Source: https://www.insurancelawhawaii.com/insurance_law_hawaii/bad_faith/page/3/
Timestamp: 2019-04-23 11:52:20+00:00

Document:
The Sixth Circuit found that the surety did not act in bad faith when it settled the general contractor's claims against the State of Michigan over delays on a construction project. Great Am. Ins. Co. v. E.L. Bailey & Co., 2016 U.S. App. LEXIS 20018 (6th Cir. Nov. 7, 2016).
Bailey, the general contractor, entered into a surety agreement under which Great American would issue surety bonds on behalf of Bailey in the construction of a kitchen at a State prison. Bailey, the principal, paid Great American (GAIC), the surety, to provide bonds guaranteeing contract performance to the State, the obligee or owner. GAIC provided a performance bond, guaranteeing performance of the contract work, and a payment bond, guaranteeing payments to subcontractors and suppliers. Under the agreement, Bailey would indemnify GAIC for all payments or other expenses GAIC incurred due on either bond, and would pay upon demand collateral in an amount to be determined by GAIC. In the event of an alleged breach by Bailey, the agreement assigned to GAIC all Bailey's rights under its contract with the State and well as all its claims against any party.
Bailey never finalized completion, and GAIC reached agreement with the State for another contractor to complete the project.
Actions were filed in three courts. Bailey and the State brought claims against one another in the Michigan Court of Claims. Mediation was ordered, and the mediator recommended that the State offer Bailey $220,400.75 to resolve all claims. The State rejected the mediator's recommendation. The court ordered another mediation scheduled for September 12, 2013. On September 11, GAIC informed Bailey that GAIC had agreed to a settlement, releasing Bailey's claims against the State with prejudice in exchange for the State paying GAIC $358,000, representing final payment under the construction contract. Bailey alleged it was unaware of the negotiations until the agreement had been reached.
In the second action, subcontractors brought claims against Bailey and GAIC under the payment bond for amounts due for the work performed. GAIC demanded collateral from Bailey, but Bailey never provided any collateral. GAIC settled the subcontractor's claims, paying out $645,287.55 and incurring over $260,000 in expenses and attorneys' fees.
In the third action, GAIC sued in federal court in this case seeking indemnification for Bailey's alleged breach of the agreement by failing to provide collateral for the subcontractor claims. GAIC amended its complaint to add a declaratory judgment claim regarding its right to settle Bailey's claims against theS. Bailey's answer asserted bad faith as an affirmative defense, contesting GAIC's right to settle Bailey's claims against the State. The district court granted summary judgment to GAIC, finding that GAIC had the right to settle Bailey's claims and awarding damages for the indemnification claim.
The Sixth Circuit affirmed. Bailey provided neither evidence about GAIC's state of mind nor any reason why GAIC's interest in settling would differ from Bailey's. There was no evidence that the settlement by GAIC was undertaken with selfish purpose at Bailey's expense. Rather, Bailey and GAIC shared an interest in securing the highest settlement possible from the State.
Further, the evidence suggested that GAIC negotiated in good faith. The emails between GAIC and the State portrayed an adversarial negotiation. The negotiation secured $358,000, well above the mediator's recommendation of $220,400.
The court agreed a surety's concealment of its settlement negotiations raised concerns. Settling a party's claim in secret, even when the claim had been assigned by contract, deprived the party of time to prepare objections and the opportunity to consider its options appropriately. But there was no evidence that GAIC had negotiated with the State for months. The emails between GAIC and the State showed communication only during the week prior to reaching the agreement and GAIC's informing Bailey. Moreover, Bailey had the opportunity to regain control of its claims by providing the collateral requested by GAIC. Had Bailey provided the collateral, it would have regained the capacity to negotiate for a higher settlement than GAIC reached. Bailey thus had both the notice and the opportunity to prevent an undesirable settlement, undermining Bailey's argument that GAIC's concealed the negotiations and was in bad faith.
