gratuitously, may thereby become subject to the duty of acting carefully” – the Barrick court held that the principle of assumption of duty applied to the case. Hence, if Mr. Jones regularly recommended and selected coverage for the Barricks, then he had a duty to do so with reasonable care.

Upon reconsidering State Farm’s and Mr. Jones’ burden on summary judgment under the Hannan standard, the Barrick court ruled that Defendants could not affirmatively negate an element of the Barricks’ remaining claims  nor could they show that the Barricks could not prove an element of the remaining claims at trial.  Therefore, the Barricks’ claims based on assumption of duty, vicarious liability, failure to supervise, and violation of the TCPA all survived and were remanded back to the trial court for further proceedings. 

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Truck Driver Left Vehicle and Loses Protection Under UM Coverage

 An over-the-road truck driver parked his truck on the shoulder of a road, got out, walked across a five-lane highway to a convenience store, purchased a soft drink and chewing tobacco, walked back across the highway towards his truck, but in the lane second-nearest the truck was struck by a vehicle which fled the scene.  The truck driver was injured and sough coverage under his employer’s uninsured motorist policy.  The UM carrier denied coverage and moved for summary judgment arguing that the truck driver was not entitled to coverage because he was not “occupying” a covered auto at the time of the accident.  The policy defined “occupying” as “in, upon, getting in, on, out or off” a covered auto.  The trial court granted summary judgment and the truck driver appealed.  The case is Beech v. John Doe, No. M2013-02496-COA-R2-CV (June 11, 2014).

            The issue on appeal was whether the truck driver was “upon” the truck at the time of the accident for purposes of uninsured motorist coverage.  The court of appeals found he was not and upheld the trial court’s grant of summary judgment.  The court of appeals looked at a number of other cases interpreting “upon.”  Most notably, the court looked to Tata v. Nichols, 848 S.W.2d 649 (Tenn. 1993) in which the Tennessee Supreme Court found that the term “upon” when used to define “occupying” for purposes of UM coverage is ambiguous.  The Supreme Court adopted four criteria for determining whether a person is “upon” a vehicle so as to “occupy” it:

(1) there is a causal relation or connection between the injury and use of the insured vehicle;

(2) the person asserting coverage must be in a reasonably close geographic proximity to the insured vehicle, although the person need not be actually touching it;

(3) the person must be vehicle oriented rather than highway or sidewalk oriented at the time; and

(4) the person must also be engaged in a transaction essential to the use of the vehicle at the time.

848 S.W.2d at 651-52.  These factors were initially set forth in the Pennsylvania case of Utica Mut. Ins. Co. v. Contrisciane, 504 Pa. 328, 473 A.2d 1005 (Pa. 1984) and are referred to as the “Utica test.” 

            Considering the Utica test and several other Tennessee cases applying the factors, the court of appeals found that, based on the facts stated above, the truck driver in Beech was not “upon” the insured vehicle when he was struck. 

Mr. Beech argued that there was a causal relationship between his injury and the insured truck because he was making a customary stop in an employer-owned vehicle.  The court was not persuaded instead finding that Mr. Beech was not operating the vehicle at the time of the injury and its use did not bring about his injuries.  Mr. Beech also argued that he was engaged in a transaction that was essential to the use of the truck because “[i]t is essential for truck drivers to have refreshments and comfort items on their trips” and federal law requires truck drivers to make stops on long trips.  The court was not persuaded by these arguments either because Mr. Beech had just begun the trip and was not at a point where federal law required him to take a break.  The court found that Mr. Beech had severed his relationship with the truck when he exited it to make a purchase and that he had not yet resumed his relationship when he was struck and injured.

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Tennessee Insurance Coverage Decision

 In Cleveland Custom Stone v. Acuity Mutual Insurance Company, No. E2013-02132-COA-R3-CV (June 10, 2014), the Tennessee Court of Appeals considered a myriad of issues in a case concerning an insurance company’s failure to pay insurance proceeds to the Plaintiffs for a building destroyed by fire. 

