Bad Faith Insurance Litigation in Ohio

B
A
D
 
F
A
I
T
H
 
I
N
S
U
R
A
N
C
E
L
I
T
I
G
A
T
I
O
N
b
y
J
o
h
n
 
H
.
 
P
h
i
l
l
i
p
s
M
a
y
 
3
,
 
2
0
1
3
1
B
A
C
K
G
R
O
U
N
D
Insurance bad faith
Insurance bad faith
 is a tort claim that an insured
 is a tort claim that an insured
person may have against an insurance company for its
person may have against an insurance company for its
bad acts. The Ohio Supreme court has held that an
bad acts. The Ohio Supreme court has held that an
insurer owes a duty of good faith to its insured in the
insurer owes a duty of good faith to its insured in the
processing, payment, satisfaction, and settlement of
processing, payment, satisfaction, and settlement of
the insured's claims. 
the insured's claims. 
Hart v. Republic Mut. Ins. Co.
(1949), 152 Ohio St. 185, 87 N.E.2d 347.
 This duty is often referred to as the "implied covenant
 This duty is often referred to as the "implied covenant
of good faith and fair dealing" which automatically
of good faith and fair dealing" which automatically
exists by operation of law in every insurance contract.
exists by operation of law in every insurance contract.
(1949), 152 Ohio St. 185, 87 N.E.2d 347.Hart v. Republic Mut. Ins. Co.
2
NO LAWFUL BASIS AND FAILURE
TO DETERMINE A LAWFUL BASIS
In 
In 
Motorists Mutual Ins. Co. v. Said
Motorists Mutual Ins. Co. v. Said
 (1992), 63 Ohio St.3d 690,
 (1992), 63 Ohio St.3d 690,
590 N.E.2d 1228,
590 N.E.2d 1228,
 the Ohio Supreme Court held that a cause of
 the Ohio Supreme Court held that a cause of
action for the tort of bad faith exists:
action for the tort of bad faith exists:
“ * * * when an insurer breaches its duty of good faith by
“ * * * when an insurer breaches its duty of good faith by
intentionally refusing to satisfy an insured's claim where there is
intentionally refusing to satisfy an insured's claim where there is
either (1) no lawful basis for the refusal coupled with actual
either (1) no lawful basis for the refusal coupled with actual
knowledge of that fact or (2) an intentional failure to determine
knowledge of that fact or (2) an intentional failure to determine
whether there was any lawful basis for such refusal. Intent that
whether there was any lawful basis for such refusal. Intent that
caused the failure may be inferred and imputed to the insurer
caused the failure may be inferred and imputed to the insurer
when there is a reckless indifference to facts or proof reasonably
when there is a reckless indifference to facts or proof reasonably
available to it in considering the claim.
available to it in considering the claim.
3
NO LAWFUL BASIS DEFINED
‘No lawful basis' for the intentional refusal to
‘No lawful basis' for the intentional refusal to
satisfy a claim means that the insurer lacks a
satisfy a claim means that the insurer lacks a
reasonable justification in law or fact for
reasonable justification in law or fact for
refusing to satisfy the claim. Where a claim is
refusing to satisfy the claim. Where a claim is
fairly debatable the insurer is entitled to refuse
fairly debatable the insurer is entitled to refuse
the claim as long as such refusal is premised on
the claim as long as such refusal is premised on
a genuine dispute over either the status of the
a genuine dispute over either the status of the
law at the time of the denial or the facts giving
law at the time of the denial or the facts giving
rise to the claim.” 
rise to the claim.” 
Said,
Said,
 supra at 699-700, 590
 supra at 699-700, 590
N.E.2d 1228
N.E.2d 1228
.
.
4
FAILURE TO DISCLOSE
COVERAGE OF INSURANCE
OAC Ann. 3901-1-54:
(E) Misrepresentation of policy provisions.
(1) An insurer shall fully disclose to first party
claimants all pertinent benefits, coverages or other
provisions of an insurance contract under which a
claim is presented.
(2) No agent shall willfully conceal from first party
claimants benefits, coverages or other provisions of
any insurance contract when such benefits,
coverages or other provisions are pertinent to a
claim
.
5
Sidebar on The Ohio Unfair Claims
Settlement Practice Act
Ohio’s appellate courts have consistently found no
Ohio’s appellate courts have consistently found no
legislative intent that would create a private cause of
legislative intent that would create a private cause of
action under the Ohio Unfair Claims Practice Act.  As
action under the Ohio Unfair Claims Practice Act.  As
such, they have determined that creating such a cause
such, they have determined that creating such a cause
of action would be inconsistent with the underlying
of action would be inconsistent with the underlying
purpose of the Act.  
purpose of the Act.  
(Strack v. Westfield Co. (1988), 33
(Strack v. Westfield Co. (1988), 33
Ohio App.3d 336, 515 N.E.2d 1005; Furr v. State Farm
Ohio App.3d 336, 515 N.E.2d 1005; Furr v. State Farm
Mut. Auto. Ins. Co. (1998), 128 Ohio App.3d 607, 716
Mut. Auto. Ins. Co. (1998), 128 Ohio App.3d 607, 716
N.E.2d 250).
N.E.2d 250).
  The Act is regulatory only.
  The Act is regulatory only.
However, violations of the Act can be introduced as
However, violations of the Act can be introduced as
evidence of bad faith insurance handling.
evidence of bad faith insurance handling.
6
WHY CLAIM BAD FAITH? (1 of 2)
If an insurance company violates that covenant
of good faith, the insured person (or
"policyholder") may sue the company on a tort
claim in addition to a standard breach of
contract claim. The contract-tort distinction is
significant because as a matter of public policy,
punitive or exemplary damages are unavailable
for contract claims, but are available for tort
claims.
7
WHY CLAIM BAD FAITH? (2 of 2)
The result is that a plaintiff in an insurance bad
The result is that a plaintiff in an insurance bad
faith case may be able to recover an amount
faith case may be able to recover an amount
larger
larger
 than the original face value of the policy,
 than the original face value of the policy,
if the insurance company's conduct was
if the insurance company's conduct was
particularly egregious. Ohio law recognizes the
particularly egregious. Ohio law recognizes the
tort of insurer bad faith in situations in which an
tort of insurer bad faith in situations in which an
insurer refuses to pay a valid claim. 
insurer refuses to pay a valid claim. 
Florists'
Florists'
Mut. Ins. Co. v. Ludy Greenhouse Mfg. Corp.
Mut. Ins. Co. v. Ludy Greenhouse Mfg. Corp.
(S.D.Ohio, 09-30-2007) 521 F.Supp.2d 661
(S.D.Ohio, 09-30-2007) 521 F.Supp.2d 661
.
.
8
ONLY THE POLICYHOLDER HAS
A BAD FAITH CLAIM. (1 of 2)
A claim of bad faith cannot be brought against
A claim of bad faith cannot be brought against
an insurer by a third-party claimant. 
an insurer by a third-party claimant. 
Pasipanki
Pasipanki
v. Morton
v. Morton
 (1990), 61 Ohio App.3d 184, 185, 572
 (1990), 61 Ohio App.3d 184, 185, 572
N.E.2d 234,
N.E.2d 234,
 citing 
 citing 
Hoskins v. Aetna Life Ins. Co.
Hoskins v. Aetna Life Ins. Co.
(1983), 6 Ohio St.3d 272, 275-276, 452 N.E.2d
(1983), 6 Ohio St.3d 272, 275-276, 452 N.E.2d
1315.
1315.
 The duty to act in good faith runs only
 The duty to act in good faith runs only
from the insurer to its own insured. 
from the insurer to its own insured. 
Pasipanki,
Pasipanki,
at 185, 572 N.E.2d 234.
at 185, 572 N.E.2d 234.
9
ONLY THE POLICYHOLDER HAS
A BAD FAITH CLAIM. (2 of 2)
Although an insurer owes a duty to its insured
Although an insurer owes a duty to its insured
to negotiate in good faith with a party injured
to negotiate in good faith with a party injured
by the insured, there is no such independent
by the insured, there is no such independent
duty to the injured party, nor is he a third party
duty to the injured party, nor is he a third party
beneficiary to the insurance contract. 
beneficiary to the insurance contract. 
Achor v.
Achor v.
Clinton Cty. Bd. of Mental Retardation &
Clinton Cty. Bd. of Mental Retardation &
Developmental Disabilities
Developmental Disabilities
 (June 5, 1986),
 (June 5, 1986),
Franklin App. No. 86AP-60.
Franklin App. No. 86AP-60.
10
T
H
E
 
