An insurance class action case in Nebraska recently discussed obligations of good faith and fair dealing.^{1<\/sup> Nebraska recognizes that the breach of the covenant of good faith and fair dealing is actionable and provides policyholders with extracontractual remedies.<\/p>\n\n\n\n\n\n\n\n}

The court noted Nebraska general law regarding good faith arising in the first-party context:     <\/p>\n\n\n\n

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Nebraska law recognizes that \u2018[a]n insurance policy is a contract.\u2019 Lynch v. State Farm Mut. Auto. Ins. Co.<\/em>, 745 N.W.2d 291, 296 (Neb. 2008). \u2018The implied covenant of good faith and fair dealing exists in every contract and requires that none of the parties do anything which will injure the right of another party to receive the benefit of the contract.\u2019 Dietzel Enterprises, Inc. v. J. A. Wever Constr., L.L.C.<\/em>, 979 N.W.2d 517, 527 (Neb. 2022). While \u2018there must have been a contract at some point in time in order for there to be a bad faith claim,\u2019 Hayes v. Metro. Prop. & Cas. Ins. Co.<\/em>, 908 F.3d 370, 374 (8th Cir. 2018) (applying Nebraska law), \u2018a cause of action for insurer bad faith is separate from, and not dependent on, a cause of action for breach of the insurance policy, although the two may share facts in common.\u2019 Millard Gutter Co. v. Shelter Mut. Ins. Co.<\/em>, 980 N.W.2d 420, 432 (Neb. 2022). Indeed, Nebraska Recognizes \u2018claims of bad faith are grounded in tort\u2019 and \u2018it is the breach of the covenant of good faith and fair dealing from which the insurer’s tort liability springs.\u2019\u2026<\/p>\n\n\n\n

\u2018The nature and extent of an implied covenant of good faith and fair dealing are measured in a particular contract by the justifiable expectations of the parties. Where one party acts arbitrarily, capriciously, or unreasonably, that conduct exceeds the justifiable expectations of the second party.\u2019 \u2026\u2019A violation of the covenant of good faith and fair dealing occurs only when a party violates, nullifies, or significantly impairs any benefit of the contract.\u2019 Spanish Oaks, Inc. v. Hy-Vee, Inc.<\/em>, 655 N.W.2d 390, 400 (Neb. 2003). This implied covenant is not \u2018an everflowing cornucopia of wished-for legal duties\u2019 and \u2018cannot give rise to new obligations not otherwise contained in a contract’s express terms.\u2019 Dick v. Koski Pro. Grp, P.C.<\/em>, 950 N.W.2d 321, 360 (Neb. 2020)\u2026 Whether a party acted in good faith in the performance of a contract \u2018is a question of Fact\u2019 under Nebraska law.<\/p>\n<\/blockquote>\n\n\n\n

We discussed the Nebraska bad faith pleading requirements in a case Merlin Law Group attorney Javier Delgado<\/a> litigated in\u00a0Nebraska Bad Faith Pleading and Requirements<\/a><\/em>. Generally, the facts must show \u201cthe absence of a reasonable<\/p>\n\n\n\n

basis for denying benefits of the insurance policy and the defendant’s knowledge or reckless disregard of the lack of a reasonable basis for denying the claim[.]\u201d The federal court noted these requirements stating:<\/p>\n\n\n\n

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For example, in Ruwe<\/em>, the \u2018principal allegation of bad faith [was] that [the insurance company] denied [the plaintiff’s] claim without a proper and thorough investigation of the fire scene and falsely accused [the plaintiff] of arson without a reasonable basis.\u2019 The lower court initially dismissed the plaintiff’s claim in Ruwe<\/em> for failing to state a cause of action, but the Nebraska Supreme Court reversed\u2026In so doing, the Nebraska Supreme Court explained that \u2018[t]o show a claim for bad faith, a plaintiff must show the absence of a reasonable basis for denying benefits of the insurance policy and the defendant’s knowledge or reckless disregard of the lack of a reasonable basis for denying the claim[.]\u2019\u2026 The Ruwe<\/em> court further explained that the \u2018knowledge or reckless disregard element\u2019 can be shown \u2018by an insurer’s failure to conduct a proper investigation and subject the results to a reasonable evaluation and review.\u2019 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<\/p>\n<\/blockquote>\n\n\n\n

The bottom line is that Nebraska recognizes insurance first-party bad faith actions at common law, and those actions can be brought only by policyholders.<\/p>\n\n\n\n

Thought For The Day<\/strong><\/p>\n\n\n\n

The principle of acting in good faith is at the heart of decent work.<\/em><\/strong><\/p>\n\n\n\n

\u2014Richard Eyre<\/em><\/p>\n\n\n\n

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^1<\/sup> Stromquist v. Progressive Universal Ins. Co.<\/em>, No 8:22-cv-00332 (D. Neb. Mar, 16, 2023)<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

An insurance class action case in Nebraska recently discussed obligations of good faith and fair dealing.1 Nebraska recognizes that the breach of the covenant of good faith and fair dealing is actionable and provides policyholders with extracontractual remedies.<\/p>\n","protected":false},"author":11,"featured_media":25891,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"content-type":"","footnotes":""},"categories":[],"tags":[43],"class_list":["post-34070","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","tag-bad-faith"],"acf":[],"yoast_head":"\n