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Extracontractual claims pose a unique set of risks to insurers, implicating their business operations and opening potentially vast exposures. Today, it is not enough to have good coverage counsel. Insurers need counsel with deep and specific bad faith and extracontractual experience. Cozen O’Connor’s team of dedicated extracontractual/bad faith attorneys have been practicing in this field for decades.
Our bad faith attorneys defend insurance clients in litigation alleging first- or third-party extracontractual claims related to all lines of business, including property, general liability, professional liability and D&O, life/health/disability and automobile policies. We handle litigation arising from claims handling, underwriting, excess verdicts, uninsured or under-insured motorist coverage, consent judgments, default judgments and garnishment actions. Our attorneys have successfully defeated individual and class claims seeking actual and consequential damages, statutory penalties, punitive damages, attorneys’ fees and policy benefits.
Because Cozen O’Connor is a global leader in the area of insurance coverage and claims litigation, we are often able to defeat breach of contract assertions at the outset, thereby mitigating any extracontractual claims. When appropriate, our attorneys are able to negotiate quick and quiet resolutions to bad faith claims. Because they involve questions of honor, duty and essential fairness, these cases are qualitatively different from other coverage disputes. Our lawyers are able to create practical frameworks for discussion, incentivize reasonable conduct and mutuality, and find solutions that limit insurer exposure.
When bad faith and extracontractual disputes must be tried, our attorneys have the proven ability to go to court—and win. We regularly and successfully defend major insurers in multi-million dollar bad faith matters in state, federal and appellate courts throughout the United States. Success is not defined simply by getting a defense verdict, but by winning in way that protects clients’ bottom lines and brands.
SERVICE AREAS
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Successfully defend bad faith litigation from inception through trial
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Design strategies to defeat institutional bad faith cases
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Respond to policy limit and time limit demands and analyze potential exposures
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Assist in the withdrawal of a defense while avoiding bad faith, waiver and estoppel claims
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Respond to unreasonable discovery requests and consent judgments
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Bifurcate bad faith claims for discovery and trial, when necessary
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Avoid or limit impact of policyholder’s assignment of rights
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Negotiate settlements in bad faith cases with multiple insureds/claimants, multiple insurers, limited insurance; avoid or defend against collusive settlements
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Monitor underlying litigation and assess impact on coverage issues and potential exposure
August 20, 2021
Just a few short years ago, there was a bright line rule under Texas law concerning appraisal awards. If an insurer timely paid an appraisal award, that payment extinguished all of the insurer’s contractual and extracontractual liability to the insured. See, e.g., Garcia v. State Farm Lloyds, 514...
July 23, 2021
Using general contract interpretation principles, the Fifth Circuit reversed summary judgment in favor of an insurer and found a duty to defend Landry’s in a data breach lawsuit. Landry’s Inc. v. The Insurance Company of the State of Pennsylvania, No. 19-20430 (July 21, 2021). Landry’s...
June 08, 2021
The Iowa Supreme Court recently
reversed the appellate court’s denial of an insurer’s motion for a directed
verdict, finding that United Fire did not breach the insurance policy and did
not commit bad faith during a property appraisal. Luigi’s, Inc. v. United Fire and Cas. Co., No. 19-1669, ---...
May 28, 2021
An insurer can no longer claim its lack of notice of a lawsuit against its insured excuses it for failing to settle the suit after the Georgia Supreme Court’s recent decision in GEICO Indemnity Co. v. Whiteside, Case No. S21Q0227 (Ga. April 19, 2021). In Whiteside, the Georgia Supreme Court held...
May 19, 2021
Waiver, estoppel and forfeiture are
doctrines on which insureds often rely to try to create coverage outside the terms of the insurance
policy. Insureds will often assert that they are entitled to such
extra-contractual coverage based entirely
on how the insurer handled the claim. But
under...
April 27, 2021
On March 8, 2021
the California Court of Appeal, reversing a $10 million verdict against
Farmers, found that a jury must specifically find unreasonable acts by an insurer
to support a “failure to settle” bad faith finding. Pinto v. Farmers Ins. Exch., No. B295742,
__ Cal. App. 5th __, 2021 WL...
April 21, 2021
Illinois does not recognize bad
faith as an independent tort. In the first-party context, bad faith is a purely
statutory construct which hinges upon whether an insurer’s conduct was
“vexatious and unreasonable.” Section 155 of the Illinois Insurance Code (215
ILCS 5/155) provides the exclusive...