I
N
S
U
R
A
N
C
E
 
C
O
M
P
A
N
Y
S
A
I
D
 
N
O
.
 
 
I
S
 
I
T
 
B
A
D
 
F
A
I
T
H
?
THERE ARE TWO TYPES OF BAD FAITH
INSURANCE CLAIMS.
FAILURE TO PAY
Failure to pay a covered loss means that you are the
policy holder, and you have suffered a loss covered by the
policy of insurance.  You make a claim and the insurance
company refuses to pay the claims without justification.
FAILURE TO PROTECT
Failure to protect means that someone has made a claim
against you, and the insurance company refuses to protect
you against the claim within the policy limits, and an
excess judgment is taken against the policy holder.
11
FAILURE TO PAY EXAMPLE
HOUSE FIRE AND PROPERTY
DAMAGE ONLY CLAIM
Facts:  Your house catches fire due to your
negligence in leaving a candle burning. You file
a proof of claim with your homeowner’s
insurance company, and the insurance company
says that you may not collect because the fire is
suspicious.
Question:  Is it bad faith?
Answer: Maybe, but not necessarily.
12
ARSON DEFENSE
In defending against an action to recover on a fire
In defending against an action to recover on a fire
insurance policy, the insurer may raise the defense of
insurance policy, the insurer may raise the defense of
arson as an affirmative defense; to establish such a
arson as an affirmative defense; to establish such a
defense, the insurer must prove, by a preponderance
defense, the insurer must prove, by a preponderance
of the evidence (either circumstantial or direct), that
of the evidence (either circumstantial or direct), that
three basic elements exist: (1) the fire was of an
three basic elements exist: (1) the fire was of an
incendiary nature; (2) the insured had a motive to
incendiary nature; (2) the insured had a motive to
commit arson; and (3) the insured had the opportunity
commit arson; and (3) the insured had the opportunity
to cause the fire to be set. 
to cause the fire to be set. 
Caserta v. Allstate Ins. Co.
Caserta v. Allstate Ins. Co.
(Franklin 1983) 14 Ohio App.3d 167, 470 N.E.2d 430,
(Franklin 1983) 14 Ohio App.3d 167, 470 N.E.2d 430,
14 O.B.R. 185
14 O.B.R. 185
.
.
13
YOUR DUTY TO COOPERATE
If insured's failure to cooperate prejudices rights of insurer and
If insured's failure to cooperate prejudices rights of insurer and
is material and substantial, insured's lack of cooperation
is material and substantial, insured's lack of cooperation
constitutes defense to liability. 
constitutes defense to liability. 
Templin v. Grange Mut. Cas. Co.
Templin v. Grange Mut. Cas. Co.
(Montgomery 1992) 81 Ohio App.3d 572, 611 N.E.2d 944
(Montgomery 1992) 81 Ohio App.3d 572, 611 N.E.2d 944
.
.
Insured's refusal to produce requested records for insurer,
Insured's refusal to produce requested records for insurer,
including financial records, income tax returns, rental property
including financial records, income tax returns, rental property
records, bank statements, credit card account statements, and
records, bank statements, credit card account statements, and
cellular phone records, in relation to insured's fire loss claim was
cellular phone records, in relation to insured's fire loss claim was
a breach of duty to cooperate with insurer and materially
a breach of duty to cooperate with insurer and materially
prejudiced insurer's investigation, precluding insured's claims for
prejudiced insurer's investigation, precluding insured's claims for
breach of contract and bad faith. 
breach of contract and bad faith. 
Doerr v. Allstate Ins. Co.
Doerr v. Allstate Ins. Co.
(C.A.6 (Ohio), 02-03-2005) No. 03-4529, 121 Fed.Appx. 638,
(C.A.6 (Ohio), 02-03-2005) No. 03-4529, 121 Fed.Appx. 638,
2005 WL 271702
2005 WL 271702
, Unreported.
, Unreported.
14
Examination Under Oath
“The relevant insurance contract provisions required
both plaintiffs to submit to examinations under oath
and to provide documents. Because plaintiffs failed to
do so, the court concludes that AFIC had no
contractual obligation to provide the plaintiffs with
insurance coverage . . . ” 
Savage v. Am. Family Ins.
Co., 2008-Ohio-4460, 178 Ohio App. 3d 154, 162, 897
N.E.2d 195, 201 (2008)
Produce whatever records are requested before the
EUO, and produce whatever records are requested as
a result of the EUO.
Some attorneys make these very confrontational.
15
Polygraph Evidence (1 of 3)
Does the client have to submit to a polygraph?
Check your policy.  I have never heard of a
mandatory obligation to submit to a polygraph,
but your client may voluntarily submit if he so
chooses.
But beware . . .
Damned if you do
Damned if you don’t
16
POLYGRAPH EVIDENCE (2 of 3)
Damned if you do
Failing a polygraph is a basis for rejection of coverage.
Failing a polygraph is a basis for rejection of coverage.
Where an insured claims that his insurer has rejected
Where an insured claims that his insurer has rejected
fire insurance coverage in bad faith and without basis,
fire insurance coverage in bad faith and without basis,
the insurer may present the results of a polygraph
the insurer may present the results of a polygraph
examination of the insured to show that the insured
examination of the insured to show that the insured
had answered questions deceptively, not as proof of
had answered questions deceptively, not as proof of
arson, but to counter the insured's claim of bad faith
arson, but to counter the insured's claim of bad faith
and to establish a basis for rejection of coverage. 
and to establish a basis for rejection of coverage. 
Moss
Moss
v. Nationwide Mut. Ins. Co. (Franklin 1985) 24 Ohio
v. Nationwide Mut. Ins. Co. (Franklin 1985) 24 Ohio
App.3d 145, 493 N.E.2d 969, 24 O.B.R. 234
App.3d 145, 493 N.E.2d 969, 24 O.B.R. 234
17
Polygraph Evidence (3 of 3)
Damned if you don’t.
Admissible if you refuse as evidence of insured
Admissible if you refuse as evidence of insured
credibility and Insurer’s motive in refusing the claim.
credibility and Insurer’s motive in refusing the claim.
Murphy v. Cincinnati Ins. Co.,
Murphy v. Cincinnati Ins. Co.,
 772 F.2d 273 (1985)
 772 F.2d 273 (1985)
, at
, at
277, stated: “Since [the insured's] willingness to
277, stated: “Since [the insured's] willingness to
submit to a polygraph examination reflected upon his
submit to a polygraph examination reflected upon his
credibility and the defendant's motive in refusing the
credibility and the defendant's motive in refusing the
claim, the district court did not err in concluding that
claim, the district court did not err in concluding that
the evidence is relevant.”
the evidence is relevant.”
18
Third Party Beneficiaries
Mortgage Holders are almost always listed as an
additional insured on your homeowners
insurance policy.
Mortgage companies are not always the best at
filing proofs of loss.
Questions:  Does the insurance company have
an obligation to pay off the Mortgage Holder as
a Third Party Beneficiary?
Answer: No!  Not without a proof of loss.
19
YOUR MORTGAGE COMPANY AS
AN ADDITIONAL INSURED
Homeowners' insurer's delay in paying mortgage
Homeowners' insurer's delay in paying mortgage
holder . . . did not establish bad faith handling of fire
holder . . . did not establish bad faith handling of fire
loss claim, where mortgage holder was entitled to be
loss claim, where mortgage holder was entitled to be
paid only upon submission of proof of loss, insurer
paid only upon submission of proof of loss, insurer
requested proof of loss, and mortgage holder never
requested proof of loss, and mortgage holder never
responded to insurer's request. 
responded to insurer's request. 
Farmers Ins. of
Farmers Ins. of
Columbus, Inc. v. Lister (Ohio App. 5 Dist., Fairfield,
Columbus, Inc. v. Lister (Ohio App. 5 Dist., Fairfield,
01-09-2006) No. 2005-CA-29, 2006-Ohio-142, 2006 WL
01-09-2006) No. 2005-CA-29, 2006-Ohio-142, 2006 WL
92946
92946
, Unreported, appeal not allowed 
, Unreported, appeal not allowed 
109 Ohio St.3d
109 Ohio St.3d
1481, 847 N.E.2d 1226, 2006-Ohio-2466
1481, 847 N.E.2d 1226, 2006-Ohio-2466
.
.
Consider a suit against the mortgage holder.
Consider a suit against the mortgage holder.
20
STATUTE OF LIMITATIONS
BREACH OF CONTRACT
EVERY LAWYER KNOWS A BREACH OF
EVERY LAWYER KNOWS A BREACH OF
WRITTEN CONTRACT IS A 15 YEAR STATUTE
WRITTEN CONTRACT IS A 15 YEAR STATUTE
OF LIMITATIONS, RIGHT? – NO!!!
OF LIMITATIONS, RIGHT? – NO!!!
R.C. 2305.06 - Except as provided in sections
126.301 and 1302.98 of the Revised Code, an
action upon a specialty or an agreement,
contract, or promise in writing shall be brought
within 
fifteen
 
