An Insurance Company's business model can be evidence of Bad Faith sufficient to submit a Bad Faith Claim to a Jury, a California Appellate Court ruled in Chicago Title Insurance Co. v. AMZ Insurance Serv's, Inc., Download Chicago Title Insurance Co. v. AMZ Insurance Serv's, Inc. (Cal. 4th DCA, Div. 3, Case No. G041188, Opinion Filed September 9, 2010) PUBLIC ACCESS also published as 188 Cal. App. 4th 401, 115 Cal. Rptr. 3d 707, 732 (Cal. 4th DCA 2010)(Subscription required to access California Reporter Third).
In that case, Pacific Specialty Insurance Company (PSIC), was held bound on "an enforceable binder of homeowner's insurance extending coverage ... for a fire loss incurred by Cheryl Mustain." The binder was entitled "Evidence of Property Insurance" (an EOI, according to the Appellate Court). It was issued by PSIC's agent, AMZ Insurance Services, Inc. PSIC "engaged in bad faith. It authorized AMZ to issue EOI's as binders before receipt of the premium payment and signed application, instructed AMZ to cancel binders in an improper manner, and declined to submit Cheryl Mustain's claim to its claims department." Chicago Title Insurance Co. v. AMZ Insurance Serv's, Inc., 115 Cal. Rptr. 3d at 732. [Emphasis added.] "PSIC ... was in a position to avoid harm and engaged in bad faith conduct." Id. The evidence in that case was held to support the Jury's verdict that PSIC knowingly allowed AMZ to send out insurance binders despite an agreement which stated on its face that AMZ was not allowed to send out insurance binders. See id. at 734.
Based on this model of doing business, PSIC was held liable for a multitude of actions and omissions -- including for Bad Faith in investigating its Insured's Claim.
Given an economic stage populated by actors portraying a certain model of doing business, it will be left to the Courts and Juries, perhaps, to determine which of many other business models may mandate findings of Bad Faith conduct in future cases.
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