The Ninth Circuit affirmed the district court's issuance of the insurer's motion for summary judgment, thereby rejecting the insureds' negligence per se claim for failure to pay benefits. Braun-Salinas v. Am Family Ins. Group, 2016 U.S. App. LEXIS 19555 (9th Cir. Oct. 28, 2016).
The insureds argued that Oregon recognized a negligence per se claim based on an insurer's failure to pay benefits in violation of the statutory standard under state law. Oregon appellate courts, however, only allowed a negligence per se claim only where a negligence claim otherwise existed. The Oregon courts had previously rejected a statutory theory, holding that a violation of the statute did not give rise to a tort action.
The insureds argued that Oregon cases barred a statutory claim, meaning a private right of action created by statute, whereas their claim was a common law claim for negligence per se claim that relied on the statute only to determine the claim's "standard of care" element. This argument was unpersuasive because the Oregon Court of Appeals had also declined to recognize a common law negligence claim for failure to pay first-party insurance benefits.
Because the insureds could not bring a negligence claim under a statutory or common law theory, they were also barred from bringing a hybrid negligence per se claim.
Thanks to my fellow Damon Key blogger, Mark Murakami (blog here), for the heads up on this case.
The federal district court for the district of Hawaii rejected the insured's argument that the insurer acted in bad faith because the insured had to contribute to a settlement of the underlying case. Hanover Ins. Co. v. Anova Food, LLC, 2016 U.S. Dist. LEXIS 146114 (D. Haw. Oct. 21, 2016).
After a prior round of briefing, the court determined that Hanover had a duty to defend, but rejected Anova's claim for pre-tender fees. [prior post here].
After the underlying case settled with Hanover and Anova each contributing one half of the amount, Anova moved for summary judgment to establish that Hanover had acted in bad faith. Anova argued that Hanover acted in bad faith by refusing to pay for the entire settlement of the underlying lawsuit.
Florida law controlled. Under Florida law, an insurer had a duty to use the same degree of care and diligence as a person of ordinary care and prudence would exercise in the management of its own business.
Here, Hanover provided a defense to Anova. Hanover negotiated with Anova during attempts to settle the underlying lawsuit. Both Hanover and Anova agreed that each would contribute half of the amount to the settlement. The case did not settle in excess of Hanover's policies.
Anova did not present any evidence that it was "forced" to contribute to the settlement as a result of Hanover's bad faith. The patent infringement claims in the underlying suit were not covered by the policies. Therefore, it made sense for Anova to contribute to the settlement. Consequently, the motion for summary judgment was denied.
The court denied the insurer's motion for summary judgment seeking to establish it did not breach the policy when denying coverage for the collapse of basement walls. Belz v. Peerless Ins. Co.,204 F. Supp. 3d 457 (D. Conn. 2016).
The Belzes purchased their home in 2001. Prior to the purchase, they were aware of notable cracking in the basement walls. An engineer was hired to inspect the cracking and determined the cracks did not threaten the structural integrity of the home.
In 2007, the Belzes installed "brightwall" panels in their basement to cover the cracks. There was no photographic evidence, but the Belzes insisted that the cracks were no more severe in 2007 than they were in 2001 when the home was purchased. The brightwall was removed in April 2013. At this point, the Belzes discovered that the cracking had progressed substantially. The cracks were large enough to put one's finger through the wall.
The Belzes filed a claim under their homeowners' policy with Peerless. Under the policy, Peerless agreed to insure for "collapse of a building or any part of a building" caused by, among other things, "hidden decay." The term "collapse" was not defined in the policy. The collapse provision excluded the collapse of foundations and retaining walls "unless the loss is a direct result of the collapse of a building."
Peerless denied the claim, citing the exclusions for "poor workmanship and materials used." The Belzes filed suit. Peerless filed a motion to dismiss which was denied [post on the court's ruling on the motion to dismiss is here].
Peerless now moved for summary judgment, arguing that the cracking in the basement walls constituted a "loss to a foundation or retaining wall." Peerless also contended that the Belzes were aware of the cracking in 2001, well before the commencement of the policy.
