When Claims are Fairly Debatable There is No Bad Faith
Post 4986
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Homeowners appealed from the district court’s denial of their breach-of-contract, consequential-damages, and bad-faith claims in Donnie Paul Bradley and Melanie Yvonne Bradley v. Allstate Insurance Company, No. 23-1397, Court of Appeals of Iowa on January 23, 2025 resolved the disputes.
BACKGROUND:
Donnie and Melanie Bradley appealed from the district court’s summary judgment ruling and final judgment following contractual disputes against Allstate Insurance Company. The Bradleys alleged errors in the district court’s interpretation of the insurance policy for their breach-of-contract claim and the granting of summary judgment to Allstate on their consequential damages and bad-faith claims. The dispute arose as a result of:
1. The Bradleys purchased an Allstate insurance policy in 2014 for their Cedar Rapids home.
2. The policy included actual cash value (ACV) and replacement cost value (RCV) coverage.
3. The August 2020 Derecho windstorm caused significant damage to their home.
4. The Bradleys reported the damage, and Allstate acknowledged the losses were covered under the policy.
5. The Bradleys, unhappy with Allstate, demanded appraisal in November 2020.
6. The parties signed an appraisal for the ACV in September 2021, and Allstate paid the Bradleys in accordance with the insurance policy.
7. The Bradleys claimed breach of contract for Allstate denying RCV coverage, alleged bad faith, and demanded consequential and punitive damages.
8. The Bradleys spent more on repairs than Allstate paid out and they continued with litigation.
9. The Bradleys ultimately paid for the repairs by refinancing their home to establish a home equity line of credit and taking out a loan against a retirement account.
10. Allstate was to reimburse the Bradleys for repair costs in excess of ACV-the equivalent of the RCV-if repairs were completed within 180 days of the ACV payment.
CLAIMS AND PROCEEDINGS:
The district court granted summary judgment to Allstate on the consequential damages and bad-faith claims but denied it for the breach-of-contract claim.
The Bradleys withdrew their request for a jury trial, and Allstate eventually paid the RCV from the appraisal.
APPEAL:
The Court of Appeals upheld the district court’s decision that consequential damages were not available under Iowa law.
The Court of Appeals agreed with the district court that the bad-faith claim was fairly debatable and that the Bradleys did not set forth a valid bad-faith claim.
DISPOSITION:
The question of whether the Bradleys were entitled to RCV payments was found to be fairly debatable as a matter of law. The Court concluded that the undisputed facts establish that there was no unreasonable delay in the ACV payment. Allstate reasonably disputed coverage as to the RCV payments on the basis that the explicit terms of the policy require repair to be completed for an RCV payment to be made.
The claim was, in the opinion of the Court of Appeals, fairly debatable because replacement was not completed within 180 days of the ACV payment. The Court of Apeals concluded that the Bradleys could not succeed on their bad faith claim.
ZALMA OPINION
The Iowa Court of Appeals educated the Bradleys and their counsel holding that an insurance policy is a contract with conditions. The Allstate policy provided, as a condition, that to receive the difference between ACV payment and the RCV the repairs must be completed within 180 days of the ACV payment. Although there was a dispute over when the repairs were completed Allstate paid both the ACV and the RCV making the entire claim moot and the other claimed damages were fairly debatable and no evidence to support a bad faith claim.
(c) 2025 Barry Zalma & ClaimSchool, Inc.
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Jury’s Findings Interpreting Insurance Contract Affirmed
Post 5105
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Madelaine Chocolate Novelties, Inc. (“Madelaine Chocolate”) appealed the district court’s judgment following a jury verdict in favor of Great Northern Insurance Company (“Great Northern”) concerning storm-surge damage caused by “Superstorm Sandy” to Madelaine Chocolate’s production facilities.
In Madelaine Chocolate Novelties, Inc., d.b.a. The Madelaine Chocolate Company v. Great Northern Insurance Company, No. 23-212, United States Court of Appeals, Second Circuit (June 20, 2025) affirmed the trial court ruling in favor of the insurer.
BACKGROUND
Great Northern refused to pay the full claim amount and paid Madelaine Chocolate only about $4 million. In disclaiming coverage, Great Northern invoked the Policy’s flood-exclusion provision, which excludes, in relevant part, “loss or damage caused by ....