eight
 years after the cause 
thereof
of action
 accrued.  
2012 S 224, eff. 9-28-12
2012 S 224, eff. 9-28-12
21
STATUTE OF LIMITATIONS
BAD FAITH
An action by an insured against an insurer,
An action by an insured against an insurer,
alleging bad faith on the part of the insurer in
alleging bad faith on the part of the insurer in
adjusting damage claims, is essentially a tort
adjusting damage claims, is essentially a tort
action governed by the four-year statute of
action governed by the four-year statute of
limitations set forth in RC 2305.09, rather than
limitations set forth in RC 2305.09, rather than
a contractual limitation period contained in the
a contractual limitation period contained in the
insurance policy. 
insurance policy. 
United Dept. Stores Co. No. 1
United Dept. Stores Co. No. 1
v. Continental Cas. Co. (Hamilton 1987) 41 Ohio
v. Continental Cas. Co. (Hamilton 1987) 41 Ohio
App.3d 72, 534 N.E.2d 878
App.3d 72, 534 N.E.2d 878
.
.
22
MALPRACTICE ALERT
MALPRACTICE ALERT
CHECK YOUR POLICY!!!!
CHECK YOUR POLICY!!!!
An insurance contract may lawfully limit the time within
An insurance contract may lawfully limit the time within
which a suit may be brought on that contract of
which a suit may be brought on that contract of
insurance if the period fixed in the policy is not
insurance if the period fixed in the policy is not
unreasonable. 
unreasonable. 
Appel v. Cooper Ins. Co. (1907), 76
Appel v. Cooper Ins. Co. (1907), 76
Ohio St. 52, 80 N.E. 955.
Ohio St. 52, 80 N.E. 955.
 Such provisions are valid
 Such provisions are valid
even though the limitation period provided in the
even though the limitation period provided in the
contract of insurance is shorter than the period
contract of insurance is shorter than the period
specified in the applicable statute, and a limitation on
specified in the applicable statute, and a limitation on
periods for the commencement of actions to a period
periods for the commencement of actions to a period
of 12 months is not unreasonable. 
of 12 months is not unreasonable. 
Appel, supra.
Appel, supra.
23
A Personal Injury example
Facts:  Your client was riding his motorcycle
when he was hit by an automobile.  Your client
suffered multiple broken bones and a skull
fracture.  He has significant medical bills.
Liability is not disputed.  The driver of the
automobile has $12,500 in insurance coverage
and no other assets.  Your client has coverage
for Uninsured Motorist Coverage (UIM) claims of
$25,000 with Allstate Insurance.
 
