Whiting Turner v. Liberty Mutual: 27-1001 applies to all claims between insured and insurer, not just first party claims

April 6, 2015

Since it's back in the news, I thought I should finally get around to writing about Whiting Turner v. Liberty Mutual, 912 F.Supp.2d 321 (D.Md. 2012). I've written about it before in context of the value of winning MIA opinions, but never got around to writing about it on the merits. 

 

Whiting Turner like most federal bad faith cases I've read is mostly about other things. The shortest summary is that someone sued Whiting Turner. Whiting Turner sent it to their insurer, Liberty Mutual. Five years in, Liberty Mutual tells Whiting Turner it won't cover most of the claims. Whiting Turner wound up having to pay for the settlement. Whiting Turner then sues Liberty Mutual under (among other things) bad faith under 27-1001. 

 

Liberty Mutual files a motion to dismiss because it says that the claim is not really a first party claim. Liberty Mutual argued that since Whiting Turner wanted liability coverage against a third party, it was a third party claim not a first party claim. See Whiting Turner, 912 F.Supp.2d at 339. 

 

The Court rejected that interpretation because the statute referred to first party casualty claims. As defined in the code, casualty insurance is insurance against liability to third parties. Since 27-1001 covered casualty claims, it clearly intended to cover claims by insureds against insurers for bad faith in handling casualty claims. Based on that (and the MIA's interpretations of the statute), the Court concluded that for 27-1001 purposes, a first party bad faith claim meant a claim by an insured against its insurer. Id. at 339-40.

 

 

 

(Parenthetically, this is a great example of the way the Federal District Court in Maryland is developing the first party bad faith regime. Essentially, federal trial court opinions are reported while Circuit Court opinions are not. That, combined with relatively frequent diversity jurisdictions, means there are more U.S. District Court cases about 27-1001 than Court of Special Appeals cases.)

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