Bad Faith And The Jury
Bad faith is for the jury where there is a dispute as to whether the insurer’s offer of payment was unreasonably low.
Where an insured has suffered a loss, efforts by the insurance company to settle the claim that are not bona fide can be a constructive refusal to pay. In Firemen’s Ins. Co. of Newark, N.J. v. Allmond, the insurance company acknowledged coverage, made an offer of settlement of $2,250, and a jury determined the amount of the loss to have been $4,000. In such a case, “it was a question for the jury to say whether the offer had been so small as to amount to an absolute refusal to pay, and if so, whether there was bad faith in such refusal.” Accordingly, the Court of Appeals affirmed the jury’s award of bad-faith damages.
Seeking A Judicial Declaration On A Disputed Coverage Issue
Seeking a judicial declaration on a disputed coverage issue does not defeat bad faith as a matter of law. ” [T]he mere filing of a declaratory judgment action does not in and of itself absolve an insurer from being subject to a bad faith penalty under O.C.G.A. § 33-4-6.” In Great Southwest Exp. Co. Inc. v. Great Am. Ins. Co. of New York, the insured filed a claim that the insurer disputed. The insurance company filed a declaratory judgment action against its insured, seeking direction from a court as to whether coverage existed. The insured counterclaimed for coverage and bad-faith damages. The trial court denied the insurance company’s motion for summary judgment on bad faith, and the Court of Appeals affirmed, holding that the issue of bad faith was for the jury. Likewise, there are circumstances when the insurance company’s failure to seek a declaratory judgment can be evidence of bad faith.
An insurer’s waiver of a coverage defense does not preclude bad faith.
An insurance company that retains a prepaid premium for four and one-half years after learning of fraudulent answers in the insurance application may waive the defense that the policy was void ab initio, but the insurer may still maintain the fraud defense to the bad faith claim. Florida Int’l Indem. Co. v. Osgood, the insured’s house burned. The insurer discovered that the insured had committed fraud in the application by failing to inform the insurer of previous losses by fire. Rather than rescinding the policy, the insurer issued a notice of nonrenewal that specifically stated that the policy remained in effect. The court determined that the notice waived the right to rely on the defense of fraud with regard to coverage. However, because “[t]he waiver did not eliminate the fact that [the insured] had defrauded [the insurer],” a directed verdict for the insurer on bad faith was appropriate.