Badfaithadvisor.com Launches Best Claims Practices and Bad Faith Avoidance Training and Continuing Education

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Badfaithadvisor.com has launched both online and onsite continuing education services at no cost to insurers and other related businesses.  For more information on the benefits and options of this no- cost training and continuing education service, click here.

NY: No Coverage For Negligent Handling of Electronic Data

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NEW YORK, Feb. 18 – A New York  intermediate appellate court ruled on Feb. 18 that claims against an insured for the alleged negligent handling of the electronic data of customers were  not covered.

In RVST Holdings v. Main Street America Assurance Co., the  liability policy in question provided for defense and indemnity to RVST for liability arising out of direct physical loss to tangible property.  The policy, however, excluded losses relating to electronic data.  The intermediate appellate court, giving the language in question its plain meaning, ruled that the insurer did not have a duty to defend or indemnify  RVST from claims relating to RVST’s alleged negligent handling of electronic data.

RVST Holdings, Inc. v. Main Street America Assurance Co.,(N.Y. App. 3rd Dept., Feb. 18, 2016)

Tender of Limits Does Not Moot Jury Valuation of UM/UIM Claim, Florida Supreme Court Rules

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TALAHASSEE, Feb. 25 – The Florida Supreme Court in a 5-2 decision  has ruled that a UM/UIM insured is entitled to a trial on underlying liability and damages before proceeding to litigate a bad faith claim, and that such a right is not mooted by the insurer’s tender of policy limits.

In Fridman v. Safeco Insurance Company of Illinois, the Supreme Court of Florida reversed a trial court ruling which vacated a $1,000.000 verdict in favor of the insured.  The trial court reasoned that Safeco’s pre-verdict tender of the policy’s  $50,000 UM/UIM limit mooted litigation of the UM/UIM claim.

After largely unproductive settlement negotiations, in February 2011, about 30 days before Fridman’s UM/UIM claim against Safeco was to be tried, Safeco tendered its $50,000 policy limit to Fridman.  The tender came more than four years after the underlying automobile accident, and more than a year after the plaintiff demanded the policy limits from Safeco.

Fridman twice refused accepting the tender, and Safeco moved to confess judgment in the amount of the policy  limits, which was denied by the trial court.  At the trial of the UM/UIM claim, the jury awarded Fridman $1,000,000, but an intermediate appeals court ruled that the judgment should be amended to omit any reference to the verdict, or to the trial court retaining jurisdiction to entertain a follow – on bad faith claim arising out of the excess verdict.

In reversing the Fifth District Court of Appeals, the Florida Supreme Court revewed a long line of decisions holding that the insured retained the right to litigate underlying liability a damages as a prerequisite to a bad faith proceeding against the insurer, because such items were required elements of proof in a bad faith proceeding in Florida.  Justice Barbara Pariente wrote:

Certainly, the insured is not obligated to obtain the determination of liability and the full extent of his or her damages through a trial and may utilize other means of doing so, such as an agreed settlement, arbitration, or stipulation before initiating a bad faith cause of action. See, e.g., Dadeland Depot, Inc. v. St. Paul Fire & Marine Ins. Co., 945 So. 2d 1216, 1234-35 (Fla. 2006). But the availability of other alternatives does not change the insured’s entitlement to a determination of liability and the full extent of damages in the first instance. Therefore, for all these reasons, we conclude that an insured is entitled to a determination of liability and the full extent of his or her damages in the UM case prior to filing a first-party bad faith action.

 

The Court went on to hold that these underlying determinations of liability and damages in a UM/UIM proceeding were subsequently binding upon the insurer provided the insurer had a full and fair opportunity to offer defense on those items in the UM/UIM proceeding.

We conclude that an insured is entitled to a jury determination of liability and the full extent of his or her damages, which may be in excess of the policy limits, in the underlying UM case, prior to litigating a first-party bad faith cause of action. This determination is then binding in the subsequent bad faith action, provided the parties have had the opportunity for appellate review of any trial errors that were timely raised. An approach such as the one taken by the trial court in this case—that is, going forward with the trial, including the verdict amount in the final judgment, and reserving jurisdiction to consider a motion to amend to add the bad faith cause of action—appropriately addresses how the parties can review that jury determination of the extent of the damages for error prior to it being used in the subsequent bad faith litigation as an element of damages.

 

The Supreme Court quashed the ruling of the Fifth District Court of Appeals and remanded the case for further proceedings.

Fridman v. Safeco Insurance Company of Illinois (Fla., Feb. 25, 2016)

Unfair Trade Claims Not Covered By Liability Insurance, Pa. Appeals Court Rules

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PITTSBURGH, Feb. 25 – The Pennsylvania Superior Court has ruled that Westfield Insurance is not obligated to defend or indemnify an insured from civil claims of unfair trade practices.

Westfield’s insured, PeopleKeys,  sued a former employee for misappropriation of trade secrets in federal court in Ohio, and the employee filed a counterclaim against PeopleKeys, alleging unfair business competition.  The counterclaim alleged that PeopleKeys’ suit was baseless, and done for the purposes of unfair competition with the former employee.  The counterclaim against PeopleKeys alleged PeopleKeys’ knew of the falsity of the allegations contained in the Ohio trade secrets litigation.  PeopleKeys submitted the counterclaim for defense and indemnity to its insurer, Westfield.

After Westfield denied coverage under the policy’s  Personal Advertising Injury Coverage Endorsement, PeopleKeys filed a breach of contract and bad faith suit against Westfield in Pennsylvania state court.  Westfield filed a motion for judgment on the pleadings, on grounds that the policy’s Personal Advertising Injury Endorsement did not apply to the Ohio counterclaim, and even if it did, the endorsement contained exclusions for 1.)  claims alleging knowing violation of the rights of another, or 2.)  claims for publication of material the insured knew to be false.  The trial court granted the motion and dismissed the claims against Westfield.

The Pa. Superior Court affirmed the trial court’s grant of Westfield’s motion for judgment on the pleadings, holding that Westfield had no duty to defend nor indemnify PeopleKeys in the Ohio litigation because the intentional conduct and knowing falsity exclusions to the Personal Advertising Injury Endorsement applied.  The Court, analyzing the counterclaim against Westfield under Ohio law, found that the allegations against Westfield plainly referred to intentional misconduct on the part of PeopleKeys, thereby barring coverage.

PeopleKeys, Inc. v. Westfield Insurance Company (Pa. Super., Feb. 25, 2016)