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RI Supreme Court revives bad faith claim against travelers



The Rhode Island Supreme Court on Friday agreed with a lower court that a unit of Traveler Cos. Inc. does not have to defend an urgent care facility in a discrimination case, but it sent a bad faith claim back to a lower court for further consideration.

In July 2015, Folosade Olofinlade, a woman of Nigerian descent, alleged that she and her 2 ½-year-old daughter accompanied her brother-in-law to the Atmed Treatment Center in Johnston, Rhode Island, to be evaluated for symptoms of the disease, according to the state Supreme Court’s unanimous ruling in Atmed Treatment Center Inc. v. The Travelers Indemnity Co. She was 38 weeks pregnant.

Olofinlade informed Atmed that her brother-in-law had a history of malaria and that this was the likely cause of his illness. She claimed that she and her daughter were then quarantined in a small room with her brother-in-law for about four hours without access to food, water or a toilet.

She also alleged that she overheard an employee declare on the phone that it may have its first case of Ebola, even though she has no facts to support such a statement, the ruling said.

She said that after four hours of confinement, she and her family members were transported to a local hospital in accordance with “hazmat protocol,”

; and that her brother-in-law was never diagnosed with Ebola or any other infectious disease.

She filed suit in October 2017, alleging discrimination under federal and state law. That lawsuit is pending in federal court.

Meanwhile, Atmed insurer Travelers Indemnity Co. agreed to defend Atmed subject to reservation of rights, but has not reimbursed it for its legal costs incurred prior to August 2019.

Atmed sued in state court seeking a declaratory judgment, the insurer bound to defend it, and asserting breach of contract and bad faith claims.

The lower court ruled in favor of the travelers. The state Supreme Court agreed that Travelers was not obligated to defend Atmed under a policy exclusion in its coverage.

However, it held that the bad faith claim “was not proper before the trial court.”

The prosecution was “separated and stayed. The parties were not given an opportunity to fully debate the issue,” the court said.

The traveler’s “alleged misrepresentations could have caused Atmed to incur damages in the form of attorneys’ fees for the time the action was brought until the date travelers agreed to defend Atmed,” the ruling said.

“This court has declared that insurers have a duty to fully and completely investigate claims made by an insured,” it said, vacating the portion of the judgment granting summary judgment on that claim, and remanding the case to the lower court.

Ahmed’s attorney, sole practitioner Neil P. Philbin, who is based in South Kingstown, Rhode Island, said the opinion “is an accurate summary of the litigation and a very thorough analysis of the issues at issue.”

The traveler’s attorney did not respond to a request for comment.


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