Insurer acted in bad faith by making a low-ball offer to sound out the insured’s negotiating position without first obtaining an evaluation of the insured property.
The MIA found that Erie Insurance Exchange acted in bad faith by making a low ball offer before completing the evaluation of the claim. Erie made its offer to settle a claim for the value of a race horse without first obtaining an estimate of the horse’s value.
Raylyn Farms is a horse training facility. It was transporting a horse on August 20, 2010, when another vehicle ran a stop sign and hit the truck transporting the horse. (Op. 5.) The horse was eventually put down. (Op. 1.) Since the other driver’s insurance could not cover the damages, Raylyn Farms filed a UM claim with Erie. (Op. 7-8).
Erie promptly began trying to value the horse. (Op. 8) Erie tried to secure an expert valuation of the horse numerous times, but failed to produce a number. (Op. 9-14.) In the midst of those attempts, Erie decided to offer $195,000 “ ‘to see where they really are.’ ” (Op. 11.) Plaintiff had asked for $825,000. (Op. 16.) Erie asked for more information, and then (after receiving the information but still without an expert valuation) stood by its offer. (Op. 16.) At the time, Erie had already retained an expert, but not heard back from him. (Op. 18.) Litigation ensued.
The MIA found that Erie had acted in bad faith by extending an offer without hearing back from its expert. In fact, Erie’s claim record reflects it was fishing for a counter-offer. The MIA felt that such tactics were precisely what §27-1001 prohibited. The fact that Erie’s expert eventually provided an evaluation that supported their offer did not change anything because the statute required “an informed judgment… at the time the insurer made a decision on the claim.” (Op. 19.)
The MIA found that the horse was worth $600,000. (Op. 22.)
The MIA rejected the Plaintiff’s request for one third of the requested damages in attorneys
fees for lack of documentation that showed the amount of work related to the bad faith claim. The MIA instead awarded $50,000 in attorney’s fees in light of the quality of the case and the work involved. (Op. 23.)