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What Is The Time for Responding to a Defense Tender?

Insurers must acknowledge  receipt of a claim within 10 working days. 21-020-008 Vt. Code R. Code § 5(A) Vt. Code R. Code § 5(A).

Insurers shall advise the first-party claimant of the acceptance or denial of a claim within 15 workings days after receipt of properly executed proof of loss. 21-020-008 Vt. Code R. Code § 6(A).

Does Reserving Rights Create a Conflict of Interest? 

No cases found.

Does a Reservation of Rights Create Additional Duties?

An insurer must obtain its insured’s consent when reserving its rights. American Fid. Co. v. Kerr, 416 A.2d 163, 165 (Vt. 1980).

What Must Be Done If A Conflict of Interest Exists?

No cases found.

Who Is Responsible for Fees of Independent Counsel?

No cases found.

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?

An insured may proceed with a cause of action for bad faith for the insurer’s failure to pay a first-party claim. Bushey v. Allstate Ins. Co., 670 A.2d 807, 809 (Vt. 1995). To establish such a claim, the insured must prove that: (1) the insurer had no reasonable basis to deny the benefits of the policy; and, (2) the insurer knew or recklessly disregarded the fact that no reasonable basis existed for denying the claim. Bushey v. Allstate Ins. Co., 670 A.2d 807, 809 (Vt. 1995).

Vermont also recognizes a cause of action for bad faith in the context of handling third-party claims against an insured. Myers v. Ambassador Ins. Co., Inc., 508 A.2d 689, 690 (Vt. 1986).

There is no private right of action contained in Vermont’s Insurance Trade Practices Act. Vt. Stat. Ann. tit. 8 § 4721; Wilder v. Aetna Life & Cas. Ins. Co., 433 A.2d 309, 310 (Vt. 1981).

Vermont’s Consumer Fraud Act did not cover the sale of insurance because “the selling of an insurance contract is not a “contract for ‘goods or services’ within the meaning of that [Act].” Wilder v. Aetna Life & Cas. Ins. Co., 433 A.2d 309, 310 (Vt. 1981).

Are Attorney’s Fees Recoverable in Insurer-Insured Dispute?

Attorney’s fees may be awarded in declaratory judgment actions if there is a finding of bad faith on the insurer’s part, or “outrageous conduct creating the ‘dominating reasons of justice.’” Concord General Mut. Ins. Co. v. Woods, 824 A.2d 572, 579 (Vt. 2003).

Are Punitive Damages Recoverable in Insurer-Insured Dispute?

An insured could recover punitive damages in appropriate circumstances. See Martell v. Universal Underwriters Life Ins. Co., 564 A.2d 584, 589 n.2 (Vt. 1989).

Alternative Coverage Options

An insurer may file a petition for declaratory judgment to determine coverage under the subject policy when its insured does not allow it to defend under a reservation of rights. Farm Bureau of Mut. Auto Ins. Co. v. Houle, 102 A.2d 326, 329 (Vt. 1954).

Relevant Statutes

Declaratory Judgment – 12 Vt. Stat. § 4711

“County courts and probate courts within their respective jurisdictions shall have 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. Such declarations shall have the force and effect of a final judgment or decree.”

Consumer Fraud Act – Vt. Stat. Ann. tit. 9, § 2451.

Insurance Trade Practices Act – Vt. Stat. tit. 8,  § 4721.

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