I will be focusing my next month of blogging on how to prove and win a first-party bad faith case in Colorado. In proving a bad faith case, the first source I look to is the Colorado Revised Statutes, specifically, C.R.S. §§10-3-1113 (Trier of Fact in Civil Actions) and 10-3-1104 (Unfair Methods of Competition–Unfair or Deceptive Acts or Practices).
Most policyholder advocates have made it up to New Jersey or another jurisdiction affected by Superstorm Sandy over the last year. Recently, I was in Atlantic City fighting over coverage for one of my clients whose carrier truly missed the boat. The purpose of the visit was to allow the carrier the opportunity to have its engineers inspect the property, something the carrier should have done months ago when my clients’s public adjuster provided an estimate that exceeded the carrier’s payment. My consultants and I sat quietly during the first hour of the inspection. As the carrier’s consultants began to leave the 4,500 square foot building, I asked a few simple questions.
Insurance companies cannot escape bad faith liability by asserting the “Advice Of Counsel” defense. Although the defense exists, it is not an affirmative defense, and is not a complete defense to bad faith.
Several weeks ago, I analyzed the Defense Bar’s latest attempt to increase the costs of litigation for policyholders. In my December 13, 2012, post, Winning a Discovery Battle in Bad Faith and C.R.S. 10-3-1115 Cases Against Insurers, I noted the Colorado Defense Bar’s latest litigation tactic—attempting to designate nonparties at fault and apportioning damages resulting from the insurer’s bad faith onto other nonparties such as vendors, contractors, or public adjusters.
Many policyholders were unable to get through to their insurers in the wake of Super-Storm Sandy, while others’ claims have been denied by insurers that never even sent a representative to the damaged property. Is it unreasonable for insurers to handle claims in that fashion, and does your property insurer owe you a duty of good faith in processing your Super-Storm Sandy claim? What are the consequences for an insurer’s unfulfilled promises?
The history and development of the Duty of Good Faith and Fair Dealing insurers owe to its own insured has evolved in California since the beginning of the 1970s. Generally, with every contract, the obligations of good faith and fair dealing are not delineated in the contract itself, but are "…imposed by law governing the manner in which the contractual obligations must be discharged-fairly in good faith."1
Following the Ninth Circuit Court of Appeal’s recent decision in Du v. Allstate Insurance Company,1 California insurers are going to have to become much more proactive in handling claims. In short, the Court held that an insurer has a duty to effectuate settlement where liability is reasonably clear, even in the absence of a settlement demand.
Generally speaking, when talking about bad faith claims in California, it involves unreasonable delay or withholding benefits to the insured. In most instances when an insurance carrier fully and promptly pays the benefits due to an insured, a bad faith claim is not viable. Even if the insurance adjuster’s conduct is hostile or over the top, in the absence of an unreasonable delay or withholding of benefit, case law indicates that no breach of contract or breach of the implied covenant of good faith and fair dealing exists. See Delgado v. Heritage Life Ins. Co.(1984) 157 Cal. App. 3d 262.
An insurer’s duty of good faith and fair dealing to its insured continues even after litigation is filed against the insurer. Colorado recognizes that an insurer’s litigation tactics may be considered by the jury in determining unreasonableness and punitive damages. See Tait ex rel. Tait v. Hartford Underwriters Ins. Co., 49 P.3d 337 (2001) (trial court increased punitive damages because during litigation the insurer committed discovery violations and delegated to counsel many of its continuing obligations to the insured despite insurer’s ongoing duty to insured pursuant to Southerland v. Argonaut Insurance Co., 794 P.2d 1102 (Colo. App. 1990); Dale v. Guaranty National Insurance Co., 948 P.2d 545 (Colo. 1997) (an insurer’s conduct even after an arbitration proceeding is relevant to a claim of bad faith breach of an insurance contract); and Coors v. Security Life of Denver Ins. Co., 112 P.3d 59 (2005) (Supreme Court upheld punitive damages award because insurer’s bad faith conduct continued after the lawsuit was filed).
Earlier this month, I wrote about a few cases where insurance company motions for summary judgment failed. This week, I am writing about another. Although I prefer to write about reported appellate opinions, the state trial court opinion in Carden v. Allstate Insurance Company, issued by New York’s Supreme Court in Westchester County in December 2010, is of interest to policyholders both in New York and elsewhere.