Insurance Bad Faith Claims and Rulings

The California Supreme Court ruled unanimously on July 27, 2026, that insureds do not have to show exhaustion of all underlying insurance before suing excess insurers for declaratory relief or breach of the implied covenant. In Fox Paine & Co. LLC v. Twin City Fire Ins. Co., the court said an actual controversy can exist before exhaustion. It reversed the Court of Appeal and remanded the case.

Aug 17

The Fifth Circuit in Canutillo Independent School District v. National Union Fire Insurance Co. of Pittsburgh held that National Union had no duty to defend or indemnify the school district for claims brought by third parties. Because the denial of coverage for the Mendoza claims was reasonable, the court said there could be no breach of the duty of good faith and fair dealing as a matter of law. The case also involved counterclaims under the Texas Insurance Code and DTPA.

Aug 11

A U.S. District Court in New Jersey dismissed professional liability coverage claims against Berkshire Hathaway Direct Insurance Company and its agent with prejudice. The case involved a denial of coverage for prior work because the plaintiffs did not maintain continuous coverage, a condition precedent. The court also rejected bad faith, finding the denial followed the policy’s plain language and duplicated the contract claim.

Aug 13

The Arizona court said the insurer had paid the insured’s claim timely and in the amount required by the policy. It held that the conduct at issue did not fit the tort of bad faith. The court left open that the insurer’s other conduct might support another theory, such as fraud or misrepresentation.

Aug 15

The Nevada Supreme Court held in North River Insurance Company v. James River Insurance Company that an excess insurer may pursue a primary insurer through equitable subrogation for an alleged bad-faith failure to settle. North River had funded the $4 million excess portion of a settlement after James River allegedly refused reasonable settlement opportunities within its $1 million limits. The court said the remedy exists even when the case settles within the combined limits of the policies.

Aug 14

The Arizona Supreme Court affirmed compensatory relief in a bad-faith dispute involving Nationwide Life Insurance Company but vacated a $2 million punitive-damages award. Sandra sued after Jerry’s death and the jury awarded her $14,951.13 for breach of contract, $150,000 for bad faith, and $2,000,000 in punitive damages. The court held punitive damages require aggravated, outrageous, malicious, or fraudulent conduct with an evil mind.

Aug 11

The California Supreme Court held in Fox Paine that the absence of exhaustion of underlying insurance is not fatal to claims for declaratory relief and breach of the implied covenant of good faith and fair dealing against excess insurers. The decision came after plaintiffs alleged their excess insurers failed to indemnify expenses from earlier litigation. The court’s ruling reversed the lower court and allowed the claims to proceed.

Aug 12

An InsuranceNewsNet article highlighted California Supreme Court guidance in Fox Paine & Co. v. Twin City Fire Insurance Co. on excess insurer disputes. The decision says policyholders may seek declaratory relief and assert bad faith claims before underlying coverage is exhausted if they allege a reasonable likelihood that excess coverage will be reached. Scott Seaman said the ruling does not change the merits standard, but clarifies when a case may be brought to court.…

Aug 12

An Arizona jury found in favor of the Goudreaults on the Thomases’ tort claims for intentional interference with business expectancies and intentional infliction of emotional distress. Judgment included $55,895 in compensatory damages after a rent set-off, plus $2,050 in retaliatory damages, $10,000 in attorney’s fees and taxable costs. The court also cited an earlier Arizona case holding emotional distress damages could be awarded in a bad faith breach of insurance contract action.…

Aug 11

A Mississippi case involving Sentinel/Centre, Seaboard/St. Paul and Exxon produced jury awards to Kimmins on contract-related claims. The jury returned verdicts of $92,327 against Sentinel/Centre for Phase I, $874,048 against Sentinel/Centre and Seaboard/St. Paul for Phase II, and $724,593 against Exxon. The decision also discussed the elements of tortious interference with contract performance.…

Aug 11

A commentary on Fox Paine & Co. v. Twin City Fire Insurance Co. says the California Supreme Court clarified that policyholders need not exhaust all underlying coverage before suing excess insurers. The case involved Fox Paine, a private equity firm that alleged three excess insurers failed to reimburse covered litigation expenses. The article says the ruling is a pleading decision and does not itself establish that any excess carrier owes coverage.

Aug 11

The California Supreme Court ruled in Fox Paine & Co. v. Twin City Fire Insurance Co. that insureds may seek declaratory relief and tortious bad faith claims against excess insurers before underlying coverage is exhausted. The court said an actual controversy can exist under California law even when excess coverage is contingent on exhaustion of lower layers. It also held that the implied covenant of good faith and fair dealing applies from the inception of the policy.

Aug 6

A North Carolina explainer says insurance bad faith can trigger Chapter 75’s unfair and deceptive trade practices statute, allowing policyholders to recover treble damages. It says businesses may also recover attorney’s fees in some cases, and that courts look to claim-handling conduct such as failure to investigate, misrepresentations or unjustified delay. The text cites cases in which insureds pursued or won Chapter 75 claims against insurers.

Aug 4

The California Supreme Court clarified that a policyholder must show a reasonable likelihood that potential liability will reach excess coverage to assert declaratory relief under an excess policy. In Fox Paine & Co., LLC v. Twin City Fire Ins. Co., the court rejected a requirement that underlying limits be exhausted first.…

Aug 7

Law360 Insurance Authority highlighted major property coverage rulings, including a New York decision extending bad faith to third-party liability coverage. The article said Renergy v. Mt. Hawley Insurance confirmed that bad faith damages are available in the third-party context nearly 20 years after earlier New York Court of Appeals cases on first-party consequential damages. It also noted a Texas Supreme Court appraisal decision in Ace American Insurance.

Jul 30

United Airlines sued Homesite Insurance Company in federal court in Illinois for $5 million over losses tied to the July 2024 CrowdStrike outage. United says Homesite is the only one of eight cyber insurers in its program to refuse payment after the outage forced the airline to cancel more than 1,600 flights. Homesite has filed its own declaratory judgment action and says it owes nothing under the policy.

Jul 29

In April 2025, the Eleventh Circuit reversed a judgment against a Florida lodge and held a jury should decide whether the insurer’s failure to initiate settlement talks before a claim was filed was bad faith. The post also noted a Northern District of New York court denied an insurer’s motion to dismiss a bad faith claim under New York’s deceptive acts law. It further mentioned a California federal lawsuit by Zywave involving representations and warranties insurance coverage.

Jul 27