The United States District Court for the District of Minnesota in Selective Insurance Company of South Carolina v. Sela,1 recently addressed whether the implied covenant of good faith includes a broader obligation to act “reasonably” and “properly” in making a decision about whether to pay benefits. Sela had submitted a claim for hail damage to his home. Selective investigated the claim and filed suit alleging that Sela made fraudulent misrepresentations and was not entitled to coverage. Sela counterclaimed for breach of contract, breach of the implied covenant of good faith and fair dealing, and bad faith, pursuant to Minn. Stat. §604.18.
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When an insurance company issues a policy, it is promising to adjust claims with the same care and diligence it would use if it were their own claim.1 Florida provides that insurers owe “a duty to their insureds to refrain from acting solely on the basis of their own interest in settlement.”2 In essence, the insurance company owe a duty to its insureds to abide by the golden rule; do unto others as you would have others do unto you.
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I often get calls from potential clients that have filed a claim with their insurance and have been enraged by an insurance agent or adjuster assigned on the claim. Many potential clients say something like “I just wanted to get the claim settled but the adjuster was acting in bad faith and just wouldn’t listen.” Most states have some case law or consumer protection laws that apply to an insurance company, but not all apply to the insurance personnel you deal with. The Supreme Court of Washington will soon decide this issue for members of the Evergreen State.
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In a recent op-ed article published in the Star Ledger, Rutgers Law Professor Jay Feinman debunked the myth that insurance companies have been using for decades to prevent good faith claims handling bills from passing through the legislature. As Feinman noted, insurance companies argue that the Insurance Fair Conduct Act (IFCA) is unnecessary and would be harmful, suggesting the bill would dramatically raise insurance premiums.
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On July 5, 2017, the Second Department gave a very meaningful win for insureds. In McBride v. New York Property Insurance Underwriting Association,1 Nor’easter Nemo struck the insured’s home causing a failure of the electrical system. The failure of the electrical system caused water pipes in the home to burst, causing water damage. New York Property Insurance Association (NYPIUA) denied the claim in its entirety.
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When it comes to commercial losses, taking the time to view the policy and figure out the applicable laws of the controlling state are necessary. However, sometimes, the basics are forgotten by even the insurance carrier. In an ideal world, losses are cut and dry but the reality is that almost every detail is up for interpretation of some sort. In a commercial loss, often more than one insurance policy kicks in when there is a landlord and tenant situation. The basic rule of thumb is that the landlord’s policy usually covers the real property loss while the tenant’s business personal property is covered under the tenant’s own business policy. However, often these lines are blurred and not definite. In order to determine coverage, both insurers will often request a copy of the lease to decipher whose policy covers what items destroyed.


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In a recent case in Tennessee, homeowners suffered a fire loss and filed a claim with their insurance company, Anpac.1 The insurance company investigated the loss and found that the homeowners intentionally set the fire and denied coverage. It then filed a declaratory judgment action. The homeowners filed counterclaims for breach of contract, unfair claims practices and bad faith. They alleged that the insurance company ignored evidence that showed they did not set the fire. In Tennessee, a statute allows insureds to seek a penalty of up to 25% of the total liability where a claim is denied in bad faith.2 When an insurance company refuses to pay a claim within 60 days of a demand, it must pay an additional 25% if the refusal was not in good faith and caused the insureds additional damages.

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Many of you are likely aware of the Florida Supreme Court decision holding a cause of action for good faith and fair dealing is not recognized in Florida.1 Despite the Chalfonte decision, good faith and fair dealing came up a fair bit in a recently settled case I litigated for approximately two years. In that case, the carrier sued the policyholder, claiming, among other things, coverage was not owed due to the policyholder’s purported lack of cooperation. The court properly kept my good faith and fair dealing affirmative defense at play, despite Chalfonte.


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