Disciplined in Sophisticated Defense and Insurance Litigation

August 26, 2014 | Blog Post| Bad Faith: Turns Out, Abnormal in Alabama Really Is Normal

A few years ago, I published an article that questioned whether Alabama’s tort of bad faith was becoming more prevalent on a theory referred to by Alabama courts as an “abnormal bad faith” action. See, “Is Abnormal Becoming the New Normal in Alabama?” Mealey’s Litigation Report: Insurance Bad Faith, Vol. 22, #20 (February 26, 2009).

As mentioned in the article, the tort of bad faith was first recognized by the Supreme Court of Alabama more than 30 years ago. Back then, the traditional tort of bad faith was only actionable if the claimant could prove that he was entitled to a directed verdict on the question of whether the insurer breached the insurance contract when it denied the claim.

Over the years that followed, Alabama courts began to identify situations involving bad faith that did not quite fall into the category of bad faith that was first recognized by the Court. These situations became known as “abnormal” bad faith actions, and included claims where the insurer “intentionally or recklessly failed to properly investigate the claim,” or dealt with claims where the insurer “created” a factual issue after the denial, and so forth. More recent reported opinions showed a willingness to allow a plaintiff to move his bad faith case forward by alleging an alternative “either/or” theory of bad faith. Either the insurer breached the contract in bad faith, or it failed to investigate in bad faith. This culminated in the Court expressly finding that an action for “abnormal” bad faith could exist even where the “normal” bad faith claim was lacking as a matter of law.

Fortunately, the Supreme Court of Alabama now seems to have backed away from this position. Recently, the Court issued State Farm Fire and Cas. Co v. Brechbill, 2013 WL 5394444 (Ala. Sept. 27, 2013) , wherein the Court directly addressed the issue of whether a claim for “abnormal” bad faith could still exist where there was a factual dispute as to whether the insurer wrongfully denied the claim. The Court found that Alabama’s tort of bad faith is a singular tort with two methods of proof – either the plaintiff demonstrates that it is entitled to a directed verdict that the insurer breached its contract with the insured, or that the insurer failed to investigate the claim in bad faith. In fact, the Court noted in a footnote that it would refrain from using the terms “abnormal” and “normal” when referring to bad faith cases, and instead “use the more descriptive terms ‘bad-faith refusal to pay’ and ‘bad faith refusal to investigate’.” Brechbill, at fn 1.

Most importantly, the Court held that all plaintiffs alleging bad faith must show that there was no legitimate reason for denying the claim. In other words, if the insurer can demonstrate a question of fact or show that it had a legitimate basis for denying the claim, the bad faith claim fails as a matter of law, regardless of the theory upon which it is presented.

Probably the most interesting comments from this opinion, however, came from Chief Justice Moore. He stated in a special concurring opinion that Alabama’s “judicially legislated tort” of bad faith should be abolished altogether, essentially inviting a constitutional challenge, and leaving the question of bad faith to the Alabama Legislature. It will be interesting to see if the Court actually goes this far; and even more interesting to see if the business-friendly, Republican-controlled Legislature and executive branches decide to take action if the Court does indeed abolish the tort.

So it turns out, abnormal isn’t that abnormal when it comes to bad faith in Alabama.

Michael Montgomery 

He practices in the areas of general liability defense, with particular focus on construction defect matters, and both first and third-party property/casualty coverage.

February 26, 2019 Blog PostTHE MARKOVITS DECISION: CONSIDERATIONS AND IMPLICATIONS

Recently, Florida’s First District Court of Appeal held that for purposes of determining the timeliness of a proposal for settlement, the complaint is considered served on the insurer when process is served upon the statutory agent, Florida’s Chief Financial Officer, and not when process is forwarded by the Chief Financial Officer to the insurer.  Markovits v. State Farm Mutual Automobile Ins. Co., 235 So. 3d 1018 (Fla. 1st DCA 2018) rehr’g denied (Feb. 5, 2018).

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February 21, 2019 Blog PostNot Off the Hook...Trouble in Paradise for Puerto Rico Insurers

Recent legislative and judicial developments in Puerto Rico may very well have revived thousands of claims that insurers believed to be time-barred, per the terms of the Suit Against Us provisions of their Policies. Until the February 14, 2019, ruling issued by a San Juan court, residential property damage claims that had not escalated to suit within a year of the date of loss, had been considered time-barred. It would seem that it may not be the case anymore, and insurers should be prepared for a potential flurry of new litigation, even involving prior Hurricane Irma and Maria claims.

