EVERYTHING IN EXCESS: PURSUING A BAD FAITH CLAIM IN VIRGINIA

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1 EVERYTHING IN EXCESS: PURSUING A BAD FAITH CLAIM IN VIRGINIA Virginia utilizes the bad faith standard in determining an insurer's liability for failure to settle within policy limits. Specifically, an insured must prove by clear and convincing evidence that the insurer acted in furtherance of its own interest with intentional disregard of the financial interest of the insured. [FN93] Virginia courts have not explicitly stated the standard of proof necessary to sustain a claim for third-party bad faith failure to settle. STATUTORY AUTHORITY Code of Virginia Remedy for arbitrary refusal of motor vehicle insurance claim. A. Whenever any insurance company licensed in this Commonwealth to write insurance as defined in denies, refuses or fails to pay to its insured a claim of $3,500 or less in excess of the deductible, if any, under the provisions of a policy of motor vehicle insurance issued by such company to the insured and it is subsequently found by the judge of a court of proper jurisdiction that such denial, refusal or failure to pay was not made in good faith, the company shall be liable to the insured in an amount double the amount otherwise due and payable under the provisions of the insured's policy of motor vehicle insurance, together with reasonable attorney's fees and expenses. The provisions of this subsection shall be construed to include an insurance company's refusal or failure to pay medical expenses to persons covered under the terms of any medical payments coverage extended under a policy of motor vehicle insurance, when the amount of the claim therefor is $3,500 or less and the refusal was not made in good faith. B. Notwithstanding the provisions of subsection A, whenever any insurance company licensed in this Commonwealth to write insurance as defined in denies, refuses or fails to pay to a third party claimant, on behalf of an insured to whom such company has issued a policy of motor vehicle liability insurance, a claim of $3,500 or less made by such third party claimant and if the judge of a court of

2 proper jurisdiction finds that the insured is liable for the claim, the third party claimant shall have a cause of action against the insurance company. If the judge finds that such denial, refusal or failure to pay was not made in good faith, the company, in addition to the liability assumed by the company under the provisions of the insured's policy of motor vehicle liability insurance, shall be liable to the third party claimant in an amount double the amount of the judgment awarded the third party claimant, together with reasonable attorney's fees and expenses. C. Notwithstanding the provisions of subsections A and B whenever any person who has paid a fee to the Department of Motor Vehicles to register an uninsured motor vehicle pursuant to or any person who has furnished proof of financial responsibility in lieu of obtaining a policy or policies of motor vehicle liability insurance pursuant to the provisions of Title 46.2 or any person who is required and has failed either to pay such fee or to furnish such proof pursuant to the provisions of Title 46.2 denies, refuses or fails to pay to a claimant a claim of $3,500 or less made by such claimant as a result of a motor vehicle accident; and if the trial judge of a court of proper jurisdiction finds that such denial, refusal or failure to pay was not made in good faith, such person shall be liable to the claimant in an amount double the amount otherwise due and payable together with reasonable attorney's fees and expenses. For the purposes of this subsection C "person" shall mean and include any natural person, firm, partnership, association or corporation. D. 1. Whenever a court of proper jurisdiction finds that an insurance company licensed in this Commonwealth to write insurance as defined in denies, refuses or fails to pay to its insured a claim of more than $3,500 in excess of the deductible, if any, under the provisions of a policy of motor vehicle insurance issued by such company to the insured and it is subsequently found by the judge of a court of proper jurisdiction that such denial, refusal or failure to pay was not made in good faith, the company shall be liable to the insured in the amount otherwise due and payable under the provisions of the insured's policy of motor vehicle insurance, plus interest on the amount due at double the rate provided in from the date that

3 the claim was submitted to the insurer or its authorized agent, together with reasonable attorney's fees and expenses. 2. The provisions of this subsection shall be construed to include an insurance company's refusal or failure to pay medical expenses to persons covered under the terms of any medical payments coverage extended under a policy of motor vehicle insurance when the refusal was not made in good faith. CASE LAW State Farm Mut. Auto. Ins. Co. v. Floyd, 366 S.E 2d 93, (Va. 1988). Insured may recover from insurer for judgment in excess of policy limits where failure to settle within policy limits is result of bad faith. Insured must show that insurer acted in furtherance of its own interest with intentional disregard of financial interest of insured. Bad faith must be proved by clear and convincing evidence Horace Mann Ins. Co. v. Government Emps. Ins. Co., 231 Va. 426, 344 S.E.2d 906. Bad faith may arise when insurer unjustifiably refuses to settle the claim within limits thereby exposing insured to excess liability Aetna v. Price, 206 Va. 749, 146 S.E.2d 220. In proper case insurance company may be liable for excess verdict if refusal or failure to settle is marked by bad faith. Mere refusal of insurance company to accept advice of

4 October 4, 2013 VIA MAIL & FAX (757) Re: v. Case No.: Dear : Per the jury s verdict and Judge Fisher s ruling on that verdict, I am enclosing herewith a Judgment which I would appreciate you signing and forwarding onto the Court for entry. Please let me know promptly if there are any revisions you deem appropriate. This is also to request that you preserve the entirety of your file in this matter, omitting nothing, in the event that the claims decisions made in this case are subject to later review. I would respectfully suggest that you have a duty to preserve the entirety of your file even though there may be documents in there which you believe would be non-discoverable because of the assertion of some privilege. This is also to demand that the carrier in this case promptly pay the limits of their coverage in partial satisfaction of the judgment to be entered. If the carrier promptly pays the entirety of their coverage, we will forgo interest and forgo immediate institution of collection procedures for the balance of the judgment. I would also respectfully suggest that Ms. Bryan s personal attorney should contact us regarding any questions

5 regarding the collection of the judgment, above the limits of coverage. Thank you for your prompt attention to these matters. Very Truly Yours, Christopher L. Anderson CA/hdb Enclosure

6 October 4, 2013 VIA MAIL & FAX (757) Re: v. Case No.: Dear : This follows yesterday s letter to you regarding the jury s verdict and Judge Fisher s ruling on that verdict. Please let me know where we stand with the Judgment I sent you on Monday. If there are no revisions, I would appreciate you signing and forwarding on to the Court for entry at your earliest opportunity. I would also ask for confirmation that the carrier will promptly pay the limits of their coverage in partial satisfaction of the judgment to be entered. Please also confirm that you agree to preserve the entirety of your file (omitting nothing) in this matter per my earlier request. I want to reiterate that we will forgo interest and immediate institution of collection procedures for the balance of the judgment if GEICO promptly pays the entirety of the coverage afforded to Ms. Bryan. Once again, thank you for your prompt attention to these matters. Very Truly Yours, Christopher L. Anderson

7 October 3, 2013 VIA MAIL & FAX (757) Re: v. Case No.: Dear : Thank you for your kind words. Our client is, however, interested in collecting the entire verdict. Please refer to the letter I sent you earlier this week. That letter still reflects our position. Please endorse the Order and forward to the Court for entry at your earliest opportunity. Very Truly Yours, Christopher L. Anderson CA/hdb Enclosure cc: