In a recent opinion by the U.S. District Court for the Middle District of Tennessee, Judge Sharp denied an insurance company’s motion for summary judgment seeking dismissal of an insured’s claim for statutory bad faith. The case is New Hampshire Ins. Co. v. Blackjack Cove, LLC, 2014 U.S. Dist. LEXIS 40122 (M.D. Tenn. March 26, 2014), and a copy can be downloaded here. Essentially, the policyholder asserted that the insurance company acted in bad faith by failing to pay its supplemental claim and by failing to comport with the terms of the policy when making an initial payment shortly after the subject tornado damage. A denial of summary judgment on a bad faith claim is not particularly noteworthy in and of itself, but this case is a bit unique in that the court’s decision was entirely policy based. Specifically, Judge Sharp ruled:
With respect to the initial storm damage claim, a jury could find that [the insurer] acted in bad faith because its payments totaling $2,595,558 did not comport with the terms of the policy and the extent of the claim submitted. . . . [With respect to the supplemental claim], if a jury finds [the insurer] denied [the policyholder’s] claims for reasons untethered to the terms of the policy to which [the insurer] bound itself, it could reasonably conclude that [the insurer] acted in bad faith.
This case is a good example of the trend among Tennessee courts to find that an insurer’s failure to follow the policy can amount to bad faith. Granted, there are cases holding that something more than a simple breach is required for bad faith liability to attach, but Judge Sharp did not apply that antiquated law here.