The Duty of Good Faith & Fair Dealing Continues After Court Finds No Duty to Defend
Post 5076
Read the full article at https://lnkd.in/gKv_Zhzn, see the full video at https://lnkd.in/gkPHVckZ and at https://lnkd.in/gXKjvr56 and at https://zalma.com/blog plus more than 5050 posts.
Duty to Defend Required After New Facts Delivered
Nautilus Insurance Co. was entitled to rely on trial court Judge Dorsey's summary judgment ruling in a previously filed separate declaratory judgment action ("First Coverage Action" ) in which Judge Dorsey determined Nautilus did not have a duty to defend at that time. Because Nautilus was told it did not have a duty to defend Plaintiff Robert Wood, it was not liable for bad faith failure to settle during the September 2016 mediation three days after the summary judgment ruling.
In Robert Wood, et al. v. Nautilus Insurance Co., Nos. 24-293, 24-551, United States Court of Appeals, Ninth Circuit (May 8, 2025) resolved the dispute over bad faith conduct with later developed facts.
THE DECISION
The Ninth Circuit concluded that district court did not commit clear error in determining Nautilus was not liable for bad faith failure to settle, because Nautilus did not have a duty to attempt to settle until there was a duty to defend, which was not triggered until after the first ReTender of the claim.
To allege a claim for bad faith, a party must plead facts sufficient to demonstrate that the insurer had no reasonable basis for disputing coverage, and that the insurer knew or recklessly disregarded the fact that there was no reasonable basis for disputing coverage.
Arguments Not Raised "Clearly And Distinctly" In The Opening Brief Are Forfeited
Wood forfeited his claim for emotional distress damages by not "clearly and distinctly" asserting the claim in his opening brief and merely stating, "because the District Court denied Wood's failure-to-settle claim, it also denied his claim for emotional distress damages."
A plaintiff must establish a bad faith claim to be entitled to emotional distress damages. Given Nautilus was not liable for bad faith failure to settle, Wood had to tie his emotional distress damages to the denial of the Third or Fourth Re-Tenders, the only acts found to be in bad faith. Wood failed to do so and as such the district court properly denied his claim for emotional distress damages.
The district court did not commit clear error in finding that Nautilus is also not liable for bad faith failure to investigate the pre-mediation evaluation report.
The Ninth Circuit concluded that the September 23, 2016 pre-mediation report did not trigger Nautilus' duty to defend - it merely provided additional evidence of a potential duty to defend. However, Judge Dorsey's order in the First Coverage Action, three days before the mediation, made clear Nautilus did not have a duty to defend. It was reasonable, therefore, for Nautilus to rely on the court order concluding it did not have a duty to defend.
The district court properly concluded that the punitive damages awarded in the underlying suit ("Switzer Action" ) were not recoverable against Nautilus because such indemnification is prohibited by Nevada public policy.
The unjust enrichment claim hinged on whether equity requires the policyholder, Wood, to pay. The Nevada Supreme Court has determined that when a court determines that the insurer never had a duty to defend, and the insurer clearly and expressly reserved its right to seek reimbursement, it is equitable to require the policyholder to pay.
It was ultimately determined that Nautilus had a duty to defend Wood in the Switzer Action, therefore, Nautilus cannot be said to have performed in excess of what was bargained for between Wood and Nautilus. Subsequently, the district court did not err in determining Nautilus was not entitled to reimbursement of its defense costs before July 28, 2017.
The district court found that Nautilus' denial of the duty to defend became unreasonable after Wood's Third Re-Tender, when it was revealed that the Weide Email falsely stated that Switzer was banned from selling certain implants in California.
The district court concluded that "[w]hile it was reasonable for [Nautilus] to rely on Judge Dorsey's rulings to some extent," once the falsity of the Weide Email was known, Nautilus "reckless[ly] disregard[ed]" the fact that there was no reasonable basis for disputing coverage and therefore acted in bad faith.
The district court concluded Nautilus acted in bad faith in denying the Fourth Re-Tender. This account of the evidence is plausible in light of the entire record, and therefore, the district court's determination was affirmed.
ZALMA OPINION
After an insurance company receives a trial court judgment that it has no duty to defend it can refuse to defend or participate in a mediation. However, the duty of good faith does not go away and the insurer must consider, in good faith, new facts that create a duty to defend. Nautilus was not required to pay punitive damages assessed against its insured nor was it entitled to a refund of the funds it spent to defend the insured because the Fourth Tender, and its evidence, created a duty to defend.
(c) 2025 Barry Zalma & ClaimSchool, Inc.
Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.
Subscribe to my substack at https://barryzalma.substack.com/subscribe
Go to X @bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/account/content?type=all; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://lnkd.in/gwEYk
Arsonist Tried To Represent Himself, Failed, and Sought Habeas Relief
Post number 5357
Read the full article at https://www.linkedin.com/pulse/he-who-acts-his-own-lawyer-has-idiot-client-barry-zalma-esq-cfe-d4bwc, See the full video at and at and at https://zalma.com/blog.
Karacson’s Arson for Profit Attempt Required Skill & Experience to Succeed
In Steve Ellis Karacson v. David Shaver, Warden, No. 25-1089, United States Court of Appeals, Sixth Circuit (May 20, 2026) Steve Karacson was convicted in Michigan state court of arson and insurance fraud after evidence showed he burned his own insured home. Investigators found multiple points of origin, gasoline odor, and evidence tying him to the scene, including cell-phone location data and a receipt showing he had purchased a gas can and gloves shortly before the fire.