24
A simple case - right?
Demand policy limits from the tortfeasor.
Demand policy limits from the tortfeasor.
They Agree to pay.
They Agree to pay.
MALPRACTICE ALERT
MALPRACTICE ALERT
Do not accept policy limits from the tortfeasor until
Do not accept policy limits from the tortfeasor until
the UIM carrier gives you permission to accept after
the UIM carrier gives you permission to accept after
an asset search.
an asset search.
Accepting without the permission of the UIM Carrier
Accepting without the permission of the UIM Carrier
could void the UIM coverage.
could void the UIM coverage.
25
Your letter to Allstate,
your client’s UIM Carrier.
Advise the UIM carrier of the accident
Give a brief summary of the facts
Ask the UIM carrier to perform an asset check of
the tortfeasor
Advise that if there are inadequate assets found,
ask for permission to settle with the tortfeasor, or
demand that Allstate advance the tortfeasor’s
policy limits ($12,500).
Advise that you are making a claim under the UIM
policy for policy limits.
26
Allstate’s response
“We are in receipt of your letter stating that you
represent John Doe, our insured in this
accident.  The policy was thoroughly reviewed
and he doesn’t have Underinsured Motorist
Coverage.  Please contact me at the number
listed below if you have any further questions.”
REALLY?
27
Your Response
Acknowledge receipt of their letter
Attach a copy of the declarations page
Request a complete copy of the policy
I go through the agent for this.  Much faster.
Ask for an explanation of why the UIM is being
denied since it is listed on the declarations
page.
Ask them to “Please respond ASAP.”
28
Allstate’s Response
“Please be advised that I am in receipt of your
letter.  The policy information that was included
with the letter was reviewed with the coverages
he has on his policy for the motorcycle.  There
is Uninsured Motorist Bodily Injury coverage.
That is if the other party had no insurance.
There is no Underinsured Motorist Bodily Injury
coverage on this file.  This coverage is needed if
the liable party has lower limits than our policy
for the medical expenses.  Please let me know if
you have any further questions.”
29
Your Response (1 of 5)
State the steps you have taken to recover the UIM
State the steps you have taken to recover the UIM
policy coverage, and be specific.
policy coverage, and be specific.
Allstate’s representative and I confirmed that Policy
Form Number AU10777 was the applicable policy, and
together we read from Page 14, Part 3, as follows:
 
An Uninsured Motor Vehicle Is:
 . . .  5. an underinsured
motor vehicle 
which has liability protection . . . less than
the limits of liability for 
Uninsured Motorist Insurance
shown on the Policy Declarations.
30
Your Response (2 of 5)
Ask for any applicable endorsements affecting
Ask for any applicable endorsements affecting
coverage:
coverage:
“I asked Allstate to send to me via email or facsimile any
endorsements in place, or waivers that my client may
have signed, that would have changed the above part of
the applicable policy.  To date, I have received nothing.
However, my office received a telephone call on
February 24, 2011, from Allstate again confirming that
Allstate would not provide Underinsured Motorist
Coverage, because although your insured and my client
had 
Un
insured Motor Vehicle Coverage, Allstate’s
position is that he does not have 
Under
insured Motorist
Coverage, despite the above language from the policy.”
31
Your Response (3 of 5)
Remind them of the law:
Remind them of the law:
“Allstate’s actions are specifically prohibited by the
Ohio Department of Insurance, which states in
pertinent part from OAC Ann. 3901-1-54:”
(E) Misrepresentation of policy provisions.
(1) An insurer shall fully disclose to first party
claimants all pertinent benefits, coverages or other
provisions of an insurance contract under which a
claim is presented.
(2) No agent shall willfully conceal from first party
claimants benefits, coverages or other provisions of
any insurance contract when such benefits, coverages
or other provisions are pertinent to a claim
.
32
Your Response (4of 5)
Advise them of the bad faith claim:
Advise them of the bad faith claim:
Allstate has breached its contract with its insured,
and as a result of the breach, compensatory
damages recoverable from Allstate are not limited by
the original policy limit.  Furthermore, because your
actions are in bad faith, my client demands
exemplary damages over and above his
compensatory damages suffered.  I am asking that
you immediately forward this letter and your entire
file to your bad faith claims unit to engage the
undersigned in negotiations on the damages
recoverable as a result of Allstate’s actions.
33
Your Response (5 of 5)
Evidence Preservation
Evidence Preservation
I am demanding that you enter into an evidence
preservation agreement, and I am requesting that
all electronically stored information be preserved for
purposes of litigation in this matter.  Since Allstate
warns all callers that their calls will be recorded, this
demand includes electronically recorded telephone
conversations.  Failure to preserve and to produce
any evidence in your possession will be grounds for
a spoliation of evidence claim against Allstate also.
34
Allstate’s Response
“I am pleased that we have been able to settle
“I am pleased that we have been able to settle
this claim in an amicable manner.  You will find
this claim in an amicable manner.  You will find
enclosed the release agreement for your client’s
enclosed the release agreement for your client’s
signature.  Please return a signed original of the
signature.  Please return a signed original of the
enclosed release to my attention.”
enclosed release to my attention.”
With the release was a check for $12,500.
With the release was a check for $12,500.
The Release stated that the insured, “releases
The Release stated that the insured, “releases
…Allstate from any and all liability and from any
…Allstate from any and all liability and from any
and all contractual obligations … “
and all contractual obligations … “
Insisting on a release of “all liability” and not
Insisting on a release of “all liability” and not
just contractual liability is bad faith.
just contractual liability is bad faith.
35
THE COMPLAINT
1. Declaratory Judgment – Declare the Policy of
Insurance to be valid.
2. Breach of Contract – Declare that the Insurance
Company breached the contract.
3. Bad Faith – Declare that the Insurance Company’s
Breach was in Bad Faith.
4.
 
Punitive Damages – Punish them so that the
insurance company does not do this again.
5.
 
Attorney Fees – Award attorney fees for having to
bring the Insurance Company to Justice.
36
YOU MUST REQUEST ATTORNEY
FEES IN THE COMPLAINT
Despite a finding that a defendant acted in bad
Despite a finding that a defendant acted in bad
faith, a trial court is without jurisdiction to
faith, a trial court is without jurisdiction to
award attorney fees to a plaintiff where the
award attorney fees to a plaintiff where the
plaintiff has failed to petition the court for fees
plaintiff has failed to petition the court for fees
in its declaratory judgment action as required
in its declaratory judgment action as required
under RC 2721.09. 
under RC 2721.09. 
Wagner v. Cleveland
Wagner v. Cleveland
(Cuyahoga 1988) 62 Ohio App.3d 8, 574 N.E.2d
(Cuyahoga 1988) 62 Ohio App.3d 8, 574 N.E.2d
533
533
. (Decided under the Declaratory Judgment
. (Decided under the Declaratory Judgment
Statute – R.C. 2721.09)
Statute – R.C. 2721.09)
37
EXPECT A BIFURCATION OF
CLAIMS FOR BAD FAITH
R.C. 2315.21(B) creates, defines, and regulates a
R.C. 2315.21(B) creates, defines, and regulates a
substantive, enforceable right to separate stages of
substantive, enforceable right to separate stages of
trial relating to the presentation of evidence for
trial relating to the presentation of evidence for
compensatory and punitive damages in tort actions
compensatory and punitive damages in tort actions
and therefore takes precedence over Civ.R. 42(B).
and therefore takes precedence over Civ.R. 42(B).
Civ.R. 42(B) is discretionary with the court, and R.C.
Civ.R. 42(B) is discretionary with the court, and R.C.
2315.21(B) is mandatory. 
2315.21(B) is mandatory. 
Havel v. Villa St. Joseph,
Havel v. Villa St. Joseph,
2012-Ohio-552, 131 Ohio St. 3d 235, 245, 963 N.E.2d
2012-Ohio-552, 131 Ohio St. 3d 235, 245, 963 N.E.2d
1270, 1279 (2012)
1270, 1279 (2012)
.
.
38
DO I NEED AN EXPERT WITNESS?
No, but you may use an expert witness.
No, but you may use an expert witness.
Testimony explaining basic principles of insurance law
Testimony explaining basic principles of insurance law
and practice and opining that the insured's claim for
and practice and opining that the insured's claim for
uninsured motorist (UM) benefits was handled
uninsured motorist (UM) benefits was handled
improperly was admissible under the expert testimony
improperly was admissible under the expert testimony
rule in the insured's bad faith suit; the testimony either
rule in the insured's bad faith suit; the testimony either
related to matters beyond the knowledge or experience
related to matters beyond the knowledge or experience
possessed by lay persons or dispels a misconception
possessed by lay persons or dispels a misconception
common among lay persons. 
common among lay persons. 
Furr v. State Farm Mut.
Furr v. State Farm Mut.
Auto. Ins. Co. (Ohio App. 6 Dist., 06-26-1998) 128
Auto. Ins. Co. (Ohio App. 6 Dist., 06-26-1998) 128
Ohio App.3d 607, 716 N.E.2d 250
Ohio App.3d 607, 716 N.E.2d 250
.
.
39
D
I
S
C
O
V
E
R
Y
 