The court had previously determined on the motion to dismiss that the terms "foundation" and "retaining wall" were ambiguous. Following the law of the case doctrine, the court again found on the motion for summary judgment that the terms were ambiguous and subject to multiple reasonable interpretations. Accordingly, the terms would be construed against Peerless. The Belzes' basement wall would not be considered part of the property's "foundation" or "retaining wall" for purposes of insurance coverage. Therefore, the cracking damage to the basement walls was not categorically excluded from coverage under the policy terms covering foundations and retaining walls. The question of whether the cracking actually resulted from "hidden decay" was a disputed question of fact left for the trier of fact.
There was also a material dispute as to whether the damage amounted to a collapse under the policy. Under Connecticut law, a "collapse" for home insurance purposes included "substantial impairment to the structural integrity of a building."
The court next considered whether the claim was timely reported. Other than the testimony of the inspecting engineers and the Belzes, there was no photographic or other evidence to show the condition of the basement walls before 2013. Instead, there was a disputed issue of fact as to when the collapse of the basement walls took place. Accordingly, Peerless had not met its burden with respect to the timing of the collapse.
Finally, there was a genuine factual dispute as to whether Peerless denied the Belzes' claim in bad faith. Deposition testimony suggested that it was Peerless' practice not to apply the "collapse" provision of the policy where the impacted structure was still standing, despite the long-standing principle under Connecticut case law that a collapse could be found even where a structure was still standing if the structural integrity was compromised.
Consequently, Peerless' motion was denied in all respects.
The insurer was partially successful in challenging two of the insureds' experts in a bad faith case. Estate of Arroyo v. Infinity Indem. Ins. Co., 2016 U.S. Dist. LEXIS 115669 (S.D. Fla. Aug. 29, 2016).
The Estate sought to qualify two experts, Lewis N. Jack and James P. Schratz. They were to opine on Infinity's handling of the Estate's insurance claims and the extent of damages warranted in the case. Jack was to testify on Infinity's duties to the insured, its investigation of the case, its reliance on Infinity's agents, and his belief that Infinity could have settled the case. Schratz's opinions mostly concerned Infinity's handling of its investigation.
Jack had practiced law for over forty years and had advised insurance companies about claims handling and complying with Florida's insurance provisions. But he had no experience in personally handling claims, had not published any materials on the subject, and was unfamiliar with guidelines from the Florida Department of Insurance. His insurance law specialty did not qualify him to opine as an expert on Infinity's handling of the Estate's insurance claims. Further, Jack's opinion about the reasonableness of damages was unreliable since his conclusions related to damages in a separate state court action involving the passenger in the decedent's automobile. Therefore, all of Jack's opinions would be excluded.
Schratz was a licensed attorney who currently consulted with clients on claims handling techniques and procedures. He spent thirteen years working in various capacities, including claims handling, with Fireman's Fund. He had published several articles on claims handling during his thirty years of relevant experience. Therefore, Schratz was qualified to opine on national industry standards of insurance company claims handling and investigation processes, and how Infinity applied them in this case.
Some opinions from Schratz, however, would be inadmissible. Schratz could not mention the equal consideration doctrine, or describe the doctrine as the "industry standard" as he did in his deposition. There was no evidence that the doctrine had been formally applied in Florida. And while Schratz could cite to the problems with Infinity's claims handing and any of their agents' alleged missteps, he could not intimate a motive or intent to any of these actions. Therefore, any mention of Infinity "totally ignoring and disregarding the interest of its insured" and that its agent "made material misrepresentations" was barred.
The United States District Court for the Western District of Washington granted the insureds' motion to compel and ordered that the insurer produce withheld discovery. Bagley v. Travelers Home & Marine Ins. Co., 2016 U.S. Dist. LEXIS 115028 (W.D. Wash. Aug. 25, 2016).