April 19, 2021
In two recent cases, the courts
showed substantial deference to patients’ treating physicians in determining
the reasonableness of medical treatment. This deference appears to reflect a
reluctance of courts to decide what healthcare is appropriate for a patient.
In Peterson v. Western National...
April 12, 2021
The key issue in insurance bad
faith litigation is whether the claims professional reasonably handled the
claim. Throughout the claims-handling process, the claims professional should
constantly ask him-or-herself whether the investigation is sufficient to
support a coverage determination and...
April 01, 2021
Mark A. Talise discusses the California Supreme Court decision in Villanueva v. Fidelity National Title Company and how it could impact all insurance providers in California.
March 29, 2021
Michael Melendez and Rebekah Shapiro discuss a recent California Appeals Court decision in Planet Bingo LLC v. Burlington Ins. Co., and what it means for liability insurers.
May 12, 2020
Jordan Hess discusses Washington's expansion of insurers’ duty to defend and the courts’ expectation that insurers “put the insured’s needs before its own” when interpreting legal ambiguities respecting their policies.
May 06, 2020
In Texas, and as a general rule, only the four corners of the policy and the four corners of the petition against the insured are relevant in deciding whether the duty to defend applies. Richards v. State Farm Lloyds, ___S.W.3d ___, 2020 WL 1313782 at *1 (Tex. 2020). Texas courts and practitioners...
April 22, 2020
Karl A. Schulz and Stephen P. Pate discuss three recent cases decided by the Texas Suprme Court that revived policyholder suits that were in limbo when Barbara Technologies and Ortiz were decided.
November 21, 2019
In Part I of this series, we explored the differences between institutional and non-institutional bad faith. For claims of institutional bad faith, plaintiffs often attempt to demonstrate a pattern and practice by offering evidence of claims of other policyholders. Unlike claims of institutional bad...
November 20, 2019
In Part I of this series, we discussed institutional bad faith and best practices for insurers to minimize the risk of these costly and intrusive lawsuits. In Part II, we will focus on cutting discovery off at the pleadings—by narrowing the plaintiff’s claim, you limit the scope of relevance in...
October 08, 2019
Terri Sutton and Jordan Hess discuss the state Supreme Court decision in Keodalah v. Allstate Insurance Company, et al.
July 17, 2019
Donnie M. Apodaca, II, Stephen Pate, and Alicia G. Curran discuss two recent the Supreme Court of Texas’s decisions and considerations for insurers before they invoke appraisal and pay the appraisal awards.
May 10, 2019
Peter Berg discusses the decision in Draggin' Y Cattle Co., Inc. v. Junkermier, Clark, Campanella, Stevens, P.C. and how it impacts settlements in Montana.
February 05, 2019
Kristie M. Abel discusses how Abbey/Land demonstrates that an insurer can successfully contest such a judgment, however, the insurer needs to meet a high burden in order to prevail.
February 01, 2019
Laura Dowgin discusses the decision in D.K. Prop., Inc. v. Nat'l Union Fire Ins. Co. of Pittsburgh, PA and notes that while it resulted in a favorable outcome for the policyholder there has been no shift in New York bad faith law.
April 20, 2018
Greg Hudson discusses the Texas Supreme Court's decision in Menchaca v. USAA Texas Lloyds Company. The court articulates five rules when extracontractual causes of action are available even when there has been no breach of the insurance policy and clarifies the procedural steps a court should follow in determining which rule applies.
April 03, 2018
Michael D. Handler and Jordan A. Hess discuss the Washington Court of Appeals reversal of a trial court’s dismissal of the bad faith claim against a claims adjuster, holding that individual insurance adjusters could be liable for violating the CPA if they caused financial injury by engaging in unfair or deceptive acts or practices that impact the public interest.
June 29, 2017
Jonathan Toren discusses a recent Washington Court of Appeals decision on three important issues for insurers relating to bad faith actions.
April 11, 2017
Alicia G. Curran and Ron Tigner discuss the Texas Supreme Court's decision setting forth five “distinct but interrelated rules” that govern the relationship between contractual and extracontractual claims in the first party insurance context.
