Bennett v. USAA Casualty Insurance Co.
144, 2016
| Del. | Mar 13, 2017Background
- On Feb. 12, 2009 a toilet in the Bennetts’ condominium cracked, causing substantial water damage to the unit and contents. The building was governed by an association insured by Philadelphia Indemnity (PIIC); the Bennetts also had a USAA policy that contained an "other insurance" provision making USAA secondary to the association's coverage.
- The Bennetts submitted claims to the Association/PIIC and to USAA; repairs were delayed and PIIC/Association did not promptly pay. USAA requested the association bylaws and later an adjuster inspected; USAA paid part of the personal property claim but denied dwelling coverage as secondary, asking for a PIIC denial letter.
- The Bennetts sued USAA for breach of contract and bad faith. At trial the Bennetts presented testimony and a contractor, but did not call a USAA representative nor introduce a PIIC denial letter into evidence during their case-in-chief.
- USAA moved for a directed verdict under Rule 50(a) on the bad faith claim at the close of the Bennetts’ case; the trial court granted the motion, finding the Bennetts failed to produce legally sufficient evidence that USAA lacked a reasonable justification for denial.
- The court instructed the jury that the bad faith claim was no longer in the case (since it had been dismissed as a matter of law); the jury returned a verdict for USAA on the breach claim. The Bennetts appealed.
- The Delaware Supreme Court affirmed: although the trial court misstated that the plaintiffs had to call a USAA witness, the Bennetts still failed to offer any evidence in their case-in-chief showing that USAA’s denial was clearly without reasonable justification, and the jury instruction removing the bad faith claim was not misleading.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether trial court erred by directing verdict for USAA on bad faith | Bennett: USAA bore the burden to prove denial was reasonable; plaintiffs need not produce USAA testimony | USAA: Plaintiffs had burden to produce evidence showing denial lacked reasonable justification; no such evidence was presented | Court: Affirmed directed verdict — plaintiffs failed to produce legally sufficient evidence in their case-in-chief that denial lacked reasonable justification |
| Whether jury instruction that bad faith claim was "no longer in the case" was prejudicial | Bennett: Instruction shifted burden and failed to clarify breach claim remained | USAA: Clarifying instruction was proper to avoid confusion after opening statements referenced bad faith | Court: Instruction was appropriate and not misleading; jury was properly instructed on breach of contract |
Key Cases Cited
- Enrique v. State Farm Mut. Auto. Ins. Co., 142 A.3d 506 (Del. 2016) (bad faith requires insurer to lack reasonable justification for denial)
- Tackett v. State Farm Fire & Cas. Ins. Co., 653 A.2d 254 (Del. 1995) (insurer liable for bad faith only when denial is clearly without reasonable justification)
- Casson v. Nationwide Ins. Co., 455 A.2d 361 (Del. Super. 1982) (elements for insured to establish contractual liability of insurer)
- Holmgren v. State Farm Mut. Auto. Ins. Co., 976 F.2d 573 (9th Cir. 1992) (insurer agents’ mental impressions and strategy are central in bad-faith inquiries)
- Fritz v. Yeager, 790 A.2d 469 (Del. 2002) (standard of review on appeal from grant of directed verdict/judgment as a matter of law)
- MCA, Inc. v. Matsushita Elec. Indus. Co., Ltd., 785 A.2d 625 (Del. 2001) (Rule 50 standard — view evidence in light most favorable to nonmoving party)