(18) As a result, to be binding on an insurer, the settlement between the Coblentz plaintiff and the insured must have been reached in good faith.
Although the case was decided in the insurer's favor because the policy afforded no coverage and the insurer had no duty to defend, the court determined that the insurer would have prevailed regardless (i.e., even if there had been coverage and a wrongful refusal to defend) because the settlement was not reached in good faith. (25)
Navigating the "good faith" and "reasonableness" requirements of Coblentz
In any area of law or business, there are practitioners who will attempt to "game the system," and thereby harm those who seek to employ the system
in good faith for its proper purpose.
Florida Insurance Bad Faith law: protecting businesses and you
Only if the insured/claimant has satisfied these requirements should it be able to assert it acted in good faith.
(A) The insured/claimant must establish it acted in good faith in attempting to settle the claim by:
The good faith, bad faith, and ugly set-up of insurance claims settlement
Rix LJ hazarded the opinion that "knowledge or shut-eye knowledge of the fact that the accident was a no fault accident would have made it a matter of bad faith to avoid the policy." Clarke LJ supported this view, saying "it does seem to me that if, at the time of the avoidance, Provident knew, or turned a blind eye to the fact that the earlier accident was a no-fault collision, it would not be acting in good faith if it avoided the policy because such avoidance would not be 'fair dealing.'" (14)
Rix LJ concluded that notice was not sufficient "unless there were to be a general principle that, at any rate where there is notice, it would not be in good faith to avoid a policy without first giving the insured an opportunity to address the reason for which the insurer is minded to avoid the policy." (15) Pill LJ applied this analysis and concluded that "a failure to make any inquiry of the insured before taking the drastic step of avoiding the policy was, in my judgment, a breach by the insurer of the duty of good faith." Pill LJ continued, "[i]f more than lip service is to be paid to the principle that an insurer shall show the utmost good faith, the principle, in my judgment, required that inquiry to be made before the 'wholly one-sided' remedy of avoidance was exercised."
Drake v. Provident's effect on insurers' duty of good faith in English law: are insurer bad faith cases going to hit England?
(8) Undoubtedly, the insurer is required to discharge its duty in good faith. Assuming the liability carrier breaches its duty of good faith in handling the case, the question remains whether, as a matter of law, the carrier might face any legal consequences for its breach if the uncovered portion of the damage award consists of punitive damages.
(16) On the carrier's motion for summary judgment, the trial court dismissed the bad faith action finding the carrier's refusal to accept plaintiff's original offer to settle "caused no legally compensable damage to its insured" and the insurer had no duty to act in good faith with respect to the punitive damages claim as it was beyond the scope of insurance coverage.
Can two wrongs make a "right" to seek indemnification of punitive damages from a liability insurance carrier?
While contract law requires an insurer to act
in good faith, many states allow insureds to use tort law to sue for denial of claims.
Overcoming attorney-client privilege and work product protection in bad-faith cases: bald assertions of bad faith should not be accepted by courts as a warrant to plaintiffs to rummage through claims files
There are four elements to the advice of counsel defense in the insurance context: (1) the insurer sought counsel's advice
in good faith; (2) the insurer disclosed all pertinent information to its attorney; (3) the insurer acted on the advice
in good faith; and (4) the attorney was competent in the particular area of law and disinterested in the matter.
DEPLOYING THE Advice of Counsel DEFENSE
In North River, the Third Circuit held that the duty of good faith "requires the reinsured to align its interests with those of the reinsurer," but that to avoid an obligation to "follow" a settlement on the grounds that it was not made
in good faith, a reinsurer must establish that the settlement was the result of "gross negligence or recklessness" on the part of the cedent and that the reinsurer suffered "economic prejudice" as a result.
Common reinsurance issues: follow the fortunes, late notice and rescission
An insurer may be acting
in good faith but still may be found to have violated the due care element of the negligence standard.
Issues for excess insurer counsel in bad faith and excess liability cases