December 16, 2016
William F. Knowles and Katie M. Sluss discuss a decision by the Division I Washington Court of Appeals that granted partial relief to an insurer and held that if an insured is legally insulated from any exposure to a tort victim, the presumption of harm in a bad faith claim against the insurer is rebutted and there is no coverage by estoppel.
October 21, 2016
William Knowles and Jonathan Toren discuss the latest Washington Supreme Court decision regarding the attorney-client privilege and whether it protects a corporation’s attorney’s communications with former employees of the corporation.
June 23, 2016
Chris Clemenson and John Daly discuss a Colorado Supreme Court decision holding that extrinsic evidence can only be used to interpret ambiguous policy language, not unambiguous policy language.
April 18, 2016
Stacey Farrell discusses a recent Alaska Supreme Court Case that concluded insurers cannot seek reimbursement for defense costs incurred defending uncovered claims.
July 30, 2015
The Hawaii Supreme Court, providing three separate reasons, held that the excess insurer could bring a cause of action for equitable subrogation.
December 23, 2014
On December 15, 2014, the Supreme Court of Pennsylvania held that bad faith claims brought pursuant to 42 Pa. C.S. § 8371 may be assigned by an insured to an injured third party under Pennsylvania law. See Allstate Prop. & Cas. Ins. Co. v. Wolfe, No. 39 MAP 2014 (Pa. Dec. 15, 2014).
November 18, 2014
In Santacruz v. Allstate Texas Lloyds, Inc., 2014 WL 5870429 (Nov. 13, 2014), the 5th Circuit allowed a policyholder to pursue a claim for common law and statutory bad faith even though the policyholder repaired the alleged damage before the insurer was able to observe that damage.
September 08, 2014
In Greene v. Farmers Insurance Exchange, the Texas Supreme Court clarified the scope and application of § 862.054 of the Texas Insurance Code, the “anti-technicality” statute, holding that the clause would only operate in situations where the policyholder affirmatively violated an obligation created under the policy. The court further held that public policy did not change this result, despite the concurring opinion of two justices that argued that the court’s opinion created confusion as to whether and when public policy would dictate a different result. Specifically, the concurrence argued that the majority opinion failed to distinguish the instant case from prior cases involving a “nonmaterial breach” by a policyholder.
August 07, 2014
In a recent decision in the case of Pyramid Technologies, Inc. v. Hartford Casualty Ins. Co., 752 F.3d 807 (9th Cir., May 19, 2014), the 9th Circuit, relying on California law, upheld a grant of summary judgment dismissing the insured’s business interruption claim as speculative. In addition, by a split decision, it reversed in part and remanded in part the trial court’s exclusion of the testimony from the insured’s expert witnesses under Daubert standards. Finally, and most importantly, the Court of Appeals reversed a grant of summary judgment concerning the insurer’s “genuine dispute” defense, holding that bad faith was an issue for the jury under the facts of the case.
August 05, 2014
A recent 3rd Circuit decision, ArcelorMittal Plate, LLC v. Joulé Technical Services, Inc., 558 Fed.Appx. 205 (3d Cir. 2014) reiterates that under New Jersey law, an insurer does not act in bad faith when denying a claim that is “fairly debatable.” Although the court disagreed with the insurer’s application of the policy’s employer’s liability exclusion to preclude coverage, it also held that there was no basis to impose bad faith liability on the insurer.
June 02, 2014
Plaintiff John Z. Huang represented Yongping Zhou in a deportation suit. Mid-suit, Zhou terminated the representation and retained another attorney. Throughout the course of the litigation, Zhou hired several more attorneys and ultimately succeeded in vacating his domestic violence conviction after spending two years in an Immigration and Naturalization Service detention center. Zhou then sued Huang for legal malpractice.
May 06, 2014
Last week, the Washington Court of Appeals held that “in an insurance bad faith case, the amount of a reasonable covenant judgment sets a floor, not a ceiling, on the damages the jury may award.” Miller v. Safeco Ins. Co., No. 68594-5-1. The claim arose out of an automobile accident in 2000, when Patrick Kenny, the at-fault driver, rear-ended a cement truck, severely injuring his three passengers.
