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What Damages Are Necessary to Show Breach of the Implied Covenant of Good Faith and Fair Dealing in an Insurance Case?

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The United States Court of Appeals Tenth Circuit addressed the fight with USAA in Blakely v. USAA, (No. 15-4059, June 2017).

Alan and Colelyn Blakely (“Blakely”) had a homeowner’s policy with USAA Casualty Company (“USAA”) that insured their home in Bountiful, Utah. Back in 2002, a fire broke out in the basement of their home—ostensibly caused by a third-party flooring company that used flammable materials. Although the fire was contained within the basement, smoke and soot damaged other sections of the home, including floor joists, exposed subflooring, and personal property. The Blakelys filed a claim under their USAA policy. By mid-2003, USAA had paid out more than $93,000 on the claim. The Blakelys were unhappy with the payout, and the quality of the repair works. In January 2005, the Blakelys invoked their contractual right to an appraisal. The appraiser came out and assessed the damages at a significantly higher number–$291,000+. By December of 2005, that full amount had been paid. The Blakelys were still not happy.

They sued USAA for breach of contract, breach of the Implied Covenant, breach of industry and statutory standards, and intentional infliction of emotional distress. USAA removed the suit to federal court based on diversity jurisdiction. Following discovery, the district court granted summary judgment in favor of USAA on all claims except the claim for breach of the Implied Covenant. The Implied Covenant claim was dismissed as frivolous under FRCP.

Claims for emotional distress under the Implied Covenant will not be available for disappointment, frustration, or anxiety normally experienced in the process of filing an insurance claim and negotiating a settlement. The Blakelys even tried to argue that USAA’s behavior lowered the value of their home—because they had to spend some of the insurance settlement meant to fix the house—on this litigation. The Court said no. The Court of Appeals found that the Blakelys did not bring forth evidence to support their claim, and affirmed the lower court’s grant of summary judgment to USAA.

The Metier Law Firm is committed to assisting people with personal injury claims throughout Colorado, Wyoming and Nebraska, and we frequently serve as co-counsel to law firms nationwide. Tom Metier recently secured the largest personal injury verdict in Colorado.