Frivolous Claim: The Need For Bad Faith Legislation

Frivolous Claim: The Need For Bad Faith Legislation

   By Randy Maniloff, Partner, White and Williams LLP

Binding Authority doesn’t do much with Bad Faith.  Of course not – because it doesn’t exist.


Actually, bad faith receives a disproportionate share of attention, compared to its importance, because the cases are often fact intensive, the standards are generally mature and those standards can vary, sometimes a lot, from state to state.  Translation – bad faith decisions, unless very unique, usually do not have wide-ranging enough significance to get the attention of Binding Authority.  One exception is when a bad faith decision serves as a lesson for how not to handle a claim.  In that situation such decisions do have across-the-board relevance.


However, over the past three years or so, there is one bad faith issue that has been consistent throughout the country: legislative efforts to enact laws that concern insurers’ claim handling practices and bad faith – despite the existence of case law and statutes addressing these issues already on the books in such states.  Efforts to enact claims handling and bad faith laws have recently taken place in at least the following states: Colorado; Connecticut; Florida; Georgia; Iowa; Maine; Maryland; Minnesota; Montana; Nevada; New Jersey; New Mexico; New York; Oregon; Pennsylvania; Rhode Island; Washington (and Washington D.C.)Fif-ty, Nif-ty, United States…


These legislative attempts have been successful in a few states, unsuccessful in others and, in still a few more, the process remains on-going.


Attached is a copy of “Frivolous Claim: The Need For Bad Faith Legislation” -- an article that I am publishing in the August 5 issue of Mealey’s Emerging Insurance Disputes that addresses these recent legislative attempts.  The article examines bad faith in general and the arguments that are often made for and against the passage of bad faith laws; looks at legislation that was passed not long ago in two states; and concludes with a discussion why bad faith legislation does more harm than good.


I will have the pleasure of presenting this article later this week to a roomful of state legislators from around the country at the 37th Annual Meeting of the American Legislative Exchange Council in San Diego.         


I hope you find the article interesting and informative.



Update on The Montrose Endorsement (known loss exclusion):  I know from the feedback that I get from readers that the Montrose Endorsement (known loss exclusion) is a popular topic and on a lot of radar screens these days.  Binding Authority follows this emerging issue closely and has reported in the past that insurers have been losing more Montrose Endorsement cases than they have been winning.  But about 10 days ago an insurer prevailed in a Montrose Endorsement case.  In reaching its decision the Alabama federal court concluded that the Montrose Endorsement serves a “valuable societal interest.”  I do not have time to write up this new Montrose decision for Binding Authority.  But if you are interested in a copy of it, just drop me a note.             


Update on Coverage College:  The 2010 White and Williams Coverage College is close to being “sold out.”  If you are planning to attend and have not yet registered, please do so as soon as possible.  If you try to register and are told that it is closed, you will be offered an opportunity to be placed on the Waiting List.  I encourage you to do so as we’ll get cancellations as the event draws near.  The brochure and link to register can be found under Events on the W&W homepage.     




Randy J. Maniloff
White and Williams LLP
1800 One Liberty Place | Philadelphia, PA 19103-7395
Direct Dial: 215.864.6311 | Direct Fax: 215.789.7608


The views expressed herein are solely those of the author and not necessarily those of the firm or its clients. The information contained herein shall not be considered legal advice. You are advised to consult with an attorney concerning how any of the issues addressed herein may apply to your own situation. The term “Binding Authority” is used herein for literary purposes only and is not an admission that any case discussed herein is in fact binding authority on any court.


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