Orlofsky ADR Services

Can an Insurer Commit Bad Faith in a Mediation?

Most jurisdictions permit a bad faith claim against an insurance carrier that unreasonably fails to settle a claim.  In Agape Senior Primary Care, Inc. v. Evanston Insurance Company, No. 3:16-cv-1610 (D.S.C. 2016), the plaintiff alleged that its insurer committed bad faith by failing to send a representative with full settlement authority to a mediation.  The local rules specifically required that a representative with full authority attend the mediation, and plaintiff alleged that this caused undue delay and expense in resolving the litigation.
The defendant moved to dismiss, arguing that those allegations failed to state a claim, but the district court denied the motion, ruling that by failing to comply with the mandatory attendance requirement, the carrier “violated its implied duty of good faith and fair dealing to properly adjust and settle the prior claims.”
The ruling in this case hinged on the presence of a local rule requiring the attendance of someone with authority.  In a private mediation where there is no similar local rule in effect, an insured may be able to place itself in the same position by demanding, prior to the mediation, in writing, that the insurer send someone with full settlement authority.  If the carrier fails to do so, a similar bad faith claim might be possible even without a local rule compelling such attendance.