Bad Faith Insurance Litigation: Scope of Extra-Contractual Damages

Advocating For or Defending Against Consequential and Punitive Damages in First- and Third-Party Claims

Recording of a 90-minute CLE webinar with Q&A

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Conducted on Wednesday, July 22, 2015

Recorded event now available

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Course Materials

This CLE course will discuss the scope of extra-contractual damages in first- and third-party insurance bad faith litigation, approaches taken by different courts and jurisdictions, and arguments for insureds to maximize and insurers to minimize damage awards. The program will focus heavily on recovery of punitive and emotional distress damages.


The essence of a bad faith action is recovery for consequential injuries, including damages that are typically recognized as tort damages. Recovery of punitive damages and the scope of consequential damages varies among jurisdictions.

In first-party bad faith claims, the plaintiff may recover unpaid policy benefits, plus interest, as well as attorneys’ fees. Most frequently contested and litigated is the recovery of damages for emotional distress caused by the claim denial. Some jurisdictions limit or qualify the recovery of these damages such as a showing that the insured suffered economic losses apart from mental distress. Punitive damages may be recovered in certain jurisdictions.

In third-party claims involving failure to settle within policy limits, some jurisdictions allow the insured to assign recovery of the policy limits to the third-party plaintiff. The insured’s consequential damages are not assignable. Some jurisdictions do not allow the inclusion of punitive damages as part of the insured’s compensatory damages. These courts have premised the exclusion of punitive damages on various public policy rationales.

Listen as our authoritative panel of insurance practitioners analyzes the recovery of extra-contractual damages, particularly punitive and emotional distress damages, in first- and third-party insurance bad faith litigation. The panel will discuss approaches taken by different jurisdictions and arguments for insureds to maximize and insurers to minimize damage awards.



  1. First-party bad faith claims
    1. Interest and attorney fees
    2. Loss of earnings
    3. Recovery of emotional distress damages
    4. Recovery of punitive damages
  2. Third-party bad faith claims
    1. Assignability of bad faith claim to third-party plaintiff
    2. Insured’s recovery of emotional distress damages
    3. Insured’s recovery of punitive damages as consequential damages
    4. Insured’s recovery of other consequential damages


The panel will review these and other key issues:

  • How do the courts approach the recovery of emotional distress damages in first-party bad faith claims?
  • What factors do courts consider when determining the availability and amount of punitive damages?
  • What rationales do courts employ to deny the inclusion of punitive damages in the insured’s consequential damage award in third-party bad faith claims?


Erin E. Bradham
Erin E. Bradham

Of Counsel
Steptoe & Johnson

Ms. Bradham  focuses her practice on commercial litigation, with an emphasis on defending major insurance...  |  Read More

White, Susan
Susan Page White

Manatt Phelps & Phillips

Ms. White conducts an active litigation practice, representing clients in complex insurance coverage matters, including...  |  Read More

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