The insureds' dock and boat ramp were damaged in a storm. Travelers refused to pay for the damage, arguing it was not covered. After Plaintiffs filed suit, Travelers admitted coverage and agreed to pay. The insureds' suit included a claim that Travelers wrongfully denied coverage, thereby costing the insureds money.
The insureds moved the court to compel Travelers to respond to certain discovery requests. First, the insureds requested the claims file Travelers maintained on their claim. The court did not order the production of privileged documents, but documents related to claims handling were not privileged. Travelers was ordered to produce all documents in the insureds' claim file that related to claim handling, even if the documents were created after the commencement of litigation.
Next, the insureds requested Travelers' training materials and claim manuals. Travelers argued that because the insureds' policy was a homeowner's policy, materials and manuals on property insurance in general were unlikely to lead to admissible evidence. The court disagreed. Because the insureds alleged bad faith, Travelers' materials and manuals on property insurance and claim handling in general were relevant. Travelers had materials on "Property Best Practices," "Introduction to Property," "The Life of the Claim," and "The Property Claim Determination Process" among other relevant topics. These materials could shed light on how Travelers instructed its adjustors to investigate, evaluate, and process a claim like the insureds.
The insureds alleged that Travelers tied the bonuses of its claim department employees to low claim payouts. Therefore, the insureds' requested that Travelers produce documents related to its employees compensation. The court held that the insureds were entitled to discovery of all documents relevant to the compensation program, including those that related to top-level employees who allegedly rewarded managers and the adjustors they supervised.
Travelers was also ordered to produce personnel files for all personnel working on their claim. This included reviews, disciplinary information, and compensation information.
Finally, the insureds sought "financial documents that evaluate the effect of reduced claims payments to Travelers' bottom line." Travelers argued the request was vague or unlikely to lead to admissible evidence. The insureds alleged that Travelers tracked information regarding the claim payouts of its offices nationwide and used this data to encourage certain claim handling behavior. Documents that confirmed the existence of such a program would be relevant to the insureds' claim. Therefore, Travelers was ordered to produce loss ratio and other profit information.
Citing the Hawaii Supreme Court's decision in St. Paul Fire & Marine Ins. Co. v. Liberty Mut. Ins. Co., 135 Haw. 449, 353 P.3d 991 (2015), the California Court of Appeal determined that the excess carrier could pursue an equitable subrogation action alleging that the primary insurers' unreasonable failure to settle within policy limits resulted in a settlement exceeding policy limits, thereby damaging the excess carrier. Ace Am. Ins. Co. v. Fireman's Fund Ins. Co., 2016 Cal. App. LEXIS 647 (Cal. Ct. App. Aug 5, 2016).
John Franco suffered serious injury in a special effects accident while working on a film set. He and his wife sued Warner Brothers Entertainment, Inc. and related entities. Fireman's Fund provided primary insurance with a $2 million limit, and an umbrella policy with a $3 million limit. Ace American provided the Warner Brothers entities an excess policy with a $50 million limit.
Fireman's Fund defended the Warner Brothers entities. Franco made settlement demands within the limits of Fireman's Fund's policies. Fireman's Fund refused such demands. Subsequently, Franco settled the lawsuit for an amount substantially in excess of policy limits. Fireman's Fund consented to the settlement and contributed to it. Ace American funded the amounts in excess of Fireman's Fund's policies' limits.
Ace American then filed suit against Fireman's Fund for equitable subrogation and breach of the covenant of good faith and fair dealing. Fireman's Fund demurred. Fireman's Fund argued an excess insurer could only sue for equitable subrogation if there was a judgment against the insured that exceeded the limits of the primary policy. Because the Franco lawsuit had settled and there was no judgment against Warner Brothers, Fireman's Fund argued, Ace American could not sue for equitable subrogation.
