Preventing Insurer Litigation Conduct From Becoming Evidence of Bad Faith: Avoiding Pitfalls From New Risks

Description

Though not unlimited, and subject to jurisdictional variations, the litigation "privilege" or "immunity" prevents parties and their lawyers from being sued by the opposing parties for what they said or did as part of a judicial or quasi-judicial proceeding. Some courts, however, have not applied these rules with equal force in insurance litigation.

Some courts have required insurers to defend bad faith allegations based on litigation strategies or conduct routinely employed by insurers. For example, bad faith has been alleged based on assertions of overzealous advocacy, that claims or defenses were pleaded or maintained without sufficient evidentiary basis, purported misrepresentation of facts or policy terms, claims of failure to produce all relevant requested documents, alleged overly aggressive assertion of privilege or work product, so-called questionable appeals, and for allegedly filing too many declaratory judgment actions.

The logic of these courts varies but might be that any act that could theoretically support the contention that an insurer failed to uphold its express or implied duties to the insured may be the basis of a bad faith claim. Stated differently, these courts may suppose that no privilege or immunity can apply to any act or statement that could possibly state a claim for bad faith.

Listen as this panel discusses how allegations of bad faith against an insurer are sometimes generated from conduct, strategies, and statements made during litigation, and then recommend strategies to minimize the risk of bad faith.