The Duty of Good Faith & Fair Dealing Continues After Court Finds No Duty to Defend
Post 5076
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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.
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Interpleader Protects All Claimants Against Life Policy and the Insurer
Who’s on First to Get Life Insurance Proceeds
Post 5184
See the full video at https://lnkd.in/gyxQfnUz and at https://lnkd.in/gAd3wqWP, and at https://zalma.com/blog plus more than 5150 posts.
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Interpleader Protects All Claimants Against Life Policy and the Insurer
In Metropolitan Life Insurance Company v. Selena Sanchez, et al, No. 2:24-cv-03278-TLN-CSK, United States District Court, E.D. California (September 3, 2025) the USDC applied interpleader law.
Case Overview
This case involves an interpleader action brought by the Metropolitan Life Insurance Company (Plaintiff-in-Interpleader) against Selena Sanchez and other defendants (Defendants-in-Interpleader).
Key Points
Plaintiff-in-Interpleader’s Application:
The Plaintiff-in-Interpleader...
A Claim by Any Other Name is not a Claim
Post 5182
It is Imperative that Insured Report Potential Claim to Insurers
Read the full article at https://lnkd.in/gfbwAsxw, See the full video at https://lnkd.in/gea_hgB3 and at https://lnkd.in/ghZ7gjxy, and at https://zalma.com/blog plus more than 5150 posts.
In Jeffrey B. Scott v. Certain Underwriters At Lloyd’s, London, Subscribing To Policy No. B0901li1837279, RLI Insurance Company, Certain Underwriters At Lloyds, London And The Insurance Company, Subscribing To Policy No. B0180fn2102430, No. 24-12441, United States Court of Appeals, Eleventh Circuit (August 25, 2025) the court explained the need for a claim to obtain coverage.
Case Background:
This appeal arises from a coverage dispute under a Directors & Officers (D&O) insurance policy. Jeffrey B. Scott, the plaintiff-appellant, was terminated from his role as CEO, President, and Secretary of Gemini Financial Holdings, LLC in October 2019. Following his termination, Scott threatened legal action against Gemini, and ...
A Claim by Any Other Name is not a Claim
Post 5182
It is Imperative that Insured Report Potential Claim to Insurers
Read the full article at https://lnkd.in/gfbwAsxw, See the full video at https://lnkd.in/gea_hgB3 and at https://lnkd.in/ghZ7gjxy, and at https://zalma.com/blog plus more than 5150 posts.
In Jeffrey B. Scott v. Certain Underwriters At Lloyd’s, London, Subscribing To Policy No. B0901li1837279, RLI Insurance Company, Certain Underwriters At Lloyds, London And The Insurance Company, Subscribing To Policy No. B0180fn2102430, No. 24-12441, United States Court of Appeals, Eleventh Circuit (August 25, 2025) the court explained the need for a claim to obtain coverage.
Case Background:
This appeal arises from a coverage dispute under a Directors & Officers (D&O) insurance policy. Jeffrey B. Scott, the plaintiff-appellant, was terminated from his role as CEO, President, and Secretary of Gemini Financial Holdings, LLC in October 2019. Following his termination, Scott threatened legal action against Gemini, and ...
Barry Zalma: Insurance Claims Expert Witness
Posted on September 3, 2025 by Barry Zalma
The Need for a Claims Handling Expert to Defend or Prove a Tort of Bad Faith Suit
© 2025 Barry Zalma, Esq., CFE
When I finished my three year enlistment in the US Army as a Special Agent of US Army Intelligence in 1967, I sought employment where I could use the investigative skills I learned in the Army. After some searching I was hired as a claims trainee by the Fireman’s Fund American Insurance Company. For five years, while attending law school at night while working full time as an insurance adjuster I became familiar with every aspect of the commercial insurance industry.
On January 2, 1972 I was admitted to the California Bar. I practiced law, specializing in insurance claims, insurance coverage and defense of claims against people insured and defense of insurance companies sued for breach of contract and breach of the implied covenant of good faith and fair dealing. After 45 years as an active lawyer, I asked that my license to practice law be declared inactive ...
The Need for a Claims Handling Expert to Defend or Prove a Tort of Bad Faith Suit
© 2025 Barry Zalma, Esq., CFE
When I finished my three year enlistment in the US Army as a Special Agent of US Army Intelligence in 1967, I sought employment where I could use the investigative skills I learned in the Army. After some searching I was hired as a claims trainee by the Fireman’s Fund American Insurance Company. For five years, while attending law school at night while working full time as an insurance adjuster I became familiar with every aspect of the commercial insurance industry.
On January 2, 1972 I was admitted to the California Bar. I practiced law, specializing in insurance claims, insurance coverage and defense of claims against people insured and defense of insurance companies sued for breach of contract and breach of the implied covenant of good faith and fair dealing. After 45 years as an active lawyer, I asked that my license to practice law be declared inactive and became a consultant and expert witness for lawyers representing insurers and lawyers ...
APPRAISAL AWARD SETS AMOUNT OF DAMAGES RECOVERED FROM INSURER
Post 5180
See the full video at https://rumble.com/v6yd2z0-evidence-required-to-prove-breach-of-contract.html and at https://youtu.be/2ywEjs3hZsw, and at https://zalma.com/blog plus more than 5150 posts.
It’s a Waste of Time to Sue Your Insurer if You Don’t Have Evidence
Evidence Required to Prove Breach of Contract
Read the full article at https://www.linkedin.com/pulse/evidence-required-prove-breach-contract-barry-zalma-esq-cfe-rfelc, see the full video at https://rumble.com/v6yd2z0-evidence-required-to-prove-breach-of-contract.html and at https://youtu.be/2ywEjs3hZsw, and at https://zalma.com/blog plus more than 5150 posts.
It’s a Waste of Time to Sue Your Insurer if You Don’t Have Evidence
In Debbie Beaty and Jonathan Hayes v. Homeowners Of America Insurance Company, No. 01-23-00844-CV, Court of Appeals of Texas, First District (August 26, 2025) Debbie Beaty and Jonathan Hayes filed a claim under their homeowner’s insurance policy with Homeowners of ...
