United States: Winning Bad Faith Insurance Coverage Awards At Trial (Video Content)

Last Updated: June 1 2016
Article by Brian Friel

This video depicts an incredible story of how AIG mishandled a massive pipeline explosion claim, only to get tagged at trial with an equally massive bad faith verdict. We include some shocking video of AIG's lead claims adjuster, seriously calling into question the old adage that, "you can't win or lose a case based on a deposition." Watch to see just how contemptuous and dismissive this adjuster was, and see how, in the correct hands, experienced trial counsel can use this kind of testimony to achieve incredible results for corporate policyholders.

In today's video, Brian Friel tells the story of how Miller Friel fought on behalf of one of its clients, El Paso Corporation (now a part of Kinder Morgan, the largest pipeline operator in the country), against AIG, one of the world's largest insurance companies. The claim and resulting trial involved an epic insurance coverage battle over commercial general liability (CGL) insurance coverage. The complexities of the claim were magnified because El Paso sought coverage as an additional insured under a CGL policy issued to one of its contractors. See Risk Transfer Nightmares. An explosion occurred during the construction of a natural gas pipeline in Wyoming, when a back hoe operator constructing a new pipeline struck an existing El Paso high-pressure natural gas line causing it to rupture and explode, resulting in the catastrophic death of a construction worker and millions of dollars of property damage. El Paso and its vendor rightfully expected AIG to settle the claim with the decedent's estate and cover the property damage, up to AIG's the $5 million policy limits. Unfortunately, AIG refused to contribute a single dollar to settle either the wrongful death claim or the property damage claims, and even refused to attend the mediation with the decedent's family members despite being invited by the mediator, thereby leaving both El Paso and its contractor to fend for themselves.

As Brian recounts in the video, AIG's denial was based on unsupportable and even extreme interpretations of its policy and, even worse, AIG and its claims adjusters refused to cooperate with El Paso in any way to resolve the underlying claims. Given AIG's intransigence, El Paso had no other choice but to settle the underlying wrongful death claim, and file suit against AIG for breach of contract and bad faith. Miller Friel ultimately litigated the claim against AIG through trial in Denver state court and obtained a judgment that AIG breached its obligations under the policy and violated its duty of good faith and fair dealing to both El Paso and its vendor. See Colorado Interstate Gas Co. v. National Union Fire Ins. Co. of Pittsburgh, Pa. The court awarded $13.7 million in damages, which included full coverage for El Paso's settlement with the decedent's estate and the property damage claims, pre-judgment interest, lost business profits, court costs, and $5 million in punitive damages as a result of AIG's bad faith.

Based on the evidence presented, the court concluded that AIG's bad faith breach of the insurance contract "was accompanied by circumstances of willful and wanton conduct which justifies the imposition of punitive damages." The AIG adjuster's videotaped testimony shown here was central to this award (his deposition testimony was allowed at trial because he refused to appear at trial). The court noted that AIG's demand that "El Paso waive any future bad faith claim in order to waive the Voluntary Payments clause and allow [AIG] to settle . . . demonstrates that [AIG] recognized that its conduct was willful and wanton."

This case illustrates the value that experienced insurance recovery trial counsel can bring to a case. Insurance carriers don't always act reasonably, and when they don't, it may be necessary to try a case against them. This particular claim illustrates the full skill set of Miller Friel and its lawyers, namely, the ability to present a claim, and then, when necessary, to follow through with it both at trial and on appeal if necessary. What we have learned over the years is that, while negotiated settlements are generally the best outcome for our clients, achieving settlement is easier when the insurance companies know that we are capable of inflicting real damage if they do not act appropriately. Insurers know that Miller Friel will litigate and try cases if they deny valid claims or take other unreasonable coverage positions. This is what sets Miller Friel apart from other firms. Trying cases is markedly different from writing briefs. Evidence must be presented to paint a picture for the judge or jury telling a compelling story. This cannot be done without careful attention to each and every witness, both before and during trial.

Miller Friel is proud of this result , which our clients have characterized as simply incredible. AIG should have settled this case early on, and had ample opportunity to do so prior to trial. That was AIG's mistake, a mistake it won't likely make again, at least if Miller Friel is involved.

Below is a transcript of today's video:

Winning Bad Faith Insurance Coverage Awards at Trial

"So you're saying it was El Paso's wish that AIG not contribute any money towards the Owen's settlement?"

"Yes."

"And was it PSI's wish that AIG not contribute any money towards the Owens' settlement?"

"I don't recall it specifically being PSI's wish, I know it was El Paso's."

"Just to make absolutely certain, because, you know, we're not going to have you probably in Denver, so I want to make sure I got this clear. It's your testimony that El Paso told you that they did not want AIG to put up any money to settle the Owens' claim as of May 25, 2007?"

"It is my recollection that your partner and El Paso asked us to waive certain policy conditions to allow them to pay the money. That's my recollection based upon as we sit here today and looking at what you've given me to look at. We were doing a favor to your partner and El Paso by waiving those policy conditions such as voluntary payment and consent."

"And you received something in return, didn't you?"

"Yes."

"What did you receive in return?"

"I requested that they not assert typical claims for file handling, bad faith, file handling."

So, a couple of years ago one of our clients which at the time was called El Paso Corporation which is now part of the Kinder Morgan Group of companies which is the largest pipeline operator in the United States.

They were installing a parallel pipeline underground, high pressure, natural gas pipeline in southern Wyoming, and there was already an existing pipeline that was in that area underground. So, they are running a parallel pipeline to that existing pipeline. So, the company goes out and contracts with a vendor who is going to do the actual trench and the digging and the installation of the pipe and a number of these contractors.

