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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, unless payment is made. 14 Va. Admin. Code § 4-400-50(A).

Insurers shall advise a first-party claimant of the acceptance or denial of a claim within 15 workings days after receipt of an executed proof of loss. 14 Va. Admin. Code § 4-400-50(A).

Does Reserving Rights Create a Conflict of Interest? 

No cases found.

Does a Reservation of Rights Create Additional Duties?

No cases found.

What Must Be Done If A Conflict of Interest Exists?

Where a conflict of interests exists, the insurer must obtain independent counsel to represent its insured. Norman v. INA, 239 S.E.2d 902, 907 (Va. 1978).

Who Is Responsible for Fees of Independent Counsel?

The insurer. See above.

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?

Virginia recognizes a common law cause of action of bad faith sounding in contract. Aetna Cas. & Sur. Co. v. Price, 146 S.E.2d 220, 228 (Va. 1966).

To determine whether an insurer has committed bad faith, the following factors are reviewed: (1) whether reasonable minds could differ in the interpretation of policy provisions defining coverage and exclusions; (2) whether the insurer has made a reasonable investigation of the facts and circumstances underlying the insured’s claim; (3) whether the evidence discovered reasonably supports a denial of liability; (4) whether it appears that the insurer’s refusal to pay was used merely as a tool in settlement negotiations; and (5) whether the defense the insurer asserts at trial raises an issue of first impression or a reasonably debatable question of law or fact.” Nationwide Mut. Ins. Co. v. St. John, 524 S.E.2d 649, 651 (Va. 2000).

A third-party beneficiary can possibly bring a common law bad faith cause of action upon the showing that at the time of contracting, the parties to the policy expressed a clear and definite intent to confer a benefit upon the third-party. See Fireman’s Fund Ins. Co. v. St. Asaph Lawyer’s Title Co., 213 B.R. 482, 483 (Bankr. E.D. Va. 1997).

Neither Virginia’s unfair or deceptive consumer practices act nor its unfair claims handing act create a private right of action for policyholders. A&E Supply Co. v. Nationwide Mut. Fire Ins. Co., 798 F.2d 669 (4th Cir. 1986); Va. Code § 59-1-196 and Va. Code § 38.1-52.9.

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

Attorney’s fees may be awarded if an insurer, not acting in good faith, has either denied coverage or failed or refused to make payment to the insured under the policy. Va. Code §§ 38.2-209.

Are Punitive Damages Recoverable in Insurer-Insured Dispute?

No cases found.

Alternative Coverage Options

An insurer may defend an action to completion under a reservation of rights and subsequently file a declaratory relief action. State Farm Fire & Cas. Co. v. Mabry, 497 S.E.2d 844, 846 (Va. 1998).

Relevant Statutes

Declaratory Judgment – Va. Code § 8.01-184

“In cases of actual controversy, circuit courts within the scope of their respective jurisdictions shall have power to make binding adjudications of right, wither or not consequential relief is, or at the time could be, claimed and no action or proceeding shall be open to objection on the ground that a judgment order or decree merely declaratory of right is prayed for.  Controversies involved in the interpretation of deeds, wills, and other instruments of writing, statutes, municipal ordinances and other governmental regulations, may be so determined, and this enumeration does not exclude other instances of actual antagonistic assertion and denial of right.”

Unfair Claims Settlement Act – Va. Code § 38.1-52.9.

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