A huge bad faith $112 million punitive damages award in an Indiana federal court last week appears to be the result of insurance companies trying to “flip-flop” the policyholder’s expert consultant.1 The trial court noted the issue and denied the insurers’ motion for summary judgment on the bad faith claim:
Indiana GRQ claims the insurers defrauded it by hiring its cleanup consultant (Jeff Pope of Burns & McDonnell) to help the insurers. Indiana GRQ calls this bad faith. Mr. Pope was hired as an environmental consultant for Indiana GRQ. He conducted field testing and produced a comprehensive report for Indiana GRQ. He produced an environmental remediation plan that the Indiana GRQ signed. Mr. Pope testified that the insurance companies (through the McLarens) retained him after his work for Indiana GRQ ceased and he stopped receiving payment.
Mr. Thoman (McLaren̵
7;s adjuster for the insurance companies) testified that the insurance companies hired Burns & McDonnell (namely Mr. Pope) because “they had an intimate knowledge of the complexities of what was happening on site” He also said that he could not recall another claim where the insurer engaged the insured’s former consultant. Mr Pope said he was held for only one meeting. He attended a call with the insurance companies to prepare [their] best estimates for the physical damage and leakage and contamination” and to discuss “opening a potential settlement” with the Indiana GRQ. Thomas Lovisa, the lead contractor performing the cleanup at the site, testified that this was “odd,” but it seems much more concerning . “Courts have been quick to find a confidential relationship in situations there [consultant] previously worked for the opposing party, especially when this consultant obtains confidential information during the representation. Thompson, IG, LLC v. Edgetech IG, Inc., 2012 US Dist. LEXIS 126808, 9-11 (ED Mich. Sept. 6, 2012).On this basis, a reasonable jury could find it bad faith to hire the very consultant who once worked for Indiana GRQ on the same remediation matter now to undermine the company’s efforts for additional compensation payments—an exercise of an unfair advantage over the insured to pressure the insured toward a settlement. Looks id.; Koch Refining. Co. v. Jennifer L. Boudreaux MV85 F.3d 1178, 1181 (5th CirTh Cir. 1996) (flip-flopping insurer and consultant provided grounds for disqualification); Wang Lab’ys., Inc. v. Toshiba Corp., 762 F.Supp. 1246, 1248 (ED Va. 1991) (viewing this flip-flop retention of a proposed expert as a “clear” case of concern)… The court must therefore deny summary judgment on this theory of bad faith.
At trial and in response to a motion for directed verdict, the policyholder argued:
Testimony of the defendant insurers’ covert scheme to use and then formally retain Pope to work against IRG’s interests under the same claim that he was originally retained by IRG is malicious and reprehensible, and the evidence presented by IRG at trial has been overwhelming — including the testimony by mr. Pope himself. Additionally, testimony from Shawn Keating, both the claims representative at the time for Zurich/American Guarantee and the lead adjuster for the entire defendant insurance market (including Interstate), supports IRG’s argument that the retention and earlier attempts to reverse Mr. Pope demonstrated bad faith.
There is often much to be learned from cases that proceed to trial. This case has much more to discuss. The lesson and point of this post is simple – insurance adjusters who attempt to hire the policyholder’s expert can be subject to bad faith claims.
Today’s thought
Punishment is justice for the unjust.
– Saint Augustine
1 Indiana GRQ v. American Guarantee & Liability Ins. Co.No. 3:21-cv-00227 (ND Ind. May 25, 2023).
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