April 29, 2014
In Betzdolt v. Auto Club Group Insurance Company, a Michigan resident was allowed to proceed with a bad faith claim against her insurer in Florida, even though the insurer did not sell policies in Florida, did not deliver policies in Florida, and was not authorized to write insurance policies in Florida. Betzdolt arises in the context of a third-party liability case (car accident) in which the Michigan resident was being defended by the Michigan insurer in Florida.
February 05, 2014
With the arrival of the new year, many are applying the mantra “out with the old, in with the new.” Although this may be motivational for personal resolutions, it does not generally apply in the context of law as last year’s law is often the basis for this year’s lawsuit. The best strategy to prevent bad faith litigation is to be aware of the current trends and decisions (see links). The following bad faith decisions showcase some of the best and the worst holdings for insurers in 2013. We will continue to monitor and report on any major developments in 2014.
January 27, 2014
In Ewing Construction Co. Inc. v. Amerisure Ins. Co., No. 12-0661, 2014 WL 185035 (Tex. Jan. 17, 2014), the Texas Supreme Court held that a general contractor who agrees to perform construction work in a “good and workmanlike manner” does not “assume liability” for damages arising out of the contractor’s defective work so as to trigger the contractual liability exclusion in a commercial general liability policy. This holding substantially clarifies the Texas Supreme Court’s prior holding in Gilbert Texas Construction LP v. Underwriters at Lloyd’s London, 327 S.W.3d 118 (Tex. 2010).
December 16, 2013
As a matter of first impression under Pennsylvania law, the court in Shannon v. New York Central Mutual Insurance Company, No: 13-cv-1432 (M.D. Pa. Nov. 20, 2013) denied a motion to strike an insurer’s defense of “bad faith set-up,” asserted in response to a bad faith claim based on the insurer’s alleged failure to settle a claim.
October 24, 2013
In Brechbill v. State Farm Fire & Cas. Co., No. 1111117, ___ So. 3d ___, 2013 WL 5394444, 2013 Ala. LEXIS 126 (Ala. Sept. 27, 2013), the Alabama Supreme Court held that there is only one, as opposed to two, causes of action for bad faith. More important, the Alabama Supreme Court held that a bad faith claim, no matter how plead, will not survive when an insurer can show a debatable reason for the denial.
September 05, 2013
Due to changes effective January 1, 2013, the Florida Motor Vehicle No-Fault Law now codified the insured’s obligation to submit to an examination under oath. At first it may seem odd that the Florida legislature had to go to such great lengths to incorporate, and explicitly condition, the receipt of no-fault benefits on the insured’s submission to an examination under oath. However, a brief look at the recent trends leading to this change demonstrates why the Florida legislature rewrote insurance contract law in the no-fault context.
September 05, 2013
The South Dakota Supreme Court in Bertelsen v. Allstate Insurance Co. (1) held that an insurer cannot avoid bad faith liability by claiming it did not know about controlling claims handling statutes, and (2) reaffirmed that an insurer cannot rely upon claimants to provide a copy of the applicable laws (i.e., a copy of the claims handling statutes), especially in the absence of a request.
July 08, 2013
In the recent decision of Schifino v. Geico General Ins. Co. et al., 2013 WL 2404115 (W.D.Pa. 2013), and for the second time in less than a year, the district court for the Western District of Pennsylvania precluded a plaintiff from offering expert testimony supporting an insurer’s alleged bad faith. The district court reasoned that expert testimony addressing the reasonableness of an insurer’s claims handling in denying a claim was unnecessary as a matter of evidence and interfered with the fact finding role of the jury.
June 14, 2013
The New York Court of Appeals, New York’s highest state court, recently held – in what appears to be a new position in New York – that an insurer that breached its duty to defend could not later rely on otherwise applicable exclusions to deny coverage for indemnification.
June 12, 2013
On certification from the U.S. District Court for the Northern District of Alabama, the Supreme Court of Connecticut recently issued an opinion holding that an insurer’s bad faith conduct in the investigation of a third-party liability insurance claim does not provide a basis for recovery under Connecticut law. Capstone Bldg. Corp. v. Am. Motorists Ins. Co., 2013 Conn. LEXIS 187 (Conn. June 11, 2013).
