The Ninth Circuit Court of Appeals recently reversed an award of summary judgment that had been in favor of an insurer in a bad faith action regarding an uninsured motorist claim, and found against the insurer. Hat v. Depositors Ins. Co., 2009 WL 2353271 (9th Cir. 2009).
The insured plaintiff filed a bad faith action against her insurer alleging that the insurer breached its contractual obligation to act in good faith as it resolved her uninsured motorist claim. The District Court had awarded the insurer summary judgment based on a finding that there was no bad faith because a genuine dispute existed as to the amount of policy benefits owed and any delays were due to the plaintiff’s ongoing treatment for her injuries.
The Ninth Circuit Court of Appeals reversed. Taking the facts in the light most favorable to the insured, the court could not conclude, as a matter of law, that the insurer’s actions were reasonable throughout its review of the insured’s claim for policy benefits. To the contrary, the court concluded that it would be reasonable for a jury to find no genuine dispute as to the claim amount in a period of apparent inactivity between August 2003 and November 2004, during which time the insurer possessed all of the insured’s medical records, agreed that she had reached “maximum medical improvement” in June 2003, and agreed with the insured that this was a policy-limit case. The court also concluded that the insurer’s failure to respond to several of the insured’s arbitration demands, its advice that she not retain an attorney, and “its conduct of depositions” also contributed to the totality of the conduct that might reasonably be characterized as bad faith. The court finally concluded that the mere fact of an ultimate settlement between the policy limit that the insured had initially demanded and the amount of the insurer’s first offer does not suggest otherwise, given that parties settle for reasons that often have nothing to do with a claim’s actual value. The court remanded for further proceedings on the bad faith and breach of contract claims, as well as on intentional infliction of emotional distress and punitive damages claims in light of the reversal.