Guide for Causes of Action for Bad Faith Claims

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Last Updated
July 19, 2021

A third party does not have standing to bring a bad faith claim against an insurer absent an assignment of the right to do so from the insured. Rowlands v. PHICO Ins. Co., 2000 WL 1092134 (D. Del. July 27, 2000). There are no statutory grounds for a bad faith cause of action in Delaware.

Recoverable Damages

Damages recoverable in a bad faith claim include contract damages, consequential damages) attorney’s fees (only if insured prevails against a property insurer), and punitive damages. Pierce v. Int’l Ins. Co. of Ill., 671, A.2d 1361, 1367 (Del. 1996). “Any recovery for emotional distress without accompanying physical injury must be based in tort law […] damages “do not arise from a breach of the duty of good faith[…]” Pierce v. International Ins. Co., 671 A.2d 1361, 1367, Del. 1996).

To establish a claim for punitive damages, a plaintiff must establish that the insurer’s conduct was “outrageous,’ because of ‘evil motive’ or ‘reckless indifference to the rights of others…’ Mere inadvertence, mistake, or errors of judgment which constitute mere negligence will not suffice.” Tackett v. State Farm Fire & Cas. Inc. Co., 653 A. 2d 254 (Del. 1995) quoting Jardel v. Hughes, 523 A. 2d 518, 529 (Del. Super. Ct. 1987).

Of further note, 6 Del. C. § 2301(d) provides:

In any tort action for compensatory damages in the Superior Court or the Court of Common Pleas seeking monetary relief for bodily injuries, death or property damage, interest shall be added to any final judgment entered for damages awarded, calculated at the rate established in subsection (a) of this section, commencing from the date of injury, provided that prior to trial the plaintiff had extended to defendant a written settlement demand valid for a minimum of 30 days in an amount less than the amount of damages upon which the judgment was entered.

Statute of Limitations

There is a three-year statute of limitations on a claim against an insurer for acting in bad faith when refusing to settle a third-party insurance claim. The claim begins to accrue when an excess judgment against an insured becomes final and non-appealable. Connelly v. State Farm Mut. Auto. Ins. Co., 135 A.3d 1271, 1281 (Del. 2016).

Contact Us

Chartwell Law represents the interests of insurers and employers, as such, we continue to continue to monitor the legal landscape. If you have any questions about issues associated with right of action for bad faith claims, our attorneys are available to help. Please contact your Chartwell Law attorney.