Buyer’s Remorse: Motion to Amend to Claim to Assert Bad Faith After Accepting Settlement Fails

Plaintiffs Eric Monzo and Dana Spring Monzo (hereinafter collectively “Plaintiffs”) sought damages against their homeowners’ insurance carrier, Defendant Nationwide Property & Casualty Insurance Company (hereinafter “Defendant”). In Eric Monzo And Dana Spring Monzo v. Nationwide Property & Casualty Insurance Co., C. A. No. K18C-11-003 NEP,  Superior Court of Delaware (January 27, 2022) the Delaware court dealt with a claim of buyer’s remorse.

FACTS

The background facts of this action are set forth in Monzo v. Nationwide Prop. & Cas. Ins. Co. (hereinafter “Monzo II“). The relevant facts pertaining to the motions include that Plaintiffs filed a Complaint against Defendant relating to Plaintiffs’ homeowners’ policy. Count I of the Complaint sought a declaratory judgment that Defendant was required to cover certain losses pursuant to Plaintiffs’ policy. Count II of the Complaint stated a claim for bad faith breach of contract, which was dismissed pursuant to stipulation between the parties, as approved by the Court, to encourage settlement.

Defendant filed a motion for summary judgment on the remaining claims, which the Court granted in full on March 18, 2020. On March 11, 2021, the Delaware Supreme Court affirmed this Court’s decision in part, but reversed as to the Option R coverage provision in Plaintiffs’ policy.

Plaintiffs filed a motion to amend the Complaint seeking to add back the bad faith claim, with new allegations stemming from limited discovery. These included the assertion that Plaintiffs’ insurance agent, Mr. Papa, had opined that he “believed that coverage may be afforded to Plaintiffs to [sic] the loss suffered.”

Defendant, after some negotiation with the plaintiff, offered to allow judgment to be entered against it in the amount of Eight Thousand Dollars ($8,000.00), inclusive of fees and costs. Mr. Monzo responded on June 16, “We will accept the offer of judgment and instruct the Clerk to enter judgment against Nationwide in the amount of $8000. We will instruct Chambers to continue the hearing scheduled for tomorrow until the next motion calendar.” Thereafter Plaintiffs filed an acceptance of the Offer with the Court, with Plaintiffs’ direction to enter judgment, on June 22, 2021. The Offer was entered by the Clerk, and the amount was paid by Defendant and accepted by Plaintiffs, as indicated in Plaintiffs’ “Satisfaction of Judgment on Count I of the Complaint” filed with the Court on July 26, 2021.

DISCUSSION

The purpose of Superior Court Civil Rule 68 (hereinafter “Rule 68”) is to encourage settlement and avoid litigation. Rule 68 prompts both parties to balance and evaluate the risks and costs of litigation against the likelihood of success at trial on the merits.

Longstanding Delaware case law confirms that general principles of contract law apply to offers of judgment where the issue of attorney fees and costs is not present. The Court applies general contract principles, which permit extrinsic evidence to be considered to arrive at a proper interpretation of contractual terms.

In this case, Plaintiffs argue that the language of the Offer is ambiguous because it is unclear whether it includes within its scope the bad faith claims that were the subject of the pending Motion to Amend. While some of that evidence was presented to the Court in the form of the emails that the parties have made exhibits to their submissions, other evidence has not been placed before the Court, including a telephone conversation between Mr. Monzo and defense counsel that is referenced in those emails. However, the Court found the Motion to Amend was futile.

The Court’s decision on the Motion to Amend resolves the case, since the claims that Plaintiffs contend were not included in the Offer’s scope-the bad faith claims- cannot be brought back into the case, and thus the judgment that has been entered includes all of Plaintiff’s claims in this case.

Generally, a bad faith claim has been recognized in Delaware “when the insurer refuses to honor its obligations under the policy and clearly lacks reasonable justification for doing so.” Bad faith claims “can stem from an insurer’s failure to investigate, pay, process a claim, or in delaying payment.” However, “a mere delay in investigating a claim or paying benefits does not alone establish an insurer’s bad faith if there was a reasonable justification for the insurer’s failure to do so.”

Plaintiffs have not alleged in their proposed amended complaint that Defendant has a “general business practice” of claims denial; therefore, there is no need for analysis under that grouping of claims. Rather, Plaintiffs have alleged that Defendant’s action constituted bad faith in that Defendant “fail[ed] to make complete and timely payment of insurance proceeds . . . without reasonable justification” and “failed to . . . investigate and process” the claim.

The amended complaint’s allegations pertaining to Mr. Papa’s representations that the incident could be covered amount to nothing but statements of first impression from an agent who was neither responsible for interpretation of the contractual provisions of the policy nor familiar with the nuanced circumstances surrounding the damages to Plaintiffs’ property. More to the point, Mr. Papa represented to Plaintiffs that coverage “may be afforded”-not that it would be.

ZALMA OPINION

People who sue their insurance company think they are guaranteed a fortune in damages. When they don’t profit from the suit they get upset and litigate and appeal. This case is a perfect example: they accepted a settlement and then tried for more by attempting to amend their suit by seeking to reinstate a bad faith claim that the plaintiff had withdrawn in hopes of reaching a settlement. It worked, they got a settlement offer that they accepted and then tried to renege on the deal. The try failed.

© 2022 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders.

He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business.

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