A recent case was decided by the Tenth District Court of Appeals which is a case of first impression in the State of Ohio. The issue for consideration was succinctly summarized on paragraph 20 of the opinion wherein the Court stated the following:
“Therefore, we must address a question of first impression in Ohio: whether a third-party claimant who is also an insured may bring a claim for bad-faith against an insurer.”
This particular newsletter will carefully study and evaluate the decision of Gillette v. Estate of Gillette, (2005) 163 Ohio App.3d 426, 2005-Ohio 5247
Bad-faith –
Insured Had No Cause of Action for Bad-faith Against Insurance Carrier – Case of First Impression in Ohio
Gillette v. Estate of Gillette, (2005) 163 Ohio App.3d 426, 2005-Ohio 5247.
Joseph M. Gillette was driving a vehicle, lost control of the vehicle and drove off the road, causing injury to himself, as well as his wife. His wife was a passenger in the car and sustained serious injury. Nationwide Insurance Company insured the vehicle and for purposes of the within litigation, it was agreed that Mr. and Mrs. Gillette were both insureds under the policy.
The key issue in the case dealt with the “multiple hats” worn by Mrs. Gillette. In particular, Mrs. Gillette presented a claim in the first-party context for Medical Payments as well as a claim under the liability portion of her policy specifically against her husband which would render her a third-party claimant as it relates to the liability claim. Therefore, Mrs. Gillette wore two hats, specifically that of a first-party and third-party claimant. Mrs. Gillette filed a lawsuit against Nationwide Insurance Company including a claim of bad-faith. The court basically was required to dissect the competing theories of liability in the context of an individual who wore “two hats.”
The court began its analysis in paragraph 9 of its opinion by setting forth the Nationwide Insurance Company’s position wherein it was stated as follows:
“Nationwide maintained that although appellant was an insured under the policy, by seeking benefits via the liability coverage Nationwide provided to her husband, she stood in the shoes of a third-party claimant. Because Ohio law precludes a third-party claimant from asserting a bad-faith claim against an insurer, Nationwide argued that it was entitled to summary judgment on appellant’s bad-faith claim.”
The Court continued its analysis by examining the standard of liability, for bad-faith, in a first-party and third-party context. The court stated in paragraph 15, 16, 17 and 18, the following:
“Generally, an insurer has a duty to exercise good faith in the processing and payment of valid claims of its insured ... An insured may assert a claim for bad-faith if ‘an insurer fails to exercise good faith in the processing of its insured where its refusal to pay the claim is not predicated upon circumstances that furnish reasonable justification thereof ...
In cases where in insured asserts a claim for bad faith, the insurer’s liability does not arise from the breach of the terms of the insurance policy, but from the ‘breach of the positive legal duty imposed by law due to the relationship of the parties’ ...
In other words, ‘the insurance contract and the relationship it creates contain more than the company’s bare promise to pay certain claims when forced to do so, implicit in the contract and the relationship is the insurer’s obligation to play fairly with its insured’ when handling the insured’s claims ... Thus in order for an insured to assert a breach of the duty of good faith, the insured and insurer must share a contractual relationship and the insurer must have acted unfairly in performing or refusing to perform its duty to provide the insured a benefit promised under the policy.
Given the contractual relationship requirement, Ohio courts have repeatedly held that a third-party claimant cannot assert bad-faith claims against an insurer.”
The court basically divided Mrs. Gillette’s claims into two parts and concluded that she could prosecute a first-party bad-faith claim, but could not prosecute one in her third-party status. In paragraphs 28 – 29 of its opinion, the court stated the following:
“In sum, we conclude that although appellant is an insured under the Nationwide policy, where she seeks liability coverage for the negligence of the named insured – her husband – she stands in the shoes of a third-party claimant who is not owed any contractual duty by the insurer. Thus, we conclude that appellant is barred from asserting a claim for bad faith for Nationwide’s delay in paying her benefits pursuant to the “Auto Liability” section of the policy ...
Consequently, if appellant can prove that Nationwide delayed payment, without reasonable justification, for the benefits she alleges she was entitled pursuant to the ‘Medical Payments’ and ‘Family Compensation’ coverages, she can recover damages for Nationwide’s breach of its duty of good faith.”
The court specifically indicated in a footnote to paragraph 29, that it was not passing judgment as to whether or not a bad-faith claim existed, but was merely concluding that a first party claim can serve as a springboard for a bad-faith claim. In reality, the court best summarized the restriction in its analysis in paragraph 27 wherein it stated the following:
“Further, we decline to engage in the policy-making appellant advocates.”
The information contained in this newsletter is not a legal opinion and is for informational purposes only. Specific questions should be directed to an attorney for a legal opinion.