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January 14, 2019 Blog PostChecking the Vitals of Hospital Liens

Claims adjusters, plaintiffs’ attorneys and defense attorneys all deal with the headaches of hospital liens.  And recent case law and inconsistent recording of liens by clerks in different counties makes matters worse.

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August 16, 2018 Blog PostNot so Fast! The Confession of Judgment Doctrine in Dispute-Over-Amount Cases

Florida law allows an insured to recover attorney’s fees if the insured prevails in a lawsuit against the insurer for insurance benefits.  See § 627.428, Florida Statutes.  The plain text of the statute requires a “judgment” against the insurer.  In Wollard v. Lloyd's & Companies of Lloyd's, 439 So. 2d 217 (Fla. 1983), however, the Florida Supreme Court held that an insurer’s post-suit payment of a claim may be the “functional equivalent of a confession of judgment or a verdict in favor of the insured”, thus, triggering the fee-shifting statute.

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January 22, 2018 Blog PostButler Wins Dismissal of a First-Party Bad Faith Claim Involving a Civil Remedy Notice That Listed a Different Household Policy

In Florida, an insured cannot bring a first-party bad faith claim based on a claim for UM coverage unless the insured first files a Civil Remedy Notice (CRN) with the Florida Department of Financial Services. In Mathurin v. State Farm, Butler recently vindicated the importance of this step by winning a dismissal of a first-party bad faith action where the CRN did not match up with the Complaint.  

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March 07, 2017 Blog PostFederal Diversity Jurisdiction: Proving Citizenship of Limited Liability Companies

Jurisdiction gives a federal court the power to hear a case. Jurisdiction matters at the outset of a lawsuit. It matters during discovery. It even matters after summary judgment. Jurisdiction matters because federal courts are courts of limited jurisdiction.

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April 01, 2016 Blog PostSouthern District Applies Fridman v. Safeco to Preclude Bifurcation

However, the Levesque case points out the down-side of GEICO’s strategy to preclude the jury in the UIM case from determining the insured’s full damages.  If the insured is precluded from proving its damages in the UIM case, it must necessarily be entitled to prove them in the subsequent bad faith case.

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March 31, 2016 Blog PostInsured is Entitled to a Determination of Liability and Damages in a UIM Case Despite the Insurer's Confession of Judgment

Ultimately, the Supreme Court held that the trial court was correct (disagreeing with the intermediate court’s decision to the contrary).

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June 02, 2015 Blog PostThe Florida Supreme Court Endorses Citizens' Immunity

The high court declared that Citizens is shielded from statutory bad-faith suits, and that bad faith is not a “willful tort,” which is a statutory exception to the immunity granted by the Florida Legislature.  The vindication was a long time coming for Citizens.  The Legislature created Citizens with a broad immunity that seemed clearly intended to shield it from bad-faith actions...

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February 10, 2015 Blog PostDoes Florida's statutory duty to disclose insurance information apply to claims arising under out-of-state policies?

One of the most common questions I get from out-of-state insurers is whether they are required to honor a claimant’s request for disclosure of insurance information under Florida Statute 627.4137. If the applicable policy was not delivered in Florida or issued for delivery in Florida, the short answer is “No.” Nonetheless, sometimes an insurer can best protect both its insured and itself by voluntarily providing at least some of the information outlined in the statute.

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January 20, 2015 Blog PostThe Season of Giving: Pennsylvania Supreme Court Finds Bad Faith Claims to be Assignable

Rejecting the holdings of two recent decisions by the Eastern District of Pennsylvania, the Supreme Court of Pennsylvania held in a 5-to-1 ruling that claims under Pennsylvania’s Bad Faith Statute (42 Pa.C.S. § 8371) are assignable to injured third parties. The decision, Allstate Prop. & Cas. Ins. Co. v. Wolfe, 2014 Pa. LEXIS 3309 (Pa. Dec. 15, 2014), considered the case of Jared Wolfe, who was injured in a car accident after being struck by Karl Zierle’s vehicle. 

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