The business that owned the building sought to add insurance coverage for the building to the business’s existing insurance policy with Acuity when it purchased the building in 2007.  The business used USIG, an agent of Acuity, to procure the coverage.  USIG provided a certificate of insurance form at the closing of the sale of the building to the business.

Following the fire, Acuity denied payment and notified the business that it never had successfully added coverage for the building.  Acuity also alleged that the business owners intentionally set the fire. 

Following a jury trial, the jury found that USIG was Acuity’s agent, that the business had procured insurance coverage from Acuity, and that the business owners did not intentionally set the fire.  The jury awarded compensatory damages, but denied punitive damages despite finding that Acuity had violated the Tennessee Consumer Protection Act (TCPA). 

On appeal, the court considered several issues, with the two most interesting being (1) whether the trial court erred in denying Acuity’s motion for directed verdict and (2) whether the trial court erred in instructing the jury.

With regard to issue (1), Acuity asserted that it should have been granted directed verdict because USIG acted outside of its agency relationship with Acuity when it issued the certificate of insurance.  Acuity also argued that the business was barred from recovering because it failed to read the policy of insurance, and that the business failed to prove that it procured insurance coverage for the building.  Under the standard for directed verdict, the trial court must take the strongest legitimate view of the evidence in favor of the nonmoving party, allow all reasonable inferences in favor of that party, and discard all countervailing evidence and deny the motion if the party with the burden of proof has presented sufficient evidence to create a fact issue for the jury to decide.  Under this standard, the court of appeals upheld the trial court’s denial of directed verdict to Acuity pointing to testimony that plaintiffs desired to add coverage for the building and that plaintiffs believed they had procured such insurance.  The court also noted that under Allstate Ins. Co. v. Tarrant, 363 S.W.3d 508, 522 (Tenn. 2012), insureds are not required to search their policies in an effort to discover errors.  Lastly, the court found that the plaintiffs provided alibis for their whereabouts at the time of the fire and offered an explanation for the suspicious nature of the fire that a former employee may have caused it in retaliation for his termination.

With regard to issue (2), the trial court instructed the jury on Tenn. Code Ann. § 55-6-115(b), which provides, in relevant part, that:

An insurance producer who solicits or negotiates an application for insurance shall be regarded, in any controversy arising from the application for insurance or any policy issued in connection with the application between the insured or the insured’s beneficiary and the insurer, as the agent of the insurer and not the insured or insured’s beneficiary.

Acuity complained that the trial court instructed the jury on this statute because the case involved misrepresentations made in a certificate of insurance and not an erroneous application for insurance.  The court of appeals found that Acuity was mistaken in its position finding the case involved mistakes in each renewed policy following the business’s request for insurance coverage for the building. 

The court likened the case to Tarrant in which the insured instructed his insurance agent to place his business vans under his commercial insurance policy but instead the insurance agent mistakenly added the business vans to the insured’s personal policy.  After an accident involving one of the business vans, the insurance carrier refused to pay the claim under the commercial policy.  The Tennessee Supreme Court held that the insurance carrier was estopped to deny coverage under the commercial policy because the insurance carrier should bear the consequences of the agent’s mistake.  The Supreme Court cited Tenn. Code Ann. § 56-6-115(b) in reaching its holding and found that the insured had not ratified the agent’s mistake when the agent was acting for the insurance carrier and not for the insured. 

In the present case, the court of appeals found that the business owners relied on USIG to provide the coverage requested and that as a result of USIG’s mistake, the coverage was not provided.  Thus, the court found that the jury instruction was relevant and applicable.

Remember that the Tennessee Code was amended in the tort reform legislation of 2011 and no longer allows TCPA claims to be brought for actions involving insurance policies.  

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Insurance Agent: Professional or Salesperson?

The California Court of Appeals explored the issue of the responsibility of an insurance agent is the case of Williams v. Hilb, Rogal & Hobbs Ins. Services of California, Inc., 177 Cal.App.4th 624, 98 Cal.Rptr.3d 910 (2nd Dist. 2009).

