Bad faith is the unreasonable failure of an insurance company to honor the terms of an insurance policy and deal with a policyholder in good faith. Insurance companies who are found to have acted in bad faith can be liable for punitive damages in addition to contract damages. Some states have bad faith statutes called "Unfair Insurance Claims Practices Acts."
Truck Catches Fire, Gets Sold, Causing Lawsuit Against ACE Unit
Republic Services of Florida LP, d/b/a Florida Refuse Service, filed suit in Hillsborough County, Florida Circuit Court, charging breach of contract against the ACE Group unit. Indemnity, based in Philadelphia, has since filed a notice to remove the matter to U.S. District Court in Tampa Florida, based on diversity of citizenship.
The basis for the suit was a July 23rd, 2004 fire that broke out in the engine compartment of a truck owned by Republic. The truck was being operated by company employee Keith A. Kleparek. He sustained unspecified injuries in the fire.
At that time, Republic had in force an Indemnity-issued workers’ compensation policy.
Republic said it fully cooperated with Indemnity in investigating the claim and secured the fire-damaged vehicle, pending an investigation by the insurer. The vehicle was examined and then “Republic unknowingly disposed of the subject truck with no knowledge that it may have inadvertently discarded potential evidence in the subsequent third-party action.”
Kleparek placed Republic on notice of filing a claim for spoliation of evidence, followed by a lawsuit in Florida state court seeking damages. Republic called for a defense from Indemnity, which responded with a denial of coverage.
Republic charges that Indemnity had a good faith duty to investigate, adjust and administer Kleparek’s workers’ comp claim, including providing instructions to its client with regard to preserving evidence. As a result of that alleged failure, Republic said it may be subject to severe prejudice by Indemnity.
Republic asked the court to stop Indemnity from denying its insurance obligations under the policy and from providing a defense in the underlying suit by Kleparek.
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