Bad Faith

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Under New Jersey law, an insurer cannot be held liable for bad faith in denying an insurance claim if the claim is “fairly debatable.” Therefore, unless a plaintiff can establish a right to summary judgment on the underlying cause of action for breach of contract, the coverage denial is considered “fairly debatable” and the court must dismiss the bad faith claim. See Pickett v. Lloyd’s, 131 N.J. 457, 473 (1993); Tarsio v. Provident Ins. Co., 108 F. Supp. 2d 397, 401 (D.N.J. 2000).…
Continue Reading District of New Jersey Finds Post-Denial Communications By Insurer’s Counsel Insufficient to Sustain Bad Faith Claim

The terms and conditions of the Standard Flood Insurance Policy (“SFIP”) are specified by regulations promulgated under the National Flood Insurance Act (“NFIA”). One of the terms in the SFIP provides that the insured cannot sue the flood carrier unless the insured has complied with all requirements of the policy and the insured must “start the suit within one year after the date of the written denial of all or part of the claim, and . . . file the suit in the United States District Court of the district in which the covered property was located at the time of the loss.”

The Fourth Circuit recently determined that an SFIP insured is time barred from filing suit if the date that the suit was filed in federal court is more than the allowable year specified in the SFIP even if the insured filed an action in state court within the one-year period. Woodson v. Allstate Ins. Co., Docket No. 16-1935 (May 3, 2017). In Woodson, the insureds suffered damages to their home as a result of Hurricane Irene, and submitted a claim to Allstate for flood damages pursuant to their SFIP.  Allstate denied the Woodsons’ claim for flood damage on February 28, 2012, and the Woodsons filed suit in in state court on February 27, 2013 alleging breach of contract, and violation of the North Carolina Unfair and Deceptive Trade Practices Act.…
Continue Reading Suit Limitation Period In Standard Flood Insurance Policy Is Not Tolled By Filing In State Court: Hurricane Irene Claim Dismissed By Fourth Circuit

As we have written about before on this blog, the water damage caused by Hurricane Sandy in October 2012 gave rise to important questions concerning the applicability of so-called “anti-concurrent causation” clauses. Such was the case in the recently-decided matter of Carevel, LLC v. Aspen American Ins. Co., 2016 U.S. Dist. LEXIS 157919 (D.N.J. Nov. 15, 2016).

In Carevel, the insured’s building in Jersey City, New Jersey suffered interior water damage during Hurricane Sandy. The relevant insurance policy excluded damage caused by flood. The flood exclusion included an anti-concurrent causation preamble with the familiar language excluding flood damage “regardless of any other cause or event that contributes concurrently or in any sequence to the loss.” Importantly for the legal issues raised in this case, the policy did cover, via endorsement, damage caused by water that backed up through sewers or drains. Following an investigation into the loss, Aspen obtained a report indicating that the interior water damage was caused by street-level flooding that had infiltrated the building during the storm. Aspen denied the claim based on the flood exclusion. The insured filed suit, claiming that the damage was caused by water that had entered the building through the basement’s sewers or drains.…
Continue Reading Hurricane Sandy, Flood, and Sewer Backup: New Jersey Federal Court Confirms Anti-Concurrent Causation Bars Insured’s Claim

In Johnson v. Omega Ins. Co., 2016 Fla. LEXIS 2148 (Sept. 29, 2016), the Florida Supreme Court determined that the 5th DCA misapplied and misinterpreted two statutes, the first providing a presumption of correctness to the initial report of an engineer retained by an insurer to investigate a sinkhole claim, and the second providing for the award of attorney’s fees to the insured upon prevailing in litigation.

In Omega, Kathy Johnson’s homeowner’s policy included statutorily mandated sinkhole coverage. In 2010, she filed a claim with Omega to recover for damages she believed were due to sinkhole activity.  In accordance with the statutory framework commonly known as the “sinkhole statutes,” Omega selected an engineer to provide an initial sinkhole investigation. That investigation revealed no sinkhole activity, and Omega denied Johnson’s claim. Under Fla. Stat. § 627.7073(1)(c), the engineer’s findings and recommendations are afforded a statutory presumption of correctness.…
Continue Reading Florida Sinkhole Statute and Recovery of Attorneys’ Fees Without Bad Faith: Florida Supreme Court Reverses the 5th DCA and Reiterates Prior Holdings

As Superstorm Sandy insurance claims wend their way through the courts, we are beginning to see decisions related to motions on the pleadings, especially with regard to extracontractual claims. The first such decision in the New Jersey federal courts that we are aware of was recently issued in Beekman v. Excelsior Insurance Company and Peerless …

The Connecticut Supreme Court’s recent decision reaffirming that a CUTPA claim against an insurance company (or agent or broker) must be strictly limited to alleging improper practices that are in violation of CUIPA will be particularly helpful to insurers in defending lawsuits asserting unfair trade practice and other bad faith claims. State of Connecticut v. …

The California Supreme Court recently issued a significant decision regarding the applicability of that state’s Unfair Competition Law (UCL) to the insurance industry, allowing certain types of such claims to be brought against insurers, potentially expanding insurers’ extra-contractual liability in that jurisdiction. On August 1, 2013, in Zhang v. The Superior Court Of San Bernardino …

In insurance fraud cases involving actual or alleged destruction of evidence by the insured, an issue often arises regarding whether an adverse inference instruction is appropriate, and, if so, what form it should take. The Second Circuit recently approved a “light” form of adverse inference instruction that allowed the jury to make an adverse inference…

Significant attention has been given in the media to the New York Assembly’s recent passage of several bills, apparently motivated by Storm Sandy, that would impact property insurance claim handling and litigation. None of these bills have been passed by the state senate yet, or signed by the governor. Some of them have been inaccurately…

In Florida, bad-faith actions against insurers pursuant to Section 624.155 cannot be brought until (1) the insured files a civil remedy notice (CRN) accepted by Florida’s Department of Financial Services; and (2) the underlying breach of contract lawsuit is “resolved in the insured’s favor.” See Blanchard v. State Farm Mut. Ins. Co., 575 So.…