Insurance agents like to argue that they do not have a duty to advise a client that it should procure additional or different insurance coverage. However, the Williams case makes it clear that  when an agent assumes additional duties by holding  himself out as an expert he can be held liable for not procuring appropriate coverage.

This just makes sense.  Most folks rely on their agent to tell them what coverage they need, particularly in the commercial insurance field, but also in the consumer area.   Agents are in a far better position than potential insureds to know what types and amounts of insurance coverage should be in place.  To be sure, the agent cannot force a client to buy any type of coverage (just like a lawyer cannot force a client to follow his or her advice or a doctor cannot force a patient to stick to a diet) but the notion that insurance agent's are nothing but salespeople is an outrage.

 

New Tennessee Law Blog

There is a new blog in town - the Tennessee Insurance Litigation Blog.  The blog is authored by Parks Chastain and Brandon McWherter.   Parks typically represents insurance companies and Brandon typically represents policyholders.

Great idea, gentlemen.  Good luck.

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Insurance Coverage Litigation?

In most states the duty to defend an insured in litigation is broader than the duty to indemnify that insured. 

Here is a 50-state survey prepared by the highly regarded Chicago-based firm of Hinshaw & Culbertson on the duty to defend.  Here is how they describe the 105-page publication:

Duty To Defend contains a survey of the law of the 50 United States and the District of Columbia on an insurer’s duty to defend a lawsuit against its insured and related topics. Each state entry includes a discussion of the scope of the duty to defend in that state and of the test employed by the state to determine whether the insurer owes such a duty. The state entries also include discussions of whether the insurer may defend pursuant to a reservation of rights and the implications of doing the same, including conflicts of interest which may be created; whether a declaratory judgment action may be brought to determine the insurer’s rights and obligations under the policy; and the consequences of the insurer’s failure to defend where it has an obligation to do so.

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Death of Drunken Driver Not "Accidental"

The United States Court of Appeals for the Fourth Circuit has ruled that a drunk driver's death was not "accidental" and therefore his surviving spouse could not collect accidental death benefits under an insurance policy.

The decedent's blood alcohol level was fifty percent higher than the legal limit when he ran into the rear of a tractor trailer parked eight feet off a West Virginia road.  It was, of course, 3:49 a.m.

His wife sought "accidental death benefits" from an insurance policy provided by the decedent's employer.  The policy provided coverage "if the insured dies 'due to an accident.'  The Plan defined 'accident' as 'an unexpected and sudden event which the insured does not  foresee.' The Plan also provided that "ReliaStar Life has final discretionary  authority to determine all questions of eligibility and status and to interpret and construe the terms of this policy(ies) of insurance."  ERISA governed this case.

The Court reviewed the law and the facts and said this:  "In sum, we are hard pressed to say that a death must be deemed accidental where a decedent voluntarily gets behind the wheel after  voluntarily drinking too much. By choosing to drive under circumstances where his vision, motor control, and judgment were likely to  be impaired, the insured placed himself and fellow motorists in  harm’s way. To characterize harm flowing from such behavior as merely "accidental" diminishes the personal responsibility that state laws and the rules of the road require. This case, in short, affords us no basis for concluding that ReliaStar’s denial of benefits was unreasonable."

The Court went on to say this:  "Finally, we emphasize the boundaries of our holding. We do not  suggest that plan administrators can routinely deny coverage to  insureds who engage in purely negligent conduct or, for example, to  anyone that speeds. In fact, accident insurance is often purchased to  cover negligence at its most typical: Insureds seek "protection from  their own miscalculations and misjudgments." Wickman, 908 F.2d at 1088 (citations omitted). In this regard, the district court’s comparison of those who drive drunk to those who apply lipstick, fiddle with the
radio dial, or restrain a child is inapt. See Eckelberry, 402 F.Supp. 2d at 712. While these actions are hardly commendable driving habits, they do not generally rise to the level of crimes. Indeed, even though acts like speeding and (in some jurisdictions) driving while talking on  a cellular phone are illegal, none compare to driving while drunk, which has long been "widely known and widely publicized" to be both illegal and highly dangerous."

