What Is The Time for Responding to a Defense Tender?
Insurers must acknowledge and act reasonably promptly upon notice of claim, Ind. Code Ann. § 27-4-1-4.5(2), but there are no regulations, statutes or case law defining “reasonably promptly.”
Insurers must promptly provide a reasonable explanation of the denial of a claim. Ind. Code Ann. § 27-4-1-4.5(14) but there are no regulations, statutes or case law defining “promptly.”
Does Reserving Rights Create a Conflict of Interest?
Yes, if a trier of fact could make findings, some of which could result in no coverage, then counsel selected by the insurer would have a conflict. Armstrong Cleaners, Inc. v. Erie Ins. Exchange, 364 F. Supp. 2d 797, 806 (S.D. Ind. 2005)(Indiana law).
Does a Reservation of Rights Create Additional Duties?
None found.
What Must Be Done If A Conflict of Interest Exists?
When an insurer’s reservation of rights creates a conflict of interest the insured is entitled to have its insurer pay attorneys of the insurer’s choice to defend it in the underlying litigation. Armstrong Cleaners, Inc. v. Erie Ins. Exchange, 364 F. Supp. 2d 797, 806 (S.D.Ind. 2005).
Who Is Responsible for Fees of Independent Counsel?
Insurer. Armstrong Cleaners, Inc. v. Erie Ins. Exchange, 364 F. Supp. 2d 797, 806 (S.D. Ind. 2005).
What Are Independent Counsel’s Obligations?
No cases found.
What Settlement Duties Exist?
No cases found.
What Actions May Result in a Claim for Bad Faith?
“To prove bad faith, the plaintiff must establish, with clear and convincing evidence, that the insurer had knowledge that there was no legitimate basis for denying liability.” Freidline v. Shelby Ins. Co., 774 N.E.2d 37, 40 (Ind. 2002)
An insurer that does not make a conscious decision to act with dishonest purpose or ill will is not guilty of bad faith. Brammer v. Allstate Ins. Co., No. 1:07-cv-05-WTL-TAB, 2009 WL 2611677 (S.D. Ind. Aug. 24, 2009).
A third party claimant cannot sue an insured for bad faith. Eichler v. Scott Pools, Inc., 513 N.E.2d 665, 667 (Ind. App. 1987).
Are Attorney’s Fees Recoverable in Insurer-Insured Dispute?
Attorneys’ fees may be recovered by the insured if it proves the insurer’s bad faith by clear and convincing evidence. Freidline v. Shelby Ins. Co., 774 N.E.2d 37, 40 (Ind. 2002).
Are Punitive Damages Recoverable in Insurer-Insured Dispute?
Punitive damages may only be awarded if there is “clear and convincing evidence” that the insurer acted with “malice, fraud, gross negligence or oppressiveness which was not the result of a mistake or fact or law, honest error or judgment, over-zealousness, mere negligence or other human failing…” Erie Ins. Co. v. Hickman, 622 N.E.2d 515, 520 (Ind. 1993).
Alternative Coverage Options
Where insurer’s investigation reveals a claim that falls outside the policy, the insurer may properly refuse to defend, but must protect its interest by either filing a declaratory action for a judicial determination of its obligations under the policy or by defending under a reservation of rights and hiring independent counsel to represent the insured. Grinnell Mut. Reinsurance Co. v. Ault, 918 N.E.2d 619, 625 (Ind. App. 2009).
An insurer is not allowed to intervene in the case against its insured to resolve questions of coverage. Cromer v. Sefton, 471 N.E.2d 700, 704 (Ind. App. 1994).
Relevant Statutes
Declaratory Judgment – Ind. Code Ann. § 34-14-1-1.
“Courts of record within their respective jurisdictions have the power to declare rights, status, and other legal relations whether or not further relief is or could be claimed. No action or proceeding shall be open to objection on the ground that a declaratory judgment or decree is prayed for. The declaration may be either affirmative or negative in form and effect. The declaration has the force and effect of a final judgment or decree.”
There is no private right of action in Indiana’s Unfair or Deceptive Rights or Practices statute, Ind. Code Ann. § 27-4-1-4.5