In Davis v. Fidelity Nat’l Ins. Co., Pennsylvania’s Court of Common Pleas addressed whether an insurer’s delay in resolving an insured’s claim constituted bad faith. In October 2004, Davis purchased a piece of property for development. Fidelity National Insurance Company’s authorized agent issued a title insurance policy to Davis for the property. In October 2007, when Davis applied for zoning ordinances, the owner of the adjacent property objected, claiming he was the record owner of the property Davis had purchased. Consequently, Davis filed a claim with Fidelity. In November 2007, Fidelity’s agent inquired into the situation and discovered that the adjacent property owner, in fact, held the deed to the subject property. The agent informed Fidelity and a few weeks later, notified Davis that the claim was being evaluated. In June 2009, Fidelity advised Davis that the claim was valid and they were working on a proposed solution. Almost three years later, Fidelity initiated settlement negotiations with the adjacent property owner. In November 2010, Davis inquired on the status of the claim and one month later, without a case assessment report, Fidelity offered the adjacent property owner $25,000 to settle the title issues. Subsequently, Davis filed a complaint against Fidelity alleging bad faith and breach of contract.
Ultimately, the court held that Fidelity committed multiple violations of the Unfair Insurance Practices Act and acted in bad faith by unreasonably delaying the resolution of Davis’ claim. Specifically, the court noted that Davis had produced clear and convincing evidence that Fidelity knew or recklessly disregarded the fact that it had no reasonable basis to delay making a decision regarding the claim. Consequently, the court exercised its discretion and awarded Davis punitive damages in excess of $1.5 million, four times the amount of Davis’ compensatory damages. In reaching this conclusion the court stated that a five-year delay was extreme and unnecessary and constituted bad faith on behalf of Fidelity. The court further noted that Fidelity consistently failed to reach a prompt and equitable settlement and failed to timely acknowledge Davis’ continual correspondences and inquiries into the claim.
Special thanks to Colleen Hayes for her contributions to this post. For more information, please contact Nicole Y. Brown at firstname.lastname@example.org.