As we go forth into 2014, Plaintiff’s with potential bad faith lawsuits can look at the ever-evolving case law and see that Courts across the United States are wising up to the practices utilized by insurers and how those claims and adjusting practices may impact the multiple parties who rely upon the insurance company’s policies to make them whole.
On June 7, 2013, the case of Willis v. Swain,1 found that an insurer can be exposed to a bad faith cause of action even if that insurer hasn’t issued a policy. The Court held that a cause of action for bad faith did not necessarily mean that a contract was necessary between the parties of the lawsuit. In fact, the Court took the stance that a bad faith cause of action was available to not just to first party insureds in that the “special relationship between the insurer and the insured and the conduct of the insurer towards the insured is what gives rise to the tort of bad faith, not solely the existence of a contract.” This means that in Hawaii, a lawsuit for breach of the covenant of good faith and fair dealing applies even without the issuance of an insurance contract to the party bringing suit, so long as that party is an injured party who has rights to the insurance policy proceeds. Bad Faith may then arise if an insurer responsible for covering the injured party’s damages fails to act appropriately and reasonably.
The Court held that the “[j]oint Underwriting Program creates a special relationship between the insurer and the program participants and is akin to an insurance policy.” Hawaii’s Court ruling is innovative and holds accountability to the actions of an insurer and their adjusting practices and reasonableness to all parties who may benefit under the policy after an injury or loss. As 2014 is here in full swing, the influence of the Willis ruling on shaping the future bad faith cases for Hawaii will be very interesting to watch as it unfolds.