May 15, 2013
The decision, which ordered the defendants to produce documents and the clerk to unseal papers filed in motion practice, represents a new and troubling broadening of the scope of discovery in bad faith cases.
April 05, 2013
Policyholders in New York and New Jersey presently have no private right of action against insurance companies for alleged violations of each state’s respective statutory claim handling guidelines – New York’s Unfair Claim Settlement Practices Act, N.Y. Ins. Law § 2601, and New Jersey’s Unfair Claim Settlement Practices Act, N.J. Admin. Code tit. 11, §§ 2-17.6 and 2-17.7. Although the New York and New Jersey statutes each prohibit insurers from engaging in unfair claim settlement practices, neither allows insureds the right to enforce the laws or seek damages for a violation by filing a lawsuit against the insurer. Rather, the Insurance Department for each state are vested with the exclusive power of enforcement, and then only when an insurer engages in a pattern of violations demonstrating that the mishandling of claims is a general business practice. That may soon change, however.
March 19, 2013
In D.R. Horton, Inc.—Denver v. Mountain States Mutual Casualty Co., No. 12-cv-01080 (February 25, 2013), another U.S. District Court judge for the District of Colorado determined a liability insured seeking defense costs from its insurer may qualify as a “first-party claimant” for purposes of Colorado’s Unfair Claim Settlement Practices Act, potentially entitling the insured to recover unpaid defense costs, attorneys’ fees in prosecuting the recovery action and two times the unpaid defense costs as a penalty.
March 15, 2013
When an insured sues an insurer for bad faith, how much of the claims file maintained by the insurer is discoverable? In a 5-4 decision, the Washington Supreme Court recently weakened insurers’ ability to protect confidential communications with their attorneys in first-party claims where the insured has alleged bad faith. Cedell v. Farmers Insurance Company of Washington, No. 85366-5 (February 22, 2013). The court held that, in the context of a first-party claim for bad faith claim handling and processing, courts must apply a presumption that there is no applicable attorney-client privilege. The court further held that an insurer would be entitled to overcome the presumption by showing that its counsel was providing legal advice as to the insurer’s potential liability and was not acting in the insurer’s “quasi-fiduciary” function. Upon this showing, the insurer is entitled to an in camera review where the trial court will determine if the privilege applies, subject to the insured’s assertions that the privilege does not apply due to an exception, including the civil fraud exception.
February 13, 2013
In its recent decision in Powell v. Cherokee Insurance Company, Case No.: 5:09-CV-00205, the U.S. District Court for the Western District of Kentucky reaffirmed that in a third-party bad faith lawsuit alleging failure to timely settle a personal injury claim, the third-party claimant must produce evidence of conduct by the insurer that is outrageous, because of the defendant’s evil motive or his reckless indifference to [her] rights in order to establish a bad faith claim under the Kentucky Unfair Claims Settlement Practices Act (UCSPA).
January 14, 2013
In what may be the continuation of a trend toward the erosion of the attorney-client privilege and work product doctrine in bad faith litigation, another court has held that an insurer's communications with defense counsel retained for the insured in an underlying liability suit are discoverable and not subject to the attorney-client privilege or work product doctrine in a subsequent third-party bad faith lawsuit, under Georgia law.
November 15, 2012
Earlier this year, the U.S. District Court for the Southern District of Texas ruled an insured can pursue its bad faith claim even where the insurer made timely payment of the appraisal award and the court dismissed the breach of contract claim on summary judgment. Intermodal Equip. Logistics, LLC and Sea Train Logistics, LLC v. Hartford Accident & Indem. Co., No. 3:10-cv-00458 (S.D. Tex. Galveston Div. May, 24, 2012).
November 06, 2012
On October 15, 2012, the U.S. District Court of Appeals for the 5th Circuit – applying Texas law – addressed another Cumis counsel matter. See Coats, Rose, Yale, Ryman & Lee, P.C. v. Navigators Specialty Ins. Co., No. 12-10055, 2012 WL 4858194 (5th Cir. Oct. 15, 2012).
September 25, 2012
Texas Supreme Court Revisits Ruttiger Extracontractural Liability in Workers' Compensation Claims All But Vanquished - Global Insurance Alert! - On June 22, 2012, the Texas Supreme Court, in Texas Mutual Insurance Company v. Ruttiger, withdrew its original August 26, 2011 opinion, substituting it with an opinion that even further limits a claimant’s extra-contractual rights in a workers’ compensation matter.
