Insurer Bad Faith Setup Defense and Reverse Bad Faith Claims: Insurer vs. Policyholder Perspectives

Insurer Defenses Against Policyholders in Bad Faith Litigation

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

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Conducted on Tuesday, November 30, 2021

Recorded event now available

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Course Materials

This CLE webinar will examine how counsel for insurers can recognize when a third-party plaintiff attempts to "set up" the insurer for a bad faith claim. The panel will address what insurers can do to avoid this trap, counterclaims, and relevant affirmative defenses based on the plaintiff's fraudulent conduct or misrepresentations.

Description

An insurer that has acted in bad faith may be liable for significant extra-contractual and punitive damages. Thus, unscrupulous plaintiffs have manufactured, manipulated, and proffered settlements under conditions which the insurer must, for legitimate reasons, refuse and thereby make itself vulnerable to damages for "bad faith."

When defending bad faith claims, insurers are increasingly deploying strategies, counterclaims, and affirmative defenses to expose the plaintiff's wrongful conduct related to the claim, such as the plaintiff's failure to cooperate and give proper notice of a claim or fraud and misrepresentation.

Some courts permit insurers to assert a "bad faith setup" defense, whereby they are allowed to demonstrate that claimants employed their own bad faith setup tactics solely to obtain punitive damages. There is also a question as to whether an insurer can assert a counterclaim for "reverse bad faith," whereby an insurer can recover for a plaintiff's breach of the covenant of good faith and fair dealing, although this approach has had limited success. Only one state expressly authorizes this defense by statute. Nonetheless, several reported cases recognize the claim, at least in dicta, and insurers continue to deploy it.

Listen as our authoritative panel of policyholder and insurer counsel discusses the latest litigation trends in defenses raised by insurers in bad faith litigation that focus on the alleged wrongful conduct of the claimant. The panel will cover the claimant's bad faith setup, fraud or misrepresentation, and the affirmative defense of reverse bad faith.

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Outline

  1. Trends in defenses to bad faith claims focusing on claimant's conduct
    1. Bad faith setup
    2. Fraud or misrepresentation
    3. Other defenses or strategies
  2. Trends in "reverse bad faith" as an affirmative defense
  3. Best practices for policyholders and claimants to counter these defenses
  4. Best practices for insurers in raising and proving these defenses

Benefits

The panel will review these and other relevant issues:

  • What conduct by claimants generally gives rise to a bad faith setup defense, and how have courts treated this defense?
  • What types of conduct by the policyholder or claimant are typically considered bad faith conduct?
  • In what circumstances have insurers pursued the doctrine of reverse bad faith, and how have the courts treated these arguments?

Faculty

Garbowski, Mark
Mark Garbowski
Shareholder
Anderson Kill

Mr. Garbowski is an attorney in the Insurance Recovery group in Anderson Kill's New York office. His practice...  |  Read More

Wiener, Harris
Harris Wiener
Senior Counsel
Clyde & Co US

Mr. Wiener focuses his practice on complex insurance, reinsurance and commercial disputes in federal and state court,...  |  Read More

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