W.V. Supreme Court Limits Bad Faith Cases Against Insurance Companies

The W.V. Supreme Court took a huge step in reducing bad faith claims in W.V. Daniel Strahin, who was shot in the arm on the property of Earl Sullivan by another man, agreed with Sullivan to sign a Covenant Not to Execute. The covenant stipulated that Strahin would receive from Sullivan any rights to make a bad faith claim if a settlement was not reached. In return, Strahin could not seek Sullivan's personal property as compensation for a jury award. Sullivan's insurance company refused to settle the claim and Strahin proceeded to trial and was awarded over $1 million. Typically, this would mean that Strahin could "step into the shoes" of Sullivan and sue Sullivan's insurance company for first-party bad faith (I don't think W.V. has 3rd party bad faith like Kentucky does). However, the Supreme Court in West Virginia has decided that because Sullivan would never actually be responsbile for the jury verdict (since Strahin had agreed not to execute on him personally) that the insurer was not responsible for paying the amount of the jury verdict exceeding Sullivan's $100k policy limits. The court reasoned that, although there was no evidence of it here, the risk of collusion exists in situations such as this becuase the insured no longer has any real incentive to defend the case. "We now hold that in order for an insured or an assignee of an insured to recover the amount of a verdict in excess of the applicable insurance policy limits from an insurer pursuant to this Court's decision in Shamblin, the insured must be actually exposed to personal liability in excess of the policy limits at the time the excess verdict is rendered," Maynard wrote. It is my humble opinion that the court went to far. The risk of collusion is too low to justify this opinion. Furthermore, unless the insurance company offered the $100k and the Strahin refused it, then the insurance company DID obviously acted in bad faith considering the size of the jury award. If they did offer the money, and plaintiff refused it, then there has been no bad faith and the case will be dismissed at the preliminary stages. If it is the latter, this certainly does not justify foreclosing an entire cause of action when insurers truly act in bad faith. hp To see the entire article, here is the link: http://www.wvrecord.com/news/191020-supreme-court-looking-ahead-in-insurance-opinion-attorney-says