September 20, 2012
Florida Appellate Court Holds that Appraisal Award Constitutes a 'Favorable Resolution' and Permits Insured to Pursue Bad Faith Claim - Global Insurance Alert - The Florida District Court of Appeal, Fourth District, recently held that an appraisal award in favor of an insured constitutes the "favorable resolution" of an action for insurance benefits necessary to proceed with a statutory first-party bad faith action under Florida law. Trafalgar v. Zurich Ins. Co., 2012 WL 3822215 (Fla. App. 4 Dist. Sept. 5, 2012).
July 24, 2012
Recent Arizona Court Opinion Reduces Ratio of Bad Faith Punitive Damages Award to a 1:1 Ratio to Compensatory Damages - Global Insurance Alert - In its recent decision, the Arizona Appellate Court, Division One, affirmed a bad faith verdict in the amount of $155,000 and held that the $55 million punitive damages award against the insurer was “unconstitutionally excessive.”
June 15, 2012
On May 31, 2012, the Florida Supreme Court rendered its 32 page, long-awaited decision in QBE Insurance Corp. v. Chalfonte Condominium Apartment Association, Inc. The court reaffirmed that Florida does not recognize the common law duty of good faith and fair dealing in the context of a first-party claim, a claimant only has a statutory first-party bad-faith cause of action, and Florida courts shall not rewrite insurance contracts.
February 13, 2012
The Erosion Continues: Washington Supreme Court Expands the Olympic Steamship Rule and Finds a Viable Bad Faith Claim by a PIP "Insured" - Global Insurance Alert! - In Matsyuk v. State Farm Fire & Cas. Co., 2012 Wash. LEXIS 119 (Feb.9 2012), the Washington Supreme Court held that: (1) a tortfeasor's insurer that provides both Personal Injury Protection (PIP) and liability coverage must pay a pro rata share of the attorney fees incurred by the PIP insureds via the equitable "common fund" doctrine, even though the insurer derived no benefit from the "fund"
May 06, 2008
Unique problems arise when an insured is facing multiple claims, liability is clear and the policy limits may be insufficient to settle all claims. How is the claims professional to handle this?
December 13, 2007
California Supreme Court Holds “Genuine Dispute” Defense to Bad Faith Claim - Insurance Coverage Alert! - CALIFORNIA SUPREME COURT HOLDS “GENUINE
DISPUTE” DEFENSE TO BAD FAITH CLAIM REQUIRES
INSURER TO THOROUGHLY INVESTIGATE AND
OBJECTIVELY EVALUATE UIM CLAIM WHEN MADE, EVEN
IF CLAIM IS ULTIMATELY PAID IN FULL
October 22, 2007
Washington Supreme Court Concludes That Insurer Acted In Bad Faith Via Subpoena And Ex Parte Communications To An Arbitrator - Insurance Coverage Alert - The Washington Supreme Court, sitting en banc, recently held that an insurance
company acted in bad faith by issuing a subpoena to and engaging in ex parte
communications with an arbitrator. The Court further stated that the insurer did not
rebut the resulting presumption of harm to the insured and that the insurer had not
June 27, 2006
Summer 2006 - Insurance Coverage Alert! - Colorado court of appeals refuses to follow browder and affirms judgment in favor of insured.
September 07, 2017
Cozen O’Connor is proud to announce the promotion of six members to shareholders of the firm: David Brisco (San Diego), Michael de Leeuw (New York), John Dickenson (West Palm Beach), Jonathan Lichtenstein (Philadelphia), William Walsh (Seattle), and Ingrid Welch (Philadelphia).
April 11, 2017
Stephen Pate discusses the recent Texas Supreme Court decision that restored protections for policyholders by putting teeth back into statutory provisions that penalize carriers for deceptive practices in an opinion insurance lawyers say is one of the most important in recent history.
November 07, 2016
A health insurer recently asked Pennsylvania's high court to overturn an appellate decision loosening the standard for punitive bad faith penalties in a case over a cancer insurance claim that experts say could lead to a surge in bad faith claims by policyholders if the justices find that ill intent on the insurer's part is not required. Abby Sher of the Bad Faith Practice Group comments.