So, we make sure that our client, El Paso Corp, is an additional insured and gets coverage under its subcontractors' and its vendors' policies in case something goes wrong, right, when you're doing a construction project like this.

Well, unfortunately something went terribly wrong. Part of the process of building this new pipeline is one of our subcontractors was charged with marking the existing pipeline in the area. The next day when one of the backhoe crane operators came in to dig the new trench, he wasn't aware where the existing pipeline was and unfortunately he tapped into the high pressure natural gas pipeline which created an explosion that some people estimated resulted in a fireball 400 feet in the air, temperatures well over 3,000 degrees Fahrenheit. We had a catastrophic situation.

The crane operator unfortunately perished, the machinery was destroyed, a pipeline that was already constructed was destroyed and about 4 acres of grasslands were burned and destroyed. So, we were looking at a very sizeable claim. The policy in place was issued by AIG to our subcontractor. But again, we have rights to that policy because the company was an additional insured.

So, we got together and banded together with our subcontractor to try and resolve this very, very terrible situation. We put the claim in jointly to AIG, notified AIG of the property damage and the body injury claim that was filed by the decedent's family. AIG refused to pay, refused to acknowledge coverage, in fact refused to participate in the proceedings at all. The company took what they thought was the fair route and they provided a very reasonable offer to the family which they accepted along with our subcontractor with their joint offer.

We then went back to AIG a second time. AIG again says no. And, they refused to contribute one penny towards the settlement.

So, we and our contractor jointly filed a suit against AIG. And, again going through litigation giving AIG a chance to settle with us. AIG at every turn refuses. They have called many, many depositions, they request many millions of pages of documents and they essentially take what we consider to be very, very egregious positions such as you pay the family too much money, such as the person operating the metal detector is a professional, who is like a licensed professional and therefore, our policy doesn't cover it, you should go under an errors and omission policy, basically a professional malpractice policy.

We have AIG's experts testify that a 15 year old could start operating that within an hour. But yet they said it was a professional licensed operation and they were going to rely on this exclusion. We go to trial in Denver, Colorado in 2012. With 3 week trial before a judge, no jury, we had a bench trial and I'm happy to report that we won.

Not only did we get the full policy limits over the AIG policy for our client and the subcontractor, but the judge awarded punitive damages against AIG essentially finding AIG acted so egregiously, so dismissively that they were acting in bad faith against their policy holders and basically hit them with an award that was almost 3 times policy limits. We took a $5 million policy and we got an award for almost $13 million dollars. Right? Just because of AIG's failure to act reasonably.

It wasn't just AIG in terms of how they treated the claim early at the outset, but it was the entire process. It was AIG and how they treated the company all the way through litigation and into trial. In fact, we have a deposition that we videotaped of the lead AIG adjustor that we used at trial.

We used it at trial because this particular person refused to appear at trial. So, because of Colorado court rules we were allowed the use the videotape deposition and you can see just in his deposition of this AIG adjustor how dismissive, how just really angry and bitter he is about this claim and what our clients were involved in.

"But you told me, did you not, that El Paso asked National Union to contribute money to settle the Owens' claim?"

"I need to review the claim file, counselor."

"All right, we are reviewing, I'm just asking you if you remember."

"We are not reviewing, give me the file in front of me. Show me El Paso's and then I'll answer your question counselor. Stop harassing me."

"I'm just asking if you recall, maybe I misheard you."

"I don't recall without my review of the claim file, counselor."

"You don't recall, okay."

"There was a demand made at some point, but I don't know if that was before the mediation or after the mediation. I don't know if the demand to pay the $3.1million to PSI's insurers occurred before the mediation and/or after. I assume it did not occur before. There was a demand that we pay all damages that was the notice, obviously, or the tender from El Paso. Just so we're clear. So, again without reviewing the file I don't recall specifically. From what I've reviewed here I know I was never asked to pay 2.1million. And I'm sorry to the extent I said 3.1 million before. The deal to me was always, please waive this so we can pay it and settle by the deadline imposed by the plaintiff. So I did them a favor really."

"I will tell you they do not consider it a favor, but we'll..."

"That was the only request that was made at the time."

This person was so extreme that the judge really pointed him out in his opinion as one of the bases for his finding of bad faith and awarding of punitive damages.

So, really this case was very difficult given the facts, with the fatality involved particularly of course, and also we, this was a case where Miller Friel litigated not just to trial but we went through trial.

I think this is another great example of what again, what Miller Friel does. We are claims advisors. We are claim negotiators, and we try to reach business compromises where we can. But if we can't, because of a carrier's position that refuses to pay or won't pay a reasonable amount of money, we will litigate for our clients, we will litigate through trial and we will litigate through the full appeal of process to vindicate our clients' rights.

We have the experience here at Miller Friel for these trials and before judges and juries around the country, and it really, it's that experience that really, we think, results in these successes that we see on the front end with our business negotiations because insurance carriers know Miller Friel will go to trial if we can't work out a deal.

Miller Friel, PLLC is a specialized insurance coverage law firm whose sole purpose is to help corporate clients maximize their insurance coverage. Our Focus of exclusively representing policyholders, combined with our extensive Experience in the area of insurance law, leads to greater efficiency, lower costs and better Results. Further discussion and analysis of insurance coverage issues impacting policyholders can be found in our Miller Friel Insurance Coverage Blog and our 7 Tips for Maximizing Coverage series.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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