{"id":902609,"date":"2024-04-25T11:13:25","date_gmt":"2024-04-25T17:13:25","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=902609"},"modified":"2024-04-25T11:13:25","modified_gmt":"2024-04-25T17:13:25","slug":"threat-of-bad-faith-does-not-constitute-a-claim-under-insurance-companys-professional-liability-policy","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/threat-of-bad-faith-does-not-constitute-a-claim-under-insurance-companys-professional-liability-policy\/","title":{"rendered":"Threat of Bad Faith Does Not Constitute a \u201cClaim\u201d Under Insurance Company\u2019s Professional Liability Policy"},"content":{"rendered":"\n<p>Ezhan Hasan | <a href=\"https:\/\/www.executivesummaryblog.com\/Threat-of-Bad-Faith-Does-Not-Constitute-a-Claim-Under-Insurance-Companys-Professional-Liability-Policy\" target=\"_blank\" rel=\"noreferrer noopener nofollow\">Wiley Rein<\/a><\/p>\n\n\n\n<p>An Ohio federal court, applying Ohio law, has held that a letter threatening a bad faith action against an insured insurance company did not constitute a \u201cClaim\u201d for the purposes of the company\u2019s errors and omissions insurance.\u00a0<a href=\"https:\/\/www.executivesummaryblog.com\/assets\/htmldocuments\/Public-Columbia-Cas-Co-v-State-Automobile-Mut-Ins.pdf\" target=\"_blank\" rel=\"noreferrer noopener nofollow\"><em>Columbia Cas. Co. v. State Automobile Mut. Ins. Co.<\/em>, 2024 WL 1331984 (S.D. Ohio Mar. 28, 2024)<\/a>. The court further held that the company\u2019s payment of the jury verdict against its own insured did not constitute \u201cLoss\u201d from a covered \u201cClaim.\u201d<\/p>\n\n\n\n<p>The insured insurance company provided general liability coverage to a motel that was sued for the wrongful death of one of its guests. After filing the wrongful death lawsuit, the estate sent the company a written settlement demand for the $1 million policy limit under the motel\u2019s general liability policy. The estate\u2019s letter asserted that the company\u2019s failure to tender the policy limit could result in excess exposure and \u201cwould be tantamount to bad faith,\u201d which the estate warned it would hold the company \u201caccountable\u201d for if the settlement demand were rejected. The company opted not to settle. A year later, the estate sent a letter demanding $5 million and asserting that the company had \u201csquandered the opportunity\u201d to settle for less. After the company did not accept this second settlement demand, the wrongful death lawsuit proceeded to trial, and a jury awarded $12 million in damages to the estate. The company and the motel filed an appeal, for which the company secured a bond to guarantee payment of the verdict amount. When the appeal concluded unsuccessfully, the company paid the full verdict amount to the estate.<\/p>\n\n\n\n<p>Shortly after the jury returned its verdict, the company provided notice to its errors and omissions carrier, seeking coverage for the portion of the verdict that exceeded the $1 million policy limit. The company also provided a copy of the initial settlement demand letter and advised its errors and omissions carrier that it had retained bad faith counsel. The errors and omissions carrier denied coverage on the basis that the company\u2019s notification was a \u201cnotice of a Wrongful Act that could give rise to a future Claim\u201d rather than a \u201cClaim\u201d because no bad faith action had been filed against the company. The company disputed the coverage denial, arguing that the second settlement demand letter was a \u201cconditional claim\u201d that ripened into an actual \u201cClaim\u201d when the jury returned the excess-of-limits verdict.<\/p>\n\n\n\n<p>In the ensuing coverage litigation, the court sided with the errors and omissions carrier and found that the second settlement demand letter did not constitute a \u201cClaim for a Wrongful Act\u201d committed by the insured company because the letter did not affirmatively assert the bad faith action or demand money damages stemming from bad faith exposure. The court reasoned that although the demand letter \u201ccould be interpreted as\u00a0<em>threatening\u00a0<\/em>a bad faith action against State Auto, it does not affirmatively assert such an action . . . , nor does it demand monetary damages or non-monetary relief from State Auto\u00a0<em>stemming from\u00a0<\/em>its potential bad faith exposure.\u201d Moreover, the court concluded that the underlying state court verdict and judgment addressed the motel\u2019s liability, not the insurance company\u2019s. In addition, the court concluded that the insured company\u2019s payment of the $12 million jury verdict did not constitute \u201cLoss\u201d it was \u201clegally obligated to pay\u201d on account of a covered \u201cClaim\u201d because no Claim had been made and the insured\u2019s liability to pay the amount arose from its agreement to guarantee payment of the appeal bond, rather than from any bad faith liability.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p><strong>When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes &#8211; please call Advise &amp; Consult, Inc. at 888.684.8305, or email <a href=\"mailto:experts@adviseandconsult.net\" target=\"_blank\" rel=\"noreferrer noopener nofollow\">experts@adviseandconsult.net<\/a>.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Ezhan Hasan | Wiley Rein An Ohio federal court, applying Ohio law, has held that a letter threatening a bad faith action against an insured insurance company did not constitute a \u201cClaim\u201d for the purposes of the company\u2019s errors and omissions insurance.\u00a0Columbia Cas. Co. v. State Automobile Mut. Ins. Co., 2024 WL 1331984 (S.D. Ohio&hellip; <a class=\"more-link\" href=\"https:\/\/www.myconstructionexpert.com\/blog\/threat-of-bad-faith-does-not-constitute-a-claim-under-insurance-companys-professional-liability-policy\/\">Continue reading <span class=\"screen-reader-text\">Threat of Bad Faith Does Not Constitute a \u201cClaim\u201d Under Insurance Company\u2019s Professional Liability Policy<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[14],"tags":[],"class_list":["post-902609","post","type-post","status-publish","format-standard","hentry","category-construction-2","entry"],"jetpack_publicize_connections":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Threat of Bad Faith Does Not Constitute a \u201cClaim\u201d Under Insurance Company\u2019s Professional Liability Policy - Advise &amp; 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