The case is Eckelberry v. ReliaStar Life Insurance Company,  No. 06-1020 (4th Cir. Nov. 17, 2006).  Read the opinion here.

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Bad Faith Law Clarified

The Tennessee Supreme Court has issued an extremely important decision in the field of bad faith law.

In Johnson v. Tennessee Farmers Mutual Insurance Company, No. E2004-00250-SC-R11-CV  (August 28, 2006), Justice Holder, writing for an unanimous court, reversed the Court of Appeals and upheld a bad faith verdict against Tennessee Farmers.

Johnson sued his own insurer after he got hit for an excess judgment in an auto case.  A 2-1 decision of the Court of Appeals took away a plaintiff's verdict of $279,430.92 against Tennessee Farmers, saying that the trial judge had not charged the jury correctly on the law of bad faith.  Judge Lee dissented, saying the trial judge had gotten it right. 

The TSC approved these excerpts from the charge to the jury:

[a] mere mistake in judgment by the insurance company does not constitute quote “bad faith” end quote. Quote “bad faith” by the insurance company is, one, failure to investigate a claim to such an extent that it would be in a position to exercise honest judgment as to whether a claim should be settled, or two, failure to fairly consider the facts relative to the accident and a claimant’s injuries known to it whether they are the actual facts or not and deciding whether the insured should or should not settle, or three, failure of the insured [sic] with the right to control the litigation and settlement to fairly consider the rights and interest of the insured as compared to the interest of the insurance company.


[a] mere mistake in judgment will not constitute bad faith, that is, if the insurer dealt fairly with the insured and acted honestly and according to its best judgment, it is not liable as it owed its insured no duty to settle merely because a settlement could be made within the limits of the policy.


[i]f Tennessee Farmers made an honest judgment and fair investigation of the claim against Robert Johnson and exercised reasonable judgment based upon that investigation, then a mistake in judgment is not bad faith and will not render it liable for failure to settle the claim. There’s no duty to settle a claim merely because settlement could have been reached within the policy limits. If a failure to negotiate a settlement is a result of a reasonable business judgment made after weighing all of the interests, then there is no liability, even if the decision not to settle turns out to be quite wrong.

More importantly, the Court said what the law was not when it held that it was not error to refuse to give the following requested instructions:

Bad faith embraces more than bad judgment or negligence and it imports a dishonest purpose, moral obliquity, conscious wrongdoing, breach of a known duty through some ulterior motive or ill will partaking of the nature of fraud, and it embraces an actual intent to mislead or deceive another.

Bad faith on the part of an insurer is a frivolous or unfounded refusal to pay the proceeds of the insurance policy. Such conduct imports a dishonest purpose and means a breach of the duty of good faith and fair dealing through some motive of self-interest or ill will. Mere negligence or bad judgment is not bad faith.

Why was it not error to refuse to give these charges?  "We are aware of no Tennessee cases holding that an insured must prove dishonest purpose, moral obliquity, conscious wrongdoing, breach of a known duty through some ulterior motive or ill will 'partaking of the nature of fraud,' or an actual intent to mislead or deceive another to obtain a judgment for bad faith refusal to settle."

This is a must-read opinion.

It is respectfully suggested that the TSC is not suggesting that the quoted language from the charge must be given in every bad faith case.  The TSC approved the concepts in the charge, and held that (a) the charge as given was not erronous and (b) the language sought to be added to the charge by the defendant was not an accurate statement of the law. 

That being said, the charge includes redundant language that, in my opinion, need not and should not be given. Over time, a charge will be developed that concisely states these points of law. 

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Jurisdiction Exercised Over Foreign Manufacturer

The Illinois Appellate Court has ruled that Illinois courts have jurisdiction over a Japanese parent corporation in a case alleging negligent design.

Plaintiff alleged that her daughter died as a result of a fire started with a Aim 'n Flame II lighting rod. The lighting rod was designed by Tokai Corporatin in Japan and distributed by its wholly-owned subsidiary, Scripto-Tokai. The subsidiary admitted that Illinois courts had personal jurisdiction over it but the parent contested jurisdiction.