(
1
 
O
F
 
2
)
Immediately ask for the claims file
Immediately ask for the personnel file of all
persons handling the claim.
Immediately ask for the claims handling
procedures manual.
Immediately ask for the recordings of the
telephone conversations.
Request the McKinsey Documents  (the fact that
you even know what McKinsey documents are
will get their attention).
40
D
I
S
C
O
V
E
R
Y
 
(
2
 
O
F
 
2
)
In an action alleging bad faith denial of insurance
In an action alleging bad faith denial of insurance
coverage, the insured is entitled to discover claims
coverage, the insured is entitled to discover claims
file materials containing attorney-client
file materials containing attorney-client
communications that are related to the issue of
communications that are related to the issue of
coverage and were created prior to the denial of
coverage and were created prior to the denial of
coverage. 
coverage. 
Boone v. Vanliner Ins. Co. (Ohio, 04-04-
Boone v. Vanliner Ins. Co. (Ohio, 04-04-
2001) 91 Ohio St.3d 209, 744 N.E.2d 154, 2001-
2001) 91 Ohio St.3d 209, 744 N.E.2d 154, 2001-
Ohio-27
Ohio-27
, reconsideration denied 
, reconsideration denied 
91 Ohio St.3d
91 Ohio St.3d
1530, 747 N.E.2d 254
1530, 747 N.E.2d 254
, certiorari denied 
, certiorari denied 
122 S.Ct.
122 S.Ct.
506, 534 U.S. 1014, 151 L.Ed.2d 415
506, 534 U.S. 1014, 151 L.Ed.2d 415
.
.
41
What if you are not the policy
holder, and the opposing party’s
insurance company will not settle?
Assuming damages in excess of the policy limits, if
the opposing party has inadequate assets to pay
the damages, send a letter indicating that opposing
counsel is to inform his or her client that you are
willing to enter into a consent judgment if the
insurance company refuses to pay the policy limits.
Demand that his client put the insurance company
on notice of the desire to settle for the policy limits.
If the insurance company refuses, ask for an
assignment of the bad faith claim.
42
The assignment of a bad faith claim.
(1 of 4)
In the instance of an insurance coverage
dispute, the assignment given by the insured to
the claimant typically contains three
components. The first is a judgment
establishing the insured’s liability.
 
 This
judgment can be obtained through various
procedures, that may be important in
determining the weight a subsequent court will
give to the judgment.
43
The assignment of a bad faith claim.
(2 of 4)
The second element is a covenant not to
execute given by the claimant to the insured,
guaranteeing that the claimant will not attempt
to enforce the judgment on any of the insured’s
assets, with the exception of the insurance
policy.
44
The assignment of a bad faith claim.
(3 of 4)
Finally, the insured assigns to the claimant, any
rights it may have under the insurance policy or
against the insurer.
 
 Armed with this assignment
of rights, the claimant then brings suit against
the insurer as assignee of the insured for
payment on the policy and additional bad faith
damages.
45
The Assignment of a bad faith claim.
(4 of 4)
The tortfeasor need not assign 100% of his bad faith
The tortfeasor need not assign 100% of his bad faith
claim.  In 
claim.  In 
Johnson, et al. v. Allstate, Case No.
Johnson, et al. v. Allstate, Case No.
WD68169, Circuit Court of Jackson County Missouri
WD68169, Circuit Court of Jackson County Missouri
,
,
Wayne Davis assigned only 90% of his bad faith claim
Wayne Davis assigned only 90% of his bad faith claim
against Allstate to the Johnsons for his drunken auto
against Allstate to the Johnsons for his drunken auto
accident that severely injured the Johnsons when
accident that severely injured the Johnsons when
Allstate refused to settle for the policy limits of
Allstate refused to settle for the policy limits of
$50,000.  The trial court awarded $10.5 million in
$50,000.  The trial court awarded $10.5 million in
damages as to the bad faith claim, making the
damages as to the bad faith claim, making the
tortfeasor a millionaire.
tortfeasor a millionaire.
46
Buy this trial guide if you are the
Plaintiff Against Allstate
47
From “Good Hands”
to Boxing Gloves
How Allstate Changed Casualty Insurance in
America  -  The Definitive Guide to Handling
Allstate Claims
David J. Berardinelli
Michael D. Freeman
Aaron C. DeShaw
Foreword by Eugene R. Anderson
Published by Trial Guides, LLC
*You must sign an affidavit that you are not
a defense attorney if you buy the book.
Slide Note
Embed
Share

Insurance bad faith is a serious issue where an insurer fails to act in good faith towards their insured. In Ohio, the Supreme Court has established the duty of good faith owed by insurers to policyholders. This duty includes the fair processing, payment, and settlement of claims. Failure to meet this duty can lead to legal action under the tort of bad faith, as outlined in relevant court cases. Additionally, the failure to disclose insurance coverage provisions can also result in legal consequences. Understanding these concepts is crucial for both insurers and insured parties in Ohio.


Uploaded on Sep 22, 2024 | 0 Views


Download Presentation

Please find below an Image/Link to download the presentation.

The content on the website is provided AS IS for your information and personal use only. It may not be sold, licensed, or shared on other websites without obtaining consent from the author. Download presentation by click this link. If you encounter any issues during the download, it is possible that the publisher has removed the file from their server.

