MAY 2017 BAD FAITH CASES: COURT FINDS THAT JURY MUST DETERMINE WHETHER INSURED AND INSURER REACHED SETTLEMENT OF SUPERSTORM SANDY CLAIM (New Jersey Federal)
In this case, the insured submitted a claim to its insurer as a result of wind and flood damage sustained during Superstorm Sandy. The insured and the insurer each hired an engineer/contractor to determine the extent of damage to the building and the cost to repair. Emails between the two contractors seemed to indicate that a settlement had been reached with regard to the replacement cost of covered damage. The insured cashed the insurer’s checks, but never made repairs to the building.
The insured’s counsel ultimately sent an additional estimate prepared by another engineer to the insurer. The insurer refused to pay the remaining balance as indicated on the additional estimate, and the insured filed suit for breach of contract and breach of the implied covenant of good faith and fair dealing.
The insurer moved for summary judgment, and argued that it had entered into a binding settlement agreement as a result of the email exchanges between the contractors respectively hired by the insured and the insurer. In response, the insured argued that the contractor it hired did not have authority to bind it to any settlement, and even if it had authority, no settlement had been agreed to.
The court noted that the insured had the burden of proving the elements of its claims for breach of contract and breach of the implied covenant of good faith and fair dealing. Ultimately, the court found that it was for a jury to determine whether the parties entered into a settlement agreement that precludes the insured’s suit against the insurer.
The court held that if “a jury finds that no enforceable settlement agreement exits, the jury must then determine whether [the insurer] breached the parties’ insurance contract and did not act in good faith” by failing to pay the balance of the additional estimate that the insured submitted.