A recent case was decided by the Tenth District Court of Appeals which is a case of first impression in the State of Ohio. The issue for consideration was succinctly summarized on paragraph 20 of the opinion wherein the Court stated the following:
“Therefore, we must address a question of first impression in Ohio: whether a third-party claimant who is also an insured may bring a claim for bad-faith against an insurer.”
This particular newsletter will carefully study and evaluate the decision of Gillette v. Estate of Gillette, (2005) 163 Ohio App.3d 426, 2005-Ohio 5247
Bad-faith –
Insured Had No Cause of Action for Bad-faith Against Insurance Carrier – Case of First Impression in Ohio
Gillette v. Estate of Gillette, (2005) 163 Ohio App.3d 426, 2005-Ohio 5247.
Joseph M. Gillette was driving a vehicle, lost control of the vehicle and drove off the road, causing injury to himself, as well as his wife. His wife was a passenger in the car and sustained serious injury. Nationwide Insurance Company insured the vehicle and for purposes of the within litigation, it was agreed that Mr. and Mrs. Gillette were both insureds under the policy.
The key issue in the case dealt with the “multiple hats” worn by Mrs. Gillette. In particular, Mrs. Gillette presented a claim in the first-party context for Medical Payments as well as a claim under the liability portion of her policy specifically against her husband which would render her a third-party claimant as it relates to the liability claim. Therefore, Mrs. Gillette wore two hats, specifically that of a first-party and third-party claimant. Mrs. Gillette filed a lawsuit against Nationwide Insurance Company including a claim of bad-faith. The court basically was required to dissect the competing theories of liability in the context of an individual who wore “two hats.”
The court began its analysis in paragraph 9 of its opinion by setting forth the Nationwide Insurance Company’s position wherein it was stated as follows:
“Nationwide maintained that although appellant was an insured under the policy, by seeking benefits via the liability coverage Nationwide provided to her husband, she stood in the shoes of a third-party claimant. Because Ohio law precludes a third-party claimant from asserting a bad-faith claim against an insurer, Nationwide argued that it was entitled to summary judgment on appellant’s bad-faith claim.”
The Court continued its analysis by examining the standard of liability, for bad-faith, in a first-party and third-party context. The court stated in paragraph 15, 16, 17 and 18, the following:
“Generally, an insurer has a duty to exercise good faith in the processing and payment of valid claims of its insured ... An insured may assert a claim for bad-faith if ‘an insurer fails to exercise good faith in the processing of its insured where its refusal to pay the claim is not predicated upon circumstances that furnish reasonable justification thereof ...
In cases where in insured asserts a claim for bad faith, the insurer’s liability does not arise from the breach of the terms of the insurance policy, but from the ‘breach of the positive legal duty imposed by law due to the relationship of the parties’ ...
In other words, ‘the insurance contract and the relationship it creates contain more than the company’s bare promise to pay certain claims when forced to do so, implicit in the contract and the relationship is the insurer’s obligation to play fairly with its insured’ when handling the insured’s claims ... Thus in order for an insured to assert a breach of the duty of good faith, the insured and insurer must share a contractual relationship and the insurer must have acted unfairly in performing or refusing to perform its duty to provide the insured a benefit promised under the policy.
Given the contractual relationship requirement, Ohio courts have repeatedly held that a third-party claimant cannot assert bad-faith claims against an insurer.”
The court basically divided Mrs. Gillette’s claims into two parts and concluded that she could prosecute a first-party bad-faith claim, but could not prosecute one in her third-party status. In paragraphs 28 – 29 of its opinion, the court stated the following:
“In sum, we conclude that although appellant is an insured under the Nationwide policy, where she seeks liability coverage for the negligence of the named insured – her husband – she stands in the shoes of a third-party claimant who is not owed any contractual duty by the insurer. Thus, we conclude that appellant is barred from asserting a claim for bad faith for Nationwide’s delay in paying her benefits pursuant to the “Auto Liability” section of the policy ...
Consequently, if appellant can prove that Nationwide delayed payment, without reasonable justification, for the benefits she alleges she was entitled pursuant to the ‘Medical Payments’ and ‘Family Compensation’ coverages, she can recover damages for Nationwide’s breach of its duty of good faith.”
The court specifically indicated in a footnote to paragraph 29, that it was not passing judgment as to whether or not a bad-faith claim existed, but was merely concluding that a first party claim can serve as a springboard for a bad-faith claim. In reality, the court best summarized the restriction in its analysis in paragraph 27 wherein it stated the following:
“Further, we decline to engage in the policy-making appellant advocates.”
The information contained in this newsletter is not a legal opinion and is for informational purposes only. Specific questions should be directed to an attorney for a legal opinion.