The California Court of Appeal noted that an insurer's cause of action for equitable subrogation included the following: Ace American had paid the claim of the insured, Warner Brothers, to protect its own interest and not as a volunteer; Ace American suffered damages caused by Fireman's Fund's act or omission; and Ace American's damages were in a liquidated sum. The appellate court found no reason to hold that either Warner Brothers or its assignee, Ace American, must suffer a loss due to Fireman's Fund's failure to reach a reasonable settlement with no remedy simply because the case settled instead of being litigated through trial. Ace American's alleged damages were clear, liquidated, and certain.
The court noted that most other jurisdictions that had considered the issue found that an insured or excess insurer that contributes to a settlement can pursue the primary insurer for failing to accept reasonable settlement within primary limits. The court cited the Hawaii Supreme Court's St. Paul decision, noting the case involved a post-verdict settlement in excess of primary limits. The Hawaii Supreme Court stated "the public interest in encouraging reasonable settlement is best serviced by permitting an excess insurer to seek relief under the doctrine of equitable subrogation." St. Paul, 135 Haw. at 456.
Therefore, the court reversed the judgment sustaining Fireman's Fund's demurrer, and remanded the case for further proceedings.
The insureds prevailed at trial in securing an award for bad faith due to the insurer's unreasonable handling of the claim. Taladay v. Metro. Group Prop. & Cas. Ins. Co., 2016 U.S. Dist. LEXIS 87659 (W.D. Wash. July 6, 2016).
Rosemarie Taladay had a homeowners policy with MetLife. After her death, one of her three sons, Gary Taladay, was living with her in the home when a fire occurred in an upstairs attic room. An investigation determined that most of the fire damage was in the attic bedroom, but water damage from the fire department's efforts to extinguish the fire was present on the first floor as well. The MetLife policy generally excluded water damage, but direct loss ensuing after water damage "caused by fire" was a covered cause of loss.
Gary Taladay had difficult discovering the identity of the insurer, MetLife. He signed two contracts for emergency services with Heritage Restoration after informing the company that he did not know the identity of the insurer and could not afford to pay for the mitigation work on his own. Heritage removed salvageable items form the house and attempted to assist in locating Ms. Taladay's fire insurance policy. Gary Taladay reported the fire to the mortgage company, Chase, but Chase refused to identify the insurance company.
Gary Taladay could not live in the house due to the fire damage and began living in an inexpensive motel. He was unable to afford both the motel bill and mortgage, so the mortgage was placed in default by Chase.
The policy was eventually located and MetLife was notified. MetLife investigated, but delayed making any payments until suit was filed. MetLife contended that it did not unreasonably deny coverage because the insureds failed to mitigate the loss to the first floor, failed to timely submit receipts for the additional living expenses, and failed to timely submit a properly completed Proof of Loss form with an inventory of unsalvageable personal property to enable Met Life to adjust the claim.
MetLife repeatedly misrepresented to the insureds that the adjustments of their entire claim, including structure damage and alternative living expenses, were contingent upon presentation of a complete inventory of damaged personal property. But at trial, numerous witnesses from MetLife testified that MetLife was able to adjust the structure portion of the claims and the alternative living expenses without the inventory of damaged personal property. MetLife compelled the insureds to file suit to recover for repair estimates was also contrary to Washington law.
MetLife also unreasonably modified the insureds' contractor's estimates of repair related to gutting the first floor of the house. This greatly reduced funds available for the insureds to make necessary repairs and made it impossible for the insureds to find a contractor willing to complete the work. Because the insureds could not make the repairs, Chase foreclosed on the house. MetLife not only wrongfully denied coverage for the repairs, but never communicated the denial to the insureds.
After suit was filed, MetLife paid a portion of the claim. The remaining issue, therefore, was whether MetLife's substantial delay in making the payment was reasonable. The MetLife adjuster created an inventory the second day he visited the property, listing approximately 140 items in the attic that were damaged by the fire. He withheld his inventory list from the insureds because they had not yet generated their own complete inventory of damaged items. The adjuster said he was waiting for a signed Proof of Loss form to be submitted by the insureds. A partially completed Proof of Loss form was submitted on September 3, 2014 by Gary's brother, Denny Taladay. In the section requesting estimates of "Actual Cash Value" of the property, Denny wrote "unknown." MetLife therefore refused to adjust the claim and refused to issue any payments until a completed inventory was received.
