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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

This program is included with the Strafford CLE Pass. Click for more information.
This program is included with the Strafford All-Access Pass. Click for more information.

Conducted on Tuesday, May 30, 2023

Recorded event now available

or call 1-800-926-7926

This CLE webinar will examine how counsel for insurers can recognize when a third-party plaintiff attempts to "setup" 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.


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.



  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


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?


Garbowski, Mark
Mark Garbowski

Anderson Kill

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

Hudgins, Rachel
Rachel E. Hudgins

Hunton Andrews Kurth

Ms. Hudgins represents clients in complex insurance coverage and bad faith litigation.

 |  Read More
Rybny, C. Scott
C. Scott Rybny

Chair Insurance Coverage & Extra-Contractual Litigation Group
Morgan & Akins

Mr. Rybny represents insurers in all phases of first and third party insurance disputes, including pre-litigation...  |  Read More

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