Failure to Name a Party as an Additional Insured Defeats Claim
Post 5104
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Contract Interpretation is Based on the Clear and Unambiguous Language of the Policy
In Associated Industries Insurance Company, Inc. v. Sentinel Insurance Company, Ltd., No. 23-CV-10400 (MMG), United States District Court, S.D. New York (June 16, 2025) an insurance coverage dispute arising from a personal injury action in New York State Supreme Court.
The underlying action, Eduardo Molina v. Venchi 2, LLC, et al., concerned injuries allegedly resulting from a construction accident at premises owned by Central Area Equities Associates LLC (CAEA) and leased by Venchi 2 LLC with the USDC required to determine who was entitled to a defense from which insurer.
KEY POINTS
Parties Involved:
CAEA is insured by Associated Industries Insurance Company, Inc. ...
Exclusion Establishes that There is No Duty to Defend Off Site Injuries
Post 5103
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Attack by Vicious Dog Excluded
In Foremost Insurance Company, Grand Rapids, Michigan v. Michael B. Steele and Sarah Brown and Kevin Lee Price, Civil Action No. 3:24-CV-00684, United States District Court, M.D. Pennsylvania (June 16, 2025)
Foremost Insurance Company (“Foremost”) sued Michael B. Steele (“Steele”), Sarah Brown (“Brown”), and Kevin Lee Price (“Price”) (collectively, “Defendants”). Foremost sought declaratory relief in the form of a declaration that
1. it owes no insurance coverage to Steele and has no duty to defend or indemnify Steele in an underlying tort action and
2. defense counsel that Foremost has assigned to Steele in the underlying action may withdraw his appearance.
Presently before the Court are two ...
ZIFL Volume 29, Issue 10
The Source for the Insurance Fraud Professional
See the full video at https://lnkd.in/gK_P4-BK and at https://lnkd.in/g2Q7BHBu, and at https://zalma.com/blog and at https://lnkd.in/gjyMWHff.
Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/ You can read the full issue of the May 15, 2025 issue at http://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-05-15-2025.pdf
This issue contains the following articles about insurance fraud:
Health Care Fraud Trial Results in Murder for Hire of Witness
To Avoid Conviction for Insurance Fraud Defendants Murder Witness
In United States of America v. Louis Age, Jr.; Stanton Guillory; Louis Age, III; Ronald Wilson, Jr., No. 22-30656, United States Court of Appeals, Fifth Circuit (April 25, 2025) the Fifth Circuit dealt with the ...
Professional Health Care Services Exclusion Effective
Post 5073
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This opinion is the recommendation of a Magistrate Judge to the District Court Judge and involves Travelers Casualty Insurance Company and its duty to defend the New Mexico Bone and Joint Institute (NMBJI) and its physicians in a medical negligence lawsuit brought by Tervon Dorsey.
In Travelers Casualty Insurance Company Of America v. New Mexico Bone And Joint Institute, P.C.; American Foundation Of Lower Extremity Surgery And Research, Inc., a New Mexico Corporation; Riley Rampton, DPM; Loren K. Spencer, DPM; Tervon Dorsey, individually; Kimberly Dorsey, individually; and Kate Ferlic as Guardian Ad Litem for K.D. and J.D., minors, No. 2:24-cv-0027 MV/DLM, United States District Court, D. New Mexico (May 8, 2025) the Magistrate Judge Recommended:
Insurance Coverage Dispute:
Travelers issued a Commercial General Liability ...
A Heads I Win, Tails You Lose Story
Post 5062
Posted on April 30, 2025 by Barry Zalma
"This is a Fictionalized True Crime Story of Insurance Fraud that explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is designed to help everyone to Understand How Insurance Fraud in America is Costing Everyone who Buys Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the Perpetrators than any Other Crime."
Immigrant Criminals Attempt to Profit From Insurance Fraud
People who commit insurance fraud as a profession do so because it is easy. It requires no capital investment. The risk is low and the profits are high. The ease with which large amounts of money can be made from insurance fraud removes whatever moral hesitation might stop the perpetrator from committing the crime.
The temptation to do everything outside the law was the downfall of the brothers Karamazov. The brothers had escaped prison in the old Soviet Union by immigrating to the United...
