Insurance Bad Faith Report

• Published date: 22 July 2022
• Subject Matter: Insurance, Litigation, Mediation & Arbitration, Insurance Laws and Products, Class Actions
• Law Firm: Dykema
• Author: Mr Thomas J. Judge, Joanne L. Zimolzak, Jason C. Reichlyn and Sarah E. Cornwell

Dykema's nationally recognized insurance practice provides quarterly reports reviewing notable bad faith decisions issued by state and federal courts nationwide. These reports, along with complete copies of the decisions reviewed, are available online to access at any time.

Delaware Superior Court Finds No Coverage For Appraisal Actions, But Allows Claims For Bad Faith Related To Breach Of Fiduciary Duty Allegations To Go Forward

MPM Holdings Inc. v. Fed. Ins. Co., No. N20C-07-014 MMJ CCLD, 2022 Del. Super. LEXIS 102 (Del. Super. Ct. Mar. 17, 2022).

A merger involving MPM Holdings Inc. closed on May 15, 2019, which spurred a pre-closing 220 demand, three appraisal actions, and a stockholders' class action. The appraisal actions and the stockholders' class action were consolidated and amended to include breach of fiduciary duty claims. Federal provided directors and officers insurance. Federal acknowledged coverage for the 220 demand and initially acknowledged coverage for the proposed class action, but it subsequently denied coverage on the basis that none of the individual defendants was an insured person under the policy. Federal also denied coverage for the appraisal actions. MPM filed suit, and Federal subsequently agreed to defend the class action subject to a reservation of rights. The Delaware Superior Court first found that Federal's coverage denial for the appraisal actions was proper because they did not allege a "wrongful act." However, the court was unable to determine coverage for the class action due to fact issues regarding application of the "Larger Settlement Rule." The court also found that questions of fact remained regarding the bad faith claim, as it was unclear if Federal's initial denial of the class action was without "reasonable justification." Read the decision.

Montana District Court Rejects Possibility Of Safe Harbor From Bad Faith Allegations

UMIA Ins., Inc. v. Arguelles, No. CV 20-177-BLG-TJC, 2022 U.S. Dist. LEXIS 48670 (D. Mont. Mar. 18, 2022).

A medical provider and its president sought coverage from UMIA Insurance, Inc. for several lawsuits alleging that the provider engaged in a pattern of improperly diagnosing rheumatoid arthritis and providing unnecessary treatments. As a result of the litigation, the provider and its president also were subpoenaed by the U.S. Department of Justice and the Department of Health and Human Services. The provider and its president sought coverage from UMIA, which undertook defense of the...