E N D

Presentation Transcript


  1. BAD FAITH INSURANCE LITIGATION by John H. Phillips May 3, 2013 1

  2. BACKGROUND Insurance bad faith is a tort claim that an insured person may have against an insurance company for its bad acts. The Ohio Supreme court has held that an insurer owes a duty of good faith to its insured in the processing, payment, satisfaction, and settlement of the insured's claims. Hart v. Republic Mut. Ins. Co. (1949), 152 Ohio St. 185, 87 N.E.2d 347. This duty is often referred to as the "implied covenant of good faith and fair dealing" which automatically exists by operation of law in every insurance contract. 2

  3. NO LAWFUL BASIS AND FAILURE TO DETERMINE A LAWFUL BASIS In Motorists Mutual Ins. Co. v. Said (1992), 63 Ohio St.3d 690, 590 N.E.2d 1228, the Ohio Supreme Court held that a cause of action for the tort of bad faith exists: * * * when an insurer breaches its duty of good faith by intentionally refusing to satisfy an insured's claim where there is either (1) no lawful basis for the refusal coupled with actual knowledge of that fact or (2) an intentional failure to determine whether there was any lawful basis for such refusal. Intent that caused the failure may be inferred and imputed to the insurer when there is a reckless indifference to facts or proof reasonably available to it in considering the claim. 3

  4. NO LAWFUL BASIS DEFINED No lawful basis' for the intentional refusal to satisfy a claim means that the insurer lacks a reasonable justification in law or fact for refusing to satisfy the claim. Where a claim is fairly debatable the insurer is entitled to refuse the claim as long as such refusal is premised on a genuine dispute over either the status of the law at the time of the denial or the facts giving rise to the claim. Said, supra at 699-700, 590 N.E.2d 1228. 4

  5. FAILURE TO DISCLOSE COVERAGE OF INSURANCE OAC Ann. 3901-1-54: (E) Misrepresentation of policy provisions. (1) An insurer shall fully disclose to first party claimants all pertinent benefits, coverages or other provisions of an insurance contract under which a claim is presented. (2) No agent shall willfully conceal from first party claimants benefits, coverages or other provisions of any insurance contract when such benefits, coverages or other provisions are pertinent to a claim. 5

  6. Sidebar on The Ohio Unfair Claims Settlement Practice Act Ohio s appellate courts have consistently found no legislative intent that would create a private cause of action under the Ohio Unfair Claims Practice Act. As such, they have determined that creating such a cause of action would be inconsistent with the underlying purpose of the Act. (Strack v. Westfield Co. (1988), 33 Ohio App.3d 336, 515 N.E.2d 1005; Furr v. State Farm Mut. Auto. Ins. Co. (1998), 128 Ohio App.3d 607, 716 N.E.2d 250). The Act is regulatory only. However, violations of the Act can be introduced as evidence of bad faith insurance handling. 6

  7. WHY CLAIM BAD FAITH? (1 of 2) If an insurance company violates that covenant of good faith, the insured person (or "policyholder") may sue the company on a tort claim in addition to a standard breach of contract claim. The contract-tort distinction is significant because as a matter of public policy, punitive or exemplary damages are unavailable for contract claims, but are available for tort claims. 7

  8. WHY CLAIM BAD FAITH? (2 of 2) The result is that a plaintiff in an insurance bad faith case may be able to recover an amount larger than the original face value of the policy, if the insurance company's conduct was particularly egregious. Ohio law recognizes the tort of insurer bad faith in situations in which an insurer refuses to pay a valid claim. Florists' Mut. Ins. Co. v. Ludy Greenhouse Mfg. Corp. (S.D.Ohio, 09-30-2007) 521 F.Supp.2d 661. 8

  9. ONLY THE POLICYHOLDER HAS A BAD FAITH CLAIM. (1 of 2) A claim of bad faith cannot be brought against an insurer by a third-party claimant. Pasipanki v. Morton (1990), 61 Ohio App.3d 184, 185, 572 N.E.2d 234, citing Hoskins v. Aetna Life Ins. Co. (1983), 6 Ohio St.3d 272, 275-276, 452 N.E.2d 1315. The duty to act in good faith runs only from the insurer to its own insured. Pasipanki, at 185, 572 N.E.2d 234. 9

  10. ONLY THE POLICYHOLDER HAS A BAD FAITH CLAIM. (2 of 2) Although an insurer owes a duty to its insured to negotiate in good faith with a party injured by the insured, there is no such independent duty to the injured party, nor is he a third party beneficiary to the insurance contract. Achor v. Clinton Cty. Bd. of Mental Retardation & Developmental Disabilities (June 5, 1986), Franklin App. No. 86AP-60. 10

  11. THE INSURANCE COMPANY SAID NO. IS IT BAD FAITH? THERE ARE TWO TYPES OF BAD FAITH INSURANCE CLAIMS. FAILURE TO PAY Failure to pay a covered loss means that you are the policy holder, and you have suffered a loss covered by the policy of insurance. You make a claim and the insurance company refuses to pay the claims without justification. FAILURE TO PROTECT Failure to protect means that someone has made a claim against you, and the insurance company refuses to protect you against the claim within the policy limits, and an excess judgment is taken against the policy holder. 11

  12. FAILURE TO PAY EXAMPLE HOUSE FIRE AND PROPERTY DAMAGE ONLY CLAIM Facts: Your house catches fire due to your negligence in leaving a candle burning. You file a proof of claim with your homeowner s insurance company, and the insurance company says that you may not collect because the fire is suspicious. Question: Is it bad faith? Answer: Maybe, but not necessarily. 12

  13. ARSON DEFENSE In defending against an action to recover on a fire insurance policy, the insurer may raise the defense of arson as an affirmative defense; to establish such a defense, the insurer must prove, by a preponderance of the evidence (either circumstantial or direct), that three basic elements exist: (1) the fire was of an incendiary nature; (2) the insured had a motive to commit arson; and (3) the insured had the opportunity to cause the fire to be set. Caserta v. Allstate Ins. Co. (Franklin 1983) 14 Ohio App.3d 167, 470 N.E.2d 430, 14 O.B.R. 185. 13

  14. YOUR DUTY TO COOPERATE If insured's failure to cooperate prejudices rights of insurer and is material and substantial, insured's lack of cooperation constitutes defense to liability. Templin v. Grange Mut. Cas. Co. (Montgomery 1992) 81 Ohio App.3d 572, 611 N.E.2d 944. Insured's refusal to produce requested records for insurer, including financial records, income tax returns, rental property records, bank statements, credit card account statements, and cellular phone records, in relation to insured's fire loss claim was a breach of duty to cooperate with insurer and materially prejudiced insurer's investigation, precluding insured's claims for breach of contract and bad faith. Doerr v. Allstate Ins. Co. (C.A.6 (Ohio), 02-03-2005) No. 03-4529, 121 Fed.Appx. 638, 2005 WL 271702, Unreported. 14

  15. Examination Under Oath The relevant insurance contract provisions required both plaintiffs to submit to examinations under oath and to provide documents. Because plaintiffs failed to do so, the court concludes that AFIC had no contractual obligation to provide the plaintiffs with insurance coverage . . . Savage v. Am. Family Ins. Co., 2008-Ohio-4460, 178 Ohio App. 3d 154, 162, 897 N.E.2d 195, 201 (2008) Produce whatever records are requested before the EUO, and produce whatever records are requested as a result of the EUO. Some attorneys make these very confrontational. 15