FACTS
Karacson initially had appointed counsel, but his relationships with both appointed attorneys ...
Foolish to Repeatedly Disobey Court Orders
All That Remains For Trial Is Plaintiff’s Damages On Each Of These Claims And Establishing Proximate Causation Of Those Damages.
Post number 5348
See the full video at and at and at https://zalma.com/blog plus 5300 posts.
In Linh Wang v. Esurance Insurance Company, No. C24-0447-JCC, United States District Court, W.D. Washington, Seattle (May 1, 2026) John C. Coughenour, United States District Judge, found that throughout this case, culminating with its briefing on Plaintiff’s renewed motion and that Defendant has subjected Plaintiff to unnecessary motion practice for clearly discoverable information and made dubious representations (including to the Court).
FACTUAL BACKGROUND
This case involves an underinsured/uninsured motorist insurance bad faith claim arising from a 2017 motor vehicle collision. The plaintiff, Linh Wang, alleges that Esurance Insurance ...
The Right to Negotiate with Insurer is Not an Assignment of Claims
Post number 5347
Read the full article at https://www.linkedin.com/pulse/ambiguous-contract-repair-assignment-barry-zalma-esq-cfe-2xppc, see the full video at https://rumble.com/v79is1s-ambiguous-contract-to-repair-not-an-assignment.html and at and at https://zalma.com/blog plus more than 5300 posts.
Nebraska Requires an Actual Assignment to Allow Contractor to Sue Insurer
In Millard Gutter Company, a corporation doing business as Millard Roofing and Gutter v. Farmers Mutual Insurance Company of Nebraska, also known as Farmers Mutual Insurance, also known as Farmers Mutual, No. A-24-818, Court of Appeals of Nebraska (May 5, 2026) Millard sued Farmers as an assignee of Jane Anzalone who had hired Millard Gutter to repair the roof of her home and agreed to allow Millard Gutter to coordinate with her insurer, Farmers Mutual, concerning reimbursement for repairs authorized under her insurance policy.
FACTUAL BACKGROUND
In ...
Qui Tam Case Without Evidence to Prove Fraud Fails
Post number 5369
Read the full article at https://www.linkedin.com/pulse/qui-tam-insurer-contended-defrauded-barry-zalma-esq-cfe-pgfgc and at https://zalma.com/blog plus more than 5550 posts.
In People Of The State Of California Ex Rel. Heath & Yuen, APC v. Silver Bird Auto Leasing, LLC et al., B342847, California Court of Appeals, Second District, Eighth Division (June 5, 2026) Heath & Yuen, APC defended parties in an automobile collision case involving a McLaren and a tour van. After that case settled for $25,000, the firm filed a qui tam action under California’s Insurance Frauds Prevention Act (IFPA) against Silver Bird Auto Leasing, LLC, X-Law Group, PC, and Filippo Marchino. The firm alleged three fraudulent acts in the underlying litigation:
1. the complaint falsely stated the McLaren was making a “legal turn,”
2. respondents produced a fraudulent repair bill/estimate, and
3. respondents failed to disclose Marchino’s GEICO insurance and its payment for repairs....
Full Faith and Credit Act Controlled
Read the full article at https://lnkd.in/evHXiiFE and at https://zalma.com/blog.
Posted on June 9, 2026 by Barry Zalma
Post number 5368
Posted on June 9, 2026 by Barry Zalma
In Prime Insurance Company, Inc. v. Medicab Transportation, LLC, Jason Rhodes, and Dale Johnson v. Prime Insurance Company, Inc and Prime Property & Casualty Insurance, Inc. No. 2:24-cv-421-SPC-KRH, United States District Court, M.D. Florida, Fort Myers Division (June 3, 2026) Medicab, a paratransit company, bought two policies in 2021: a Business Auto Policy from PPCI and a Commercial Liability Policy from Prime. Both policies, as originally written, appeared to cover injuries arising from loading and unloading patients from Medicab vans.
After a patient, Margaret St. Aubin, fell while being unloaded from a van and suffered injuries, her Estate made a $1 million demand. Prime and its claims administrator concluded that the Commercial Policy’s loading/unloading language had been included by mutual mistake, because...
Full Faith and Credit Act Controlled
Read the full article at https://lnkd.in/evHXiiFE and at https://zalma.com/blog.
Posted on June 9, 2026 by Barry Zalma
Post number 5368
Posted on June 9, 2026 by Barry Zalma
In Prime Insurance Company, Inc. v. Medicab Transportation, LLC, Jason Rhodes, and Dale Johnson v. Prime Insurance Company, Inc and Prime Property & Casualty Insurance, Inc. No. 2:24-cv-421-SPC-KRH, United States District Court, M.D. Florida, Fort Myers Division (June 3, 2026) Medicab, a paratransit company, bought two policies in 2021: a Business Auto Policy from PPCI and a Commercial Liability Policy from Prime. Both policies, as originally written, appeared to cover injuries arising from loading and unloading patients from Medicab vans.
After a patient, Margaret St. Aubin, fell while being unloaded from a van and suffered injuries, her Estate made a $1 million demand. Prime and its claims administrator concluded that the Commercial Policy’s loading/unloading language had been included by mutual mistake, because...
