Court Denies National Union's Motion to Dismiss Bad Faith Case Finding Absence of Credible Investigation

Mkt. Lofts Cmt. Ass'n v. Nat'l Union Fire Ins. Co., No. CV 15-03093-RGK, 2016 U.S. Dist. LEXIS 64014 (C.D. Cal. May 4, 2016)

Judge Klausner denied National Union’s motion for summary judgment on bad faith.  The court also denied its request to terminate the defense going forward (based on the filing of a second cross-complaint that was not the express subject of