Only after suit was filed did MetLife finally pay $91,771 for additional loss under the claim.The court found this unreasonable. The adjuster had concealed his inventory of personal property items from the insureds even after the insures informed him that they needed a professional to assist with the inventory. MetLife failed to provide the insureds with reasonable assistance, contrary to Washington law. Consequently, MetLife breached the duty of good faith. The court awarded $254,770, plus attorneys' fees for actual and punitive damages.
The California Supreme Court considered whether the calculation for punitive damages may include attorneys' fees expended to obtain benefits determined after the jury has rendered its punitive damages verdict. Nickerson v. Stonebridge Life Ins. Co., 2016 Cal. LEXIS 3757 (Cal. June 9, 2016).
The insured broke his leg on February 11, 2008, when he fell from the wheelchair lift on his van. He was treated in the emergency room and then admitted to the hospital. After spending several weeks confined to a hospital bed, he was permitted to move to his wheelchair, but could tolerate sitting in the wheelchair for only limited periods of time. On May 19, 2008, the insured's doctor determined he was ready to return home except that he was unable to maneuver through his home without a particular part for his wheelchair. After obtaining the part, the insured was released from the hospital on May 30, 2008. He had been hospitalized for 109 days.
Following his release from the hospital, the insured sought benefits from Stonebridge Life Insurance Company under a policy that promised to pay him $350 per day for each day he was confined in a hospital for necessary care and treatment. Invoking the policy's definition of "necessary treatment", Stonebridge determined, without consulting the views of the insured's treating physicians, that his hospitalization was "medically necessary" only from February 11 to 29. Stonebridge sent the insured a check for $6,450, which represented payment of $150 for one visit to the emergency room and $6,300 for 18 days of hospitalization at $350 per day.
The insured file suit, alleging that Stonebridge breached the policy by failing to pay him benefits for the full 109 days of his hospital stay and that Stonebridge breached the implied covenant of good faith and fair dealing by denying him his full policy benefits. The parties stipulated before trial that if the insured succeeded on his complaint, the trial court could determine the amount of attorneys' fees to which the insured was entitled under Brandt v Superior Court, 37 Cal. 3d 813 (1985). Under Brandt, if the insurer withholds policy benefits in bad faith, attorneys' fees incurred to compel payment of the benefits are recoverable as an element of the plaintiff's damages.
The jury awarded the insured $31,500 in unpaid policy benefits and $35,000 for emotional distress. The jury also found that Stonebridge engaged in fraud and awarded $19 million in punitive damages. After the jury rendered its verdict, the parties stipulated that the amount of attorneys' fees to which the insured was entitled under Brandt was $12,500, and the court awarded this amount.
Stonebridge moved for a new trial seeking a reduction in the punitive damages award. The trial court agreed and granted Stonebridge a new trial unless the insured consented to a reduction of the punitive damages award to $350,000. In calculating the permissible amount of punitive damages, the court considered only the $35,000 the jury had awarded in compensatory damages for emotional distress for Stonebridge's tortious breach of the implied covenant of good faith and fair dealing; it did not include the $12,500 in Brandt fees.
The insured rejected the reduction in punitive damages and appealed the order granting a new trial. The Court of Appeal affirmed, rejecting the insured's argument that the trial court should have taken in to account the $12,500 in Brandt fees.
The California Supreme Court granted review, limited to the following question: "is an award of attorneys' fees under Brandt properly included as compensatory damages where the fees are awarded by the jury, but excluded from compensatory damages when they are awarded by the trial court after the jury has rendered its verdict?" In other words, should the $12,500 that was awarded as attorneys' fees be included in the calculation of the ratio of punitive damages to compensatory damages for the purpose of determining whether, and by what amount, the jury's $19 million punitive damages award exceeded constitutional limits?
