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."
Wage Claim Tussle Ensnares ACE Group Unit
January 20th, 2014 - A dispute over a construction contractor’s wage claim has spilled into the courts with the Unified Port of San Diego suing its one-time liability carrier - ACE American Insurance Co.
The Port District operates two cargo terminals, two cruise ship terminals and twenty public parks in San Diego County. During the normal course of business, it secured a public officials liability policy from the ACE Group unit for a one-year period effective July 1st, 2011.
The Port District said it first notified ACE in August 2011 of a claim against it as a result of California’s prevailing wage law. Hensel Phelps Construction Co. and Phelps Portman San Diego LLC demanded indemnity and damages from the Port District relating to their potential liability under the law. They said they had relied on an earlier Port District representation that the wage law was not applicable to a construction job they performed.
The Port District asked ACE to attend mediation hearings, but ACE reportedly declined to do so. After the contractors sued the Port District in California state court on June 14th, 2013, the insurer further said it would neither indemnify nor defend the Port District.
In its own lawsuit filed in state court, the Port District said ACE had a duty to defend it and breached its contract. It also accused ACE of dealing in bad faith.
The Port District did not specify in its lawsuit the amount of compensatory or consequential damages it seeks from ACE. But in a petition to remove the suit to U.S. District Court in San Diego, ACE said the Port District was seeking at least $9.5 million in indemnity, plus defense costs and Brandt attorney fees summing to $109,000.
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