The Court put the issue and holding this way: "This case presents the question of whether a foreign corporation that designs a product can immunize itself from liability for negligent design by marketing the product through a subsidiary. We hold that it cannot. We find that the use of a subsidiary to introduce the product it designed to Illinois markets suffices for the exercise of personal jurisdiction over the foreign corporation for an action for negligent design."

The opinion does a great job summarizing the law in this area and collects cases from across the country. The decision is a great place to start your research if you face this question in your practice.

The case is SAIA v. SCRIPTO-TOKAI CORPORATION, Nos. 1-04-2609 and 1-04-2736 (Illinois App. Ct. May 26, 2006). Read the opinion here. I have occasionally had trouble getting good links to these opinions so if the link breaks here is a list of the May decisions of the court that you can use to find the opinion.

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Patient Wins Doctor's Case Against Insurance Company

This doctor got hit for an excess verdict in a medical malpractice case. He assigned the patient his bad faith claim against his insurer, alleging that it refused to settle the case within the policy limits and assigned him a lawyer with a conflict. The patient won compensatory and punitive damages. The case is Jurinko v. The Medical Protective Company, No. 03-CV-4053 (E.D. Pa. March 29, 2006).

The trial judge affirmed entry of judgment and issued the opinion including the following remarks:

"[Defendant] Medical Protective employee James Alff admitted that he knew that [the original defendant] Dr. Marcincin's exposure was in excess of $50,000, and yet he never offered more than $50,000.9 The jury also heard testimony that the [excess] CAT/MCARE fund had informed Medical Protective that their failure to tender was in bad faith and was undermining the settlement of the case. Alff admitted that Dr. Marcincin could not negotiate with funds from his $1 million secondary line of coverage (the CAT/MCARE fund) without tender of the full policy limits. Alff also admitted to unfair gamesmanship in his negotiating tactics, and attempting to get the CAT/MCARE fund to cover Dr. Marcincin's liability from Dr. Edelman's line of coverage in order to save Medical Protective money. The evidence demonstrated that both Alff and Jacqueline Busterna, who was negotiating for the CAT/MCARE fund, believed the case would settle for around $1 million. From the evidence presented, it was also possible for the jury to conclude that the Jurinkos would have been offered approximately $1 million had Medical Protective tendered its policy, even if the CAT/MCARE fund had not offered any money from Dr. Marcincin's $1 million line of secondary insurance. Overall, the Court finds sufficient evidence for the jury to find bad faith.

The jury also received sufficient evidence to find that Medical Protective acted in bad faith when it assigned Kilcoyne to defend both Dr. Marcincin and Dr. Edelman, thereby creating a conflict of interest that would affect and undermine Kilcoyne's representation of Dr. Marcincin throughout the malpractice litigation. Alff testified that Medical Protective made this assignment fully aware that it was unethical and would create a conflict of interest, and that it did so to save money. There was also sufficient evidence for the jury to find that this bad faith action deprived Dr. Marcincin of his ability to vigorously assert his best defense (the liability of Dr. Edelman) and thereby caused the excess jury verdict against Dr. Marcincin alone in the underlying litigation." [Footnotes omitted.]

On the issue of punitive damages:

"Third, the Court finds that the harm was the result of intentional conduct, and not mere accident. Alff testified that he knowingly appointed a single lawyer to represent Drs. Marcincin and Edelman, although hewas aware that this posed a conflict of interest, for the financial benefit of his employer. Alff also testified that he intentionally failed to tender Dr. Marcincin's policy during settlement negotiations, because he wanted the CAT/MCARE fund to paymore from Dr. Edelman's policy. He testified that he knew that such negotiating tactics were unfair, but engaged in them nevertheless, in an attempt to save his employer money. In other words, he was "intentionally stonewalling" during the negotiating process."

A very interesting opinion, especially given the fact that our supreme court is looking at the issue of defining the tort of bad faith as we speak.

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Supreme Court Takes "Bad Faith" Case

The Tennessee Supreme Court has granted a Rule 11 application in Johnson v. Tennessee Farmers Mutual Ins. Co. With this case, the Tennessee Supreme Court will decide whether the tort of "bad faith" exists is Tennessee.

