Insurers Working Remotely Should Beware Bad Faith Setups

By Michael Longo
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Law360 (April 7, 2020, 5:55 PM EDT) --
Michael Longo
Michael Longo
Over the course of the past several weeks, state and local governments across the nation have issued orders requiring businesses to partially or entirely vacate their physical premises and begin working remotely. Countless other businesses have implemented mandatory or voluntary work-from-home policies.

The purpose of these directives, of course, is to slow the transmission of COVID-19 via interpersonal contact at busy workplaces. But businesses, including insurance companies, must remain cognizant of their ongoing legal duties as they undertake the transition to a remote working environment.

For insurance companies, a critical aspect of this transition is the timely delivery of mail to claims professionals. While many claims are now reported electronically, time-limited settlement demand letters are often sent by postal mail. After all, when attempting to set the carrier up for extracontractual exposure, the claimant's goal is for the carrier to fail to timely respond to the demand.

In the past, some attorneys representing claimants have timed demands to arrive before long weekends or during the holidays in the hope that the demand will not be promptly acted upon. The current shift to remote working environments presents a similar opportunity for claimants to manufacture bad faith claims.

Legal Precedent and the Current Pandemic

Court opinions have recognized factual scenarios regarding time-limited demands that were missed or delayed due to holidays. For instance, in Hicks v. Dairyland Insurance Company,[1] the claims professional did not see the two-week time-limited settlement demand until after it had expired due to mailing delays and an intervening holiday.

In Whiteside v. Infinity Casualty Insurance Co.,[2] the claimant's attorney sent a six-day time-limited demand letter that was set to expire on a holiday. While not all jurisdictions approve of such abbreviated time periods, at least one court has found a period of 10 days reasonable under the circumstances.[3]

It is important to remember that court rules extending deadlines through weekends and holidays are not applicable to out-of-court settlement correspondence. Likewise, although some states are tolling court-related deadlines due to the COVID-19 pandemic, these mandates do not generally apply to extra-judicial activities such as settlement demands.

For instance, New York Gov. Andrew Cuomo's March 20 Executive Order 202.8 purports to toll "any specific time limit for the commencement, filing, or service of any legal action, notice, motion, or other process or proceeding, as prescribed by the procedural laws of the state" until April 19. There is no reference in the executive order to responses to time-limited settlement demands or any other time limits set by private parties.

Carriers may believe that delays due to the COVID-19 pandemic will be deemed reasonable under the circumstances in the context of a bad faith suit. That may be the case in limited instances, such as where a stay-at-home or shelter-in-place order would render accessing mail a violation of the law. However, carriers must recognize that a finding of bad faith is often a highly discretionary determination conducted by a jury.

The members of that jury will also have undergone significant hardship during the pandemic, and many will have looked to their insurers for institutional stability. The insured and claimant will testify that now, more than ever, they needed the settlement completed and their interests protected by the insurer. Accordingly, while remaining compliant with governmental mandates pertaining to the COVID-19 pandemic, carriers are urged to operate under the assumption that the pandemic will not serve to excuse conduct that would otherwise constitute bad faith.


In short, carriers should be prepared for an uptick in time-limited settlement demands during the COVID-19 pandemic. In response, carriers should ensure that despite any distractions or difficulties caused by the transition to a remote workplace, incoming mail is timely forwarded to the handling claims professional. Claims professionals should promptly review incoming mail and scrutinize the contents for time-limited demand language. In this way, carriers can continue to protect the interests of their insureds and minimize their own exposure to extra-contractual liability.

Michael Longo is a partner at Goldberg Segalla LLP.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

[1] Hicks v. Dairyland Insurance Company , 441 Fed.Appx. 463 (9th Cir. 2011).

[2] Whiteside v. Infinity Casualty Insurance Co. , 2008 WL 3456508 (M.D. Georgia 2008).

[3] Roberts v. Printup , 595 Fed.3d 1181 (10th Cir. 2010).

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