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Home / Insurance / What kind of hail is that? Indiana Hail Bad Faith Claims | Property Insurance Protection Law Blog

What kind of hail is that? Indiana Hail Bad Faith Claims | Property Insurance Protection Law Blog



Proving that an insurance company failed to act in the utmost good faith is not as easy as it sounds. Many shout “bad faith” without fully understanding what it means or how to prove it. Winning a “bad faith” lawsuit is difficult anywhere, especially in Indiana. A recent hail damage Order1 the decision that no bad faith occurred should be read by those with hail damage, and especially those with property insurance claims in Indiana.

The judge came to the bottom line of the first paragraph of the order:

To sue an insurance company for bad faith in Indiana, an insured must prove that the insurer knew there was no legitimate basis for denying liability. Here, a condominium complex̵

7;s roof was allegedly damaged by hail, and the complex and its insurer could not agree on a repair estimate. The insured, North Shore Co-Owners’ Association, Inc. (‘North Shore’), purchased the action against the insurer, Nationwide Mutual Insurance Co. (‘Nationwide’), for breach of contract and bad faith; a motion for declaratory judgment was later added reflecting the same issues as in their breach of contract claim. The insurer moved for partial summary judgment on the grounds of bad faith and declaratory judgment. Because Nationwide has shown a legitimate basis for denying liability, and because the declaratory judgment is superfluous to the breach of contract count likely to be resolved at trial, we grant the partial motion for summary judgment, denying both the bad faith and declaratory judgment counts. claims.

The court recited Indiana law regarding good faith as follows:

Under Indiana law, insurers are required to act in good faith with their insureds.” Winding Ridge v. State Farm Fire & Casualty Co .942 F.3d 824, 833 (7th Cir. 2019) (‘Winding Ridge II‘); see also Monroe Guaranteed Ins. Co. v. Magwerks Corp., 829 NE2d 968, 977 (Ind. 2005). This obligation includes refraining from “(1) making an unfounded refusal to pay insurance proceeds; (2) causes an unreasonable delay in payment; (3) deceive the insured; and (4) to exercise any unfair advantage to pressure an insured into a settlement of his claim.’ Erie Ins. Co., v. Hickman622 NE2d 515, 519 (Ind. 1993). But this “does not create a new cause of action each time an insurer wrongfully denies a claim.” Winding Ridge II942 F.3d at 520. It has “long been the rule in Indiana” that “insurance companies may, in good faith, contest claims.” Hickman622 NE2d at 520. Thus, to prove bad faith, the plaintiff must establish by clear and convincing evidence that “the insurer had knowledge that there was no legitimate basis for denying liability.” Freidline v. Shelby Ins. Co., 774 NE2d 37, 40 (Ind. 2002). Plaintiffs are also required to prove an insurer’s “deliberate fault” or “culpable mental state.” Winding Ridge II, 942 F.3d at 833. “This is a high burden of proof.” Id. (quoting Inman v. State Farm Mut. Car. ins. Co.981 NE2d 1202, 1207 (Ind. 2012)).

The final element regarding “deliberate fault” or a “culpable mental state” invites insurance adjusters to delay and deny claims with the simple excuse of sheer negligence or studied blunder. While I don’t make the laws, the insurance companies teach their adjusters that they are failing to act in good faith without having to have some evil mind in doing so. The word “bad” is somewhat easier to say than “failed to act in good faith cause of action.” A minority of courts have mistakenly added this “malice” requirement that is not in the training manuals for insurance adjusters. I’m not sure where that came from in Indiana jurisprudence.

In this case, the policyholder sought to prove that the “ordinary group of experts” retained by the insurer were biased. The case should be studied for what is needed on this claim. Repeated detention alone will not win the case proving bias:

North Shore alleges that Nationwide acted in bad faith because Ladder-Now and Nederveld are “simply biased preferred vendors who are paid large sums of money each year by Nationwide,” a jury could find that Wildason ignored Shields’ report, and that Wildason “intentionally carried out a inadequate inspection for hail damage.’ North Shore repeatedly argues that these issues must be sent to a jury for resolution, but “bad faith is a question of law that the court must resolve, not a question of fact that [North Shore’s] the claim rests.’…

We also reject North Shore’s argument that Nationwide acted in bad faith because it hired Ladder-Now and Nederveld, who are “simply biased preferred vendors who are paid large sums of money each year by Nationwide.” The only support North Shore provides for this statement are the tax returns for Nederveld’s income over the years from Nationwide. There is no reference to financial information for Ladder-Now, so North Shore’s argument with respect to the alleged “biased” provider is not fully supported. In the case of Nederveld, North Shore has not provided any other relevant information, such as how often Nationwide has engaged Nederveld, how much of Nederveld’s business is dependent on Nationwide, how many other engineering firms Nationwide has contracts with, etc. Although North Shore had provided some of this missing contextual information about Nationwide and Nederveld’s business relationship, North Shore has failed to provide any reasons for attributing bias to an otherwise normal business relationship, particularly given the myriad of possible good reasons a company might choose to do business with another company on a recurring basis. Despite extensive discovery, North Shore has provided no other evidentiary support for Nederveld’s alleged bias.

If there was a silver lining for policyholders outside of this otherwise dreary arrangement, it was the finding that the jury could award indemnity costs without the indemnity taking place:

We also reject North Shore’s argument that declaratory judgments are necessary to preserve arguments about whether North Shore must actually replace the roofs before being awarded the full replacement cost benefits. As North Shore itself points out, a jury can award the entire indemnity cost benefits under breach of contract. North Shore’s referral to Rockford Mutual Insurance Co. v. Pirtle, where the Indiana Court of Appeals addressed this question of actual damages, is inapposite because that case involved only a breach of contract claim. Id. (citing 911 NE2d 60 (Ind. Ct. App. 2009)). Furthermore, the jury in that case awarded the plaintiff full replacement costs, without the building actually being repaired or replaced….

I have long warned against biased and results-oriented experts. For example, Insurance company experts are often biased and results oriented, featured an ad by an expert promising to help lower insurance company payouts. I list a number of posts where I have written about the subject in, Causation experts may be more important than witnesses – or don’t believe your lying eyes when your insurance company hires an expert.

The lesson learned is that the possibility of bringing charges against an insurance company varies greatly from state to state. The cases are never easy. Many advertising lawyers and others who pontificate on social media about “bad faith” often do so without ever being in the arena and actually proving it. If there really is a “good” bad faith case, find lawyers who know what they’re doing to help you.

Today’s thought

The roots of all goodness lie in the soil of appreciation for goodness.
– The Dalai Lama
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1 North Shore Co-owners Ass’n v. Nationwide Mutual Ins. Co.No. 1:18-cv-03632 (SC Ind. Aug. 30, 2022).


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