Cyber Liability Insurance Bad Faith Suit Trimmed In Utah

A U.S. District Court Judge in Utah has granted partial summary judgment in favor of Travelers Insurance in a bad faith suit involving a Cyber Liability insurance policy.  U.S. District Judge Ted Stewart of Utah has dismissed portions of a bad faith suit against Travelers, ruling that it has no duty to defend or indemnify its insured, Federal Recovery, in an underlying data breach lawsuit.  The Court found that Travelers’ coverage position was “fairly debatable,” and therefore that the position it took cannot, as a matter  of law, be found to have been taken in bad faith.

The Court denied Traveler’s motion to dismiss that portion of the suit against it relating to Traveler’s intake and handling of the claim, however.  The insured claims that Travelers breached its duty of good faith and fair dealing in allegedly misleading its insured to delay the filing of the claim until it received formal suit papers.   The Court also found there were factual issues relating to whether Travelers  diligently investigated, evaluated, and communicated about the claim to its insured, and denied Travelers’ summary judgment motion as to those claims also.

The Takeaway:   This decision is a textbook example of a jurisdiction in which having a reasonable position to deny coverage to an insured is not the end of the bad faith analysis.  Claims handling (the means), separate and apart from the claims decision (the end), is subject to bad faith scrutiny under this jurisdiction’s bad faith law.  Best claims practices, therefore, should facilitate proper claims decisions being made in conjunction with proper claims handling, from initial intake to final coverage decision.

Travelers v. Fed. Recovery Services (D. Utah 2016)

3rd Circuit Affirms Denial of Remand Motion, Upholds UM/UIM Waiver

In Lieb v. Allstate, the 3rd Circuit Court of Appeals affirmed district court rulings 1.) denying the insured’s remand motion after Allstate removed the case from state court; and 2.) affirming dismissal of breach of contract claims under an automobile insurance policy, finding the insured’s waiver of UM/UIM coverage to be valid under the Pa.M.V.F.R.L.

The district court properly looked to  assessing jurisdictional amount as of the time of the removal, the appeals court found.  At that time, the Plaintiff’s complaint contained a claim for insurance bad faith, thus taking the value of the case in excess of the $75,000 jurisdictional limit.

The appeals court also affirmed the dismissal of the insured’s suit for UM/UIM benefits, finding a signed waiver form in compliance with Pa. law.

Lieb v. Allstate (3rd Cir. 2016)

NJ Gov. Signs Fraudulent COI Bill

New Jersey Governor Chris Christie has signed legislation which makes it expressly illegal to request the issuance of certificates of insurance which contain false or misleading information. Click on link below for full text of bill.

New Jersey Bill S-3270

11th Circuit Confirms No Coverage for Yacht Disappearance

In Gamez v. Ace American Insurance Company, the US Court of Appeals for the 11th Circuit upheld Ace American’s voiding a policy covering a $32 million yacht after ACE established the insured made material misstatements concerning ownership of the boat in the application for coverage.

The Court held that the insured attempted to confuse two separate sections of a Florida statute covering material misrepresentations, one permitting the voiding of a policy for material misrepresentations in the application, and the other holding that post-coverage misrepresentations would not void coverage unless the misrepresentations were material.

Gamez v. Ace American Insurance Company (U.S. Ct. App., 11th Cir., 2016)

Prevent. Protect. Defend.

Welcome to Badfaithadvisor.com!  Our goal is to serve as an information hub for Insurers and their In-House legal teams to help them navigate current issues in insurance coverage and bad faith.  We will provide case updates, but more importantly practical advice on preventing and avoiding unnecessary exposure in the first instance, and successfully defending against such exposure in the second.

Have a question or request? Send an email to chaddick@dmclaw.com  or give me a call at 717-731-4800, and we will be happy to provide something of interest and value to you.

Best,
CJ Haddick