Stonebridge argued that when a trial court determines Brandt fees after the jury has already rendered its punitive damages verdict, the fees should not be considered in calculating the punitive-compensatory ratio.
The Supreme Court disagreed. There was no reason to exclude the amount of Brandt fees from the constitutional calculus merely because they were determined, pursuant to the parties' stipulation, by the trial court after the jury rendered its punitive damages verdict. To exclude the fees from consideration would mean overlooking a substantial and mutually acknowledged component of the insured's harm. Therefore, the judgment of the Court of Appeals was reversed and the case was remanded to the Court of Appeals for further proceedings.
The Eighth Circuit affirmed the jury verdict which determined that the insurer acted in bad faith for failing to settle within policy limits. Bamford, Inc. v. Regent Ins. Co., 2016 U.S. App. LEXIS 8787 (8th Cir. May 13, 2016).
In May 2009, an employee of Bamford caused a vehicular accident resulting in the death of the employee and a serious injury to the other driver, Bobby Davis. A steel pipe stored on the roof of the Bamford truck became dislodged and penetrated Davis' left thigh, went through his abdomen and pelvis, and out his right buttock, pinning him inside his vehicle for thirty to sixty minutes before help arrived.
Bamford held a commercial auto liability policy with Regent with a policy limit of $6 million. Regent began investigating. Bamford hired coverage counsel, Daniel Placzek. The Davis family retained attorney Tom Fee. On August 5, 2010, Fee sent Regent a settlement packet offering to settle the claim for policy limit of $6 million. Placzek followed up, informing Regent that the Davises' claims presented an exposure risk above Bamford's $6 million policy limits and demanded a settlement within policy limits.
Regent retained attorney Brian Nolan as coverage counsel. Nolan thought the claims were worth less than $1 million. He informed Regent that he was investigating a possible loss-of-consciousness defense, based on the possibility that the Bamford driver had lost consciousness before the accident. Nolan believed that such a defense would be a complete bar to liability.
Mediation was attempted in December 2010. Regent came up to $774,000, and Fee came down to $4,995,000. Thereafter, the Davises filed suit against Bamford.
In September 2011, Regent retained attorney Steve Ahl to provide a second valuation opinion. Ahl valued the claims between $1.75 and $2.25 million, and felt the value of the claims would not approach policy limits.
Communications in Regent's files noted that Regent felt no case was worth more than $2 million in Nebraska. Nolan and Ahl both felt that Nebraska was a conservative jurisdiction in terms of jury verdicts.
By May 2012, Regent placed reserves on the case at $2.25 million. The Davises prevailed on partial summary judgment in June 2012. The court not only granted the Davises' request to strike the loss-of-consciousness defense, it also found Bamford liable as a matter of law. Therefore, the only issue at trial would be the amount of damages.
Settlement was attempted again shortly before trial. On the day before trial, the Davises offered to settle for $3.9 million. Regent countered for $2.05 million.
The trial lasted seven days and the jury returned a verdict of $10.6 million for the Davises. Bamford appealed, and the case then settled for $8 million. Bamford was responsible for the excess judgment.
Bamford then sued Regent for its bad faith in refusing to settle. Following a five-day trial, the jury returned a verdict for Bamford, awarding it damages of over $2 million for the amount it paid for the excess judgment. The trial court denied Regent's renewed motion for judgment as a matter of law and for a new trial.
On appeal, the Eighth Circuit noted the issue was whether, drawing all reasonable inferences in Bamford's favor, a reasonable jury would find that Regent acted in bad faith. The court held there was not sufficient evidence to support such a conclusion.
Regent's failure to adjust its valuation following the district court's grant of partial summary judgment strongly supported the conclusion that Regent acted in bad faith. Knowing that the jury would be instructed that Bamford was negligent as a matter of law and liable for Davises' injuries, Regent's valuations of the case were unreasonable.
Therefore, Bamford presented sufficient evidence from which a reasonable jury could conclude that Regent acted in bad faith in failing to settle the Davises' claims within the policy limits.

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