  16. Polygraph Evidence (1 of 3) Does the client have to submit to a polygraph? Check your policy. I have never heard of a mandatory obligation to submit to a polygraph, but your client may voluntarily submit if he so chooses. But beware . . . Damned if you do Damned if you don t 16

  17. POLYGRAPH EVIDENCE (2 of 3) Damned if you do Failing a polygraph is a basis for rejection of coverage. Where an insured claims that his insurer has rejected fire insurance coverage in bad faith and without basis, the insurer may present the results of a polygraph examination of the insured to show that the insured had answered questions deceptively, not as proof of arson, but to counter the insured's claim of bad faith and to establish a basis for rejection of coverage. Moss v. Nationwide Mut. Ins. Co. (Franklin 1985) 24 Ohio App.3d 145, 493 N.E.2d 969, 24 O.B.R. 234 17

  18. Polygraph Evidence (3 of 3) Damned if you don t. Admissible if you refuse as evidence of insured credibility and Insurer s motive in refusing the claim. Murphy v. Cincinnati Ins. Co., 772 F.2d 273 (1985), at 277, stated: Since [the insured's] willingness to submit to a polygraph examination reflected upon his credibility and the defendant's motive in refusing the claim, the district court did not err in concluding that the evidence is relevant. 18

  19. Third Party Beneficiaries Mortgage Holders are almost always listed as an additional insured on your homeowners insurance policy. Mortgage companies are not always the best at filing proofs of loss. Questions: Does the insurance company have an obligation to pay off the Mortgage Holder as a Third Party Beneficiary? Answer: No! Not without a proof of loss. 19

  20. YOUR MORTGAGE COMPANY AS AN ADDITIONAL INSURED Homeowners' insurer's delay in paying mortgage holder . . . did not establish bad faith handling of fire loss claim, where mortgage holder was entitled to be paid only upon submission of proof of loss, insurer requested proof of loss, and mortgage holder never responded to insurer's request. Farmers Ins. of Columbus, Inc. v. Lister (Ohio App. 5 Dist., Fairfield, 01-09-2006) No. 2005-CA-29, 2006-Ohio-142, 2006 WL 92946, Unreported, appeal not allowed 109 Ohio St.3d 1481, 847 N.E.2d 1226, 2006-Ohio-2466. Consider a suit against the mortgage holder. 20

  21. STATUTE OF LIMITATIONS BREACH OF CONTRACT EVERY LAWYER KNOWS A BREACH OF WRITTEN CONTRACT IS A 15 YEAR STATUTE OF LIMITATIONS, RIGHT? NO!!! R.C. 2305.06 - Except as provided in sections 126.301 and 1302.98 of the Revised Code, an action upon a specialty or an agreement, contract, or promise in writing shall be brought within fifteen eight years after the cause thereof of action accrued. 2012 S 224, eff. 9-28-12 21

  22. STATUTE OF LIMITATIONS BAD FAITH An action by an insured against an insurer, alleging bad faith on the part of the insurer in adjusting damage claims, is essentially a tort action governed by the four-year statute of limitations set forth in RC 2305.09, rather than a contractual limitation period contained in the insurance policy. United Dept. Stores Co. No. 1 v. Continental Cas. Co. (Hamilton 1987) 41 Ohio App.3d 72, 534 N.E.2d 878. 22

  23. MALPRACTICE ALERT CHECK YOUR POLICY!!!! An insurance contract may lawfully limit the time within which a suit may be brought on that contract of insurance if the period fixed in the policy is not unreasonable. Appel v. Cooper Ins. Co. (1907), 76 Ohio St. 52, 80 N.E. 955. Such provisions are valid even though the limitation period provided in the contract of insurance is shorter than the period specified in the applicable statute, and a limitation on periods for the commencement of actions to a period of 12 months is not unreasonable. Appel, supra. 23

  24. A Personal Injury example Facts: Your client was riding his motorcycle when he was hit by an automobile. Your client suffered multiple broken bones and a skull fracture. He has significant medical bills. Liability is not disputed. The driver of the automobile has $12,500 in insurance coverage and no other assets. Your client has coverage for Uninsured Motorist Coverage (UIM) claims of $25,000 with Allstate Insurance. 24

  25. A simple case - right? Demand policy limits from the tortfeasor. They Agree to pay. MALPRACTICE ALERT Do not accept policy limits from the tortfeasor until the UIM carrier gives you permission to accept after an asset search. Accepting without the permission of the UIM Carrier could void the UIM coverage. 25

  26. Your letter to Allstate, your client s UIM Carrier. Advise the UIM carrier of the accident Give a brief summary of the facts Ask the UIM carrier to perform an asset check of the tortfeasor Advise that if there are inadequate assets found, ask for permission to settle with the tortfeasor, or demand that Allstate advance the tortfeasor s policy limits ($12,500). Advise that you are making a claim under the UIM policy for policy limits. 26

  27. Allstates response We are in receipt of your letter stating that you represent John Doe, our insured in this accident. The policy was thoroughly reviewed and he doesn t have Underinsured Motorist Coverage. Please contact me at the number listed below if you have any further questions. REALLY? 27

  28. Your Response Acknowledge receipt of their letter Attach a copy of the declarations page Request a complete copy of the policy I go through the agent for this. Much faster. Ask for an explanation of why the UIM is being denied since it is listed on the declarations page. Ask them to Please respond ASAP. 28

  29. Allstates Response Please be advised that I am in receipt of your letter. The policy information that was included with the letter was reviewed with the coverages he has on his policy for the motorcycle. There is Uninsured Motorist Bodily Injury coverage. That is if the other party had no insurance. There is no Underinsured Motorist Bodily Injury coverage on this file. This coverage is needed if the liable party has lower limits than our policy for the medical expenses. Please let me know if you have any further questions. 29

  30. Your Response (1 of 5) State the steps you have taken to recover the UIM policy coverage, and be specific. Allstate s representative and I confirmed that Policy Form Number AU10777 was the applicable policy, and together we read from Page 14, Part 3, as follows: An Uninsured Motor Vehicle Is: . . . 5. an underinsured motor vehicle which has liability protection . . . less than the limits of liability for Uninsured Motorist Insurance shown on the Policy Declarations. 30

  31. Your Response (2 of 5) Ask for any applicable endorsements affecting coverage: I asked Allstate to send to me via email or facsimile any endorsements in place, or waivers that my client may have signed, that would have changed the above part of the applicable policy. To date, I have received nothing. However, my office received a telephone call on February 24, 2011, from Allstate again confirming that Allstate would not provide Underinsured Motorist Coverage, because although your insured and my client had Uninsured Motor Vehicle Coverage, Allstate s position is that he does not have Underinsured Motorist Coverage, despite the above language from the policy. 31

