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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To Recover UIM Benefits the At Fault Driver Must be Underinsured
Post 5092
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Angie Foresee appealed from the judgment of the district court dismissing her complaint and awarding attorney fees in favor of Metropolitan Group Property and Casualty Insurance Company (Metropolitan). In Angie Foresee v. Metropolitan Group Property And Casualty Insurance Company, and DOES I-V, No. 51902, Court of Appeals of Idaho (June 2, 2025) the trial court award was affirmed.
FACTUAL BACKGROUND
Foresee was involved in a rear-end collision with a third-party driver (at-fault driver). At the time of the accident, the at-fault driver carried a liability automobile insurance policy that had a $100,000 coverage limit per person. Foresee had underinsured motorist coverage (UIM) that included a $50,000 coverage limit per person through Metropolitan. Foresee alleged damages in excess of $100,000.
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Post 5091
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False Report of Theft of Vehicle Established
Post 5090
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Sufficiency of the Accusatory Instrument
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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.
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Insurance Coverage Dispute:
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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...
