Jury assignment proves fatal to plaintiff’s allegation of bad faith

The Eighth Circuit recently upheld an Arkansas district court’s dismissal of plaintiff’s first-party bad faith claim against her insurance company after the insurer prevailed in its motion for summary judgment.

Tilghman v. Allstate Prop. & Case. Ins. Co., __F.4and __, 2022 WL 18977 (8and Cir. 2022), was born from a car accident in Arkansas. Plaintiff sued Defendant Lott, claiming more than $30,000 in past medical expenses, at least $46,000 in future medical expenses, and lost future earnings of between $440,000 and $1,000,000. After failing to recover from the defendant, the plaintiff filed an uninsured motorist claim with its auto insurance provider, Allstate, on its policy which provided uninsured motorist bodily injury coverage up to 50,000 $ per person per accident.

Allstate eventually offered $40,000 to settle the plaintiff’s pretrial claims. The plaintiff rejected the settlement offer and added Allstate to its pending lawsuit in state court suing Allstate under the breach of contract and first party bad faith theories. Allstate has returned the case to federal court.

During litigation, plaintiff served discovery on Allstate, requesting various categories of documents to support its bad faith claim, including the unredacted claim file, claims processing and training materials, personal records of Allstate employees involved in Plaintiff’s claim, and Allstate’s financial information and structures. Allstate objected to the production of these documents on the grounds that they were too broad and violated work product and attorney-client privileges. The plaintiff filed a motion for the documents, which the district court denied, finding that the request for discovery was too broad and disproportionate to the needs of the case.

After the district court denied Plaintiff’s bad faith discovery claims, Allstate sought summary judgment on Plaintiff’s bad faith claim, saying Plaintiff failed to provide sufficient evidence showing that Allstate s was actually engaged in dishonest, malicious or oppressive conduct, which the district court granted.

At trial, on the plaintiff’s remaining claim for breach of contract, a jury awarded the plaintiff $12,000 in damages. The plaintiff appealed the district court’s decision denying her motion to compel production of the bad faith documents. The plaintiff argued that the denial of her motion to directly compel leads the district courts to grant abusive summary judgment on her bad faith claim against Allstate.

The Eighth Circuit noted that under Arkansas law, first-party bad faith exists if the insurer “engaged in affirmative fault that was dishonest, malicious, or oppressive” (citing Unum Life Ins. Co. of Am. V. Edwards, 210 SW3d 84, 87 (Ark. 2005)), “in an attempt to avoid liability under an insurance policy.” (quoting Aetna Case. & On. Co. v. Broadway Arms Corp., 664 SW2d 463, 465 (Ark. 1984). Further, the Court stated that “an insured cannot sustain a bad faith claim for an insurer’s valuation where the insurer was reasonable in its valuation and justified in refusing to pay more. Tilghman at 6.

Allstate argued that the correctness of the district court’s decision on the motion to compel is irrelevant in light of the jury’s award of $12,000 on plaintiff’s breach of contract claim. Allstate argued that because its final offer was $40,000, $28,000 more than the jury ultimately awarded, Allstate did not necessarily act in bad faith in evaluating the plaintiff’s claim. Therefore, Plaintiff could not have been harmed by an improper decision of the District Court regarding Plaintiff’s finding of bad faith.

The Eighth Circuit agreed with Allstate in determining that it did not need to make a decision on the merits of the district court’s denial of plaintiff’s discovery requests. The fact that the jury found the value of the plaintiff’s claim to be $12,000 meant that Allstate had in effect overstated the case when it offered $40,000 to settle the case before trial. Allstate necessarily acted reasonably in its assessment and justified not offering the $50,000 policy limits.

Nor was the Eighth Circuit swayed by Plaintiff’s argument that the amount of the jury award is irrelevant because bad faith claims permit the recovery of damages that amount to separate categories of damages available under a claim for breach of contract. The Eighth Circuit countered that the categories of compensation available for bad faith claims are a separate issue from whether an insurer actually acted in bad faith.

The Eighth Circuit Court pointed out that the jury award, being significantly less than the amount offered by Allstate before trial, was fatal to the plaintiff’s claim that Allstate acted in bad faith in assessing its claim. As such, the District Court was correct in rejecting Plaintiff’s bad faith allegation.

About Jessica J. Bass

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