  32. Your Response (3 of 5) Remind them of the law: Allstate s actions are specifically prohibited by the Ohio Department of Insurance, which states in pertinent part from OAC Ann. 3901-1-54: (E) Misrepresentation of policy provisions. (1) An insurer shall fully disclose to first party claimants all pertinent benefits, coverages or other provisions of an insurance contract under which a claim is presented. (2) No agent shall willfully conceal from first party claimants benefits, coverages or other provisions of any insurance contract when such benefits, coverages or other provisions are pertinent to a claim. 32

  33. Your Response (4of 5) Advise them of the bad faith claim: Allstate has breached its contract with its insured, and as a result of the breach, compensatory damages recoverable from Allstate are not limited by the original policy limit. Furthermore, because your actions are in bad faith, my client demands exemplary damages over and above his compensatory damages suffered. I am asking that you immediately forward this letter and your entire file to your bad faith claims unit to engage the undersigned in negotiations on the damages recoverable as a result of Allstate s actions. 33

  34. Your Response (5 of 5) Evidence Preservation I am demanding that you enter into an evidence preservation agreement, and I am requesting that all electronically stored information be preserved for purposes of litigation in this matter. Since Allstate warns all callers that their calls will be recorded, this demand includes electronically recorded telephone conversations. Failure to preserve and to produce any evidence in your possession will be grounds for a spoliation of evidence claim against Allstate also. 34

  35. Allstates Response I am pleased that we have been able to settle this claim in an amicable manner. You will find enclosed the release agreement for your client s signature. Please return a signed original of the enclosed release to my attention. With the release was a check for $12,500. The Release stated that the insured, releases Allstate from any and all liability and from any and all contractual obligations Insisting on a release of all liability and not just contractual liability is bad faith. 35

  36. THE COMPLAINT 1. Declaratory Judgment Declare the Policy of Insurance to be valid. 2. Breach of Contract Declare that the Insurance Company breached the contract. 3. Bad Faith Declare that the Insurance Company s Breach was in Bad Faith. 4. Punitive Damages Punish them so that the insurance company does not do this again. 5. Attorney Fees Award attorney fees for having to bring the Insurance Company to Justice. 36

  37. YOU MUST REQUEST ATTORNEY FEES IN THE COMPLAINT Despite a finding that a defendant acted in bad faith, a trial court is without jurisdiction to award attorney fees to a plaintiff where the plaintiff has failed to petition the court for fees in its declaratory judgment action as required under RC 2721.09. Wagner v. Cleveland (Cuyahoga 1988) 62 Ohio App.3d 8, 574 N.E.2d 533. (Decided under the Declaratory Judgment Statute R.C. 2721.09) 37

  38. EXPECT A BIFURCATION OF CLAIMS FOR BAD FAITH R.C. 2315.21(B) creates, defines, and regulates a substantive, enforceable right to separate stages of trial relating to the presentation of evidence for compensatory and punitive damages in tort actions and therefore takes precedence over Civ.R. 42(B). Civ.R. 42(B) is discretionary with the court, and R.C. 2315.21(B) is mandatory. Havel v. Villa St. Joseph, 2012-Ohio-552, 131 Ohio St. 3d 235, 245, 963 N.E.2d 1270, 1279 (2012). 38

  39. DO I NEED AN EXPERT WITNESS? No, but you may use an expert witness. Testimony explaining basic principles of insurance law and practice and opining that the insured's claim for uninsured motorist (UM) benefits was handled improperly was admissible under the expert testimony rule in the insured's bad faith suit; the testimony either related to matters beyond the knowledge or experience possessed by lay persons or dispels a misconception common among lay persons. Furr v. State Farm Mut. Auto. Ins. Co. (Ohio App. 6 Dist., 06-26-1998) 128 Ohio App.3d 607, 716 N.E.2d 250. 39

  40. DISCOVERY (1 OF 2) Immediately ask for the claims file Immediately ask for the personnel file of all persons handling the claim. Immediately ask for the claims handling procedures manual. Immediately ask for the recordings of the telephone conversations. Request the McKinsey Documents (the fact that you even know what McKinsey documents are will get their attention). 40

  41. DISCOVERY (2 OF 2) In an action alleging bad faith denial of insurance coverage, the insured is entitled to discover claims file materials containing attorney-client communications that are related to the issue of coverage and were created prior to the denial of coverage. Boone v. Vanliner Ins. Co. (Ohio, 04-04- 2001) 91 Ohio St.3d 209, 744 N.E.2d 154, 2001- Ohio-27, reconsideration denied 91 Ohio St.3d 1530, 747 N.E.2d 254, certiorari denied 122 S.Ct. 506, 534 U.S. 1014, 151 L.Ed.2d 415. 41

  42. What if you are not the policy holder, and the opposing party s insurance company will not settle? Assuming damages in excess of the policy limits, if the opposing party has inadequate assets to pay the damages, send a letter indicating that opposing counsel is to inform his or her client that you are willing to enter into a consent judgment if the insurance company refuses to pay the policy limits. Demand that his client put the insurance company on notice of the desire to settle for the policy limits. If the insurance company refuses, ask for an assignment of the bad faith claim. 42

  43. The assignment of a bad faith claim. (1 of 4) In the instance of an insurance coverage dispute, the assignment given by the insured to the claimant typically contains three components. The first is a judgment establishing the insured s liability.This judgment can be obtained through various procedures, that may be important in determining the weight a subsequent court will give to the judgment. 43

  44. The assignment of a bad faith claim. (2 of 4) The second element is a covenant not to execute given by the claimant to the insured, guaranteeing that the claimant will not attempt to enforce the judgment on any of the insured s assets, with the exception of the insurance policy. 44

  45. The assignment of a bad faith claim. (3 of 4) Finally, the insured assigns to the claimant, any rights it may have under the insurance policy or against the insurer.Armed with this assignment of rights, the claimant then brings suit against the insurer as assignee of the insured for payment on the policy and additional bad faith damages. 45

  46. The Assignment of a bad faith claim. (4 of 4) The tortfeasor need not assign 100% of his bad faith claim. In Johnson, et al. v. Allstate, Case No. WD68169, Circuit Court of Jackson County Missouri, Wayne Davis assigned only 90% of his bad faith claim against Allstate to the Johnsons for his drunken auto accident that severely injured the Johnsons when Allstate refused to settle for the policy limits of $50,000. The trial court awarded $10.5 million in damages as to the bad faith claim, making the tortfeasor a millionaire. 46

  47. Buy this trial guide if you are the Plaintiff Against Allstate From Good Hands to Boxing Gloves How Allstate Changed Casualty Insurance in America - The Definitive Guide to Handling Allstate Claims David J. Berardinelli Michael D. Freeman Aaron C. DeShaw Foreword by Eugene R. Anderson Published by Trial Guides, LLC *You must sign an affidavit that you are not a defense attorney if you buy the book. 47

More Related Content

giItT1WQy@!-/#giItT1WQy@!-/#giItT1WQy@!-/#giItT1WQy@!-/#giItT1WQy@!-/#giItT1WQy@!-/#