Judge Inman's decision in this case renders the tort virtually meaningless. It requires almost intentional conduct to give rise to liability.

Judge Lee's dissent says that the law of Tennessee is (and should be) that bad faith may be found if the jury determines from a consideration of all relevant factors that good faith was absent. She would not require proof of fraud or dishonesty.

Expect a decision in the Spring of 2006.

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New Blog

I came upon a new blog - Insurance Scrawl - written by Marc Mayerson in D.C.

Here is how Marc describes the purpose of the blog:

"Insurance Scrawl focuses on the law of insurance, the insurance of business, and the business of insurance. It is the first insurance blog (or insurance blawg) that approaches these issues from the perspective of policyholders. The principal focus is on commercial property-casualty matters (and not life/health/disability/auto or the insurance needs of individuals). The goals of this weblog are to provide current updates, with links to source materials, on matters about which well-informed professionals should be aware and to share my perspective and knowledge about insurance-coverage issues. In-house lawyers, risk managers, brokers, outside counsel, insurance-company and reinsurance professionals, adjusters, professors, law students, and judges are the intended audience. Although Insurance Scrawl approaches the subject from a particular vantage point, readers should find the articles to be more analytical than polemical."

I read several of the posts and it seems to me that this blog is a good resource for those of us who do insurance coverage litigation.

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Family Exclusion Held Valid

The Tennessee Supreme Court has ruled that the "family exclusion" that exists in every motor vehicle insurance policy I have ever seen is not void as against Tennessee law or public policy. The case came before the Court on a certified question from a federal district court in East Tennessee.

Applications for Insurance Coverage

Have you ever got the feeling that the insurance company trying to sell you life insurance did not want you to tell the truth? Have you ever had an agent say "you don't have to put that down?"

The questions on many applications are very difficult to understand. For instance, "Do you smoke?" I don't consider myself a smoker in any shape, form or fashion, and no other sane person would. ( I have plenty of other vices, to be sure, but not this one.)

Nevertheless, I made the mistake of answering that question "Yes" 6 years ago because 2 or 3 times a year I used to smoke a cigar with the guys. I use the term "smoke" lightly - it would be more accurate to say that I allowed the cigar to burn between the index and middle finger of my hand while using my right hand to raise a Bombay Saffire on the rocks (two olives) to my parched lips.

My candor raised the premium on my policy dramatically - and I learned a lesson. No - not a lesson to lie - a lesson that smoking an occasionally stoggie with my brothers or friends was not worth $12.87 per uninhaled puff.

Here is a decision about a woman who died of breast cancer. When her husband tried to collect on her life insurance policy, the insurance company denied the claim, saying that she had lied about her smoking history. The California Supreme Court does a great job explaining why there was a genuine issue of material fact and remanded the case for trial.

Be careful out there.

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Discovery in Bad Faith Cases

The Florida Supreme Court recently held that a person bringing a first-party bad faith action against an insurance company has the right to discover all materials contained in the underlying insurance claim and related litigation file. Read the decision by clicking here.

In this type of case there is always a big fight over whether certain materials are protected by the work product privilege. Insurers attempt to invoke the doctrine. Plaintiffs seek the documents, saying that the information in such documents is directly relevant to resolution of the issue of whether bad faith was committed. In Florida, full discovery has traditionally been permitted in third-party claims but the law on first party claims was not as generous. This law opens up discovery in first party bad faith cases.

Florida has a well-developed body of bad faith law. This decision substantially changes the law of discovery in those cases and will greatly impact the law on this subject around the nation.

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Bad Faith Action Survives

We have all seen it too many times. Your client has legitimate medical expenses well in excess of policy limits. Liability is not clear but will go to the jury. The defendant's insurer refuses to settle the case for policy limits.

That happened to defendant Johnson. His insurance company refused to settle an action against him. His $25,000/$50,000 in policy limits were to be of little help paying a judgment of $193,750. He sued his insurance company for bad faith failure to settle the case, and a jury agreed.

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