Scottsdale Insurance Company Bad Faith

Happy Independence Day!

The owners and attorneys of Eaux Holdings were celebrating an early 4th of July on Friday when they received a court Order confirming their bad faith verdict against Scottsdale Insurance. I previously blogged about this case in Hurricane Laura Bad Faith Verdict Against Scottsdale Insurance. Scottsdale is a non-admitted surplus lines insurance company affiliated with and wholly-owned by, Nationwide Mutual Insurance Company.

The Memorandum Order1 upheld the findings of claim delay by Scottdale Insurance and discussed the legal issue:

Eaux sued Scottsdale for violations of La. R.S. 22:1892, which provides for a bad faith penalty when an insurer fails to pay the amount due within 30 days after receipt of satisfactory proof of loss, and when that failure to pay is arbitrary, capricious, or without probable cause….

Scottsdale argues that Eaux failed to meet its burden at trial to show that the May 2021 final payment was untimely, which is required to prevail on its bad faith claims related to this payment. Scottsdale maintains that the policy and Louisiana law are clear that a Replacement Cost Value payment is not owed until repairs are complete and the insured submits the amounts actually spent on repairs. Scottsdale argues that the evidence submitted at trial established that the May 2021 payment was made within 30 days of receipt of the claimed repair costs, and as such the payment is not untimely.

Eaux argues that to uphold the jury’s findings that all of Scottsdale’s payments were late (with the one stipulated exception), Eaux merely needs to show that Scottsdale had sufficient information to know the extent of Eaux’s loss and failed to pay that much within 30 days. Eaux argues that it provided ample evidence to support this assertion such as: Jeff Major’s testimony that he informed Scottsdale that the building was a total loss on September 15, 2020 and provided a four-volume, detailed estimate to Scottsdale; Scottsdale admitting that its first adjusted in September said it was at least a $1.5 million loss and might be cheaper to tear down and rebuild; the testimony of Jeff Majors, Joey Odom, and Evan Monheiser that they all tried to communicate with Scottsdale for months, informed Scottsdale of the repairs and costs, and Scottsdale did not respond.

Insurance payment delay is a failure to act in good faith. In Louisiana, the time frame is codified because insurers will always come up with excuses for delaying payment. The court agreed:

Eaux maintains that the proper legal standard for a JMOL is whether there is any ‘substantial evidence, in the light most favorable to the successful party,’ that supports the jury’s findings that Scottsdale’s payments were more than 30 days after satisfactory proof of loss. Eaux argues that there is copious support for those finding and as such this motion should be denied. The Court agrees and finds no basis in law to reverse its earlier ruling as to this issue.

In Understanding Louisiana Bad Faith Law When Claims Payments Are Delayed or Paid Too Late, I made the following observation:

The most important and basic principle of good faith duty owed by insurers to Louisiana first-party customers is to make unconditional payments of claims within 30 days of receiving an adequate proof of loss. If an insurer delays payment for more than thirty days after investigation of the loss, my considered opinion is that Louisiana policyholders should seek and be referred to legal counsel about their legal rights.

Louisiana Revised Statute § 22:1892 sets forth a 30-day time period for prompt payment. Louisiana Revised Statute § 22:1973 provides a 60-day time period for the insurer to make an unconditional payment to the insured after the insured makes satisfactory proof of loss. These statutes have remedies and penalties when insurers fail to follow them.

This recent Order from a Louisiana federal judge suggests that I am correct. Insurers need to pay what they owe as soon as they can if they want to avoid complaints about bad faith behavior. Unfortunately, in an attempt to escape accountability, Scottsdale Insurance argued an excuse that would turn the insurance policy into a reimbursement agreement. Instead, Scottsdale Insurance should simply try harder to fulfill the “On Your Side” promise by its parent, Nationwide Insurance. Sometimes, these cases are lessons for how to do better with property adjustments.

Thought For The Day

Where liberty dwells, there is my country.
—Benjamin Franklin
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1 Eaux Holdings v. Scottsdale Ins. Co., No. 2:20-cv-01582, 2022 U.S. Dist. LEXIS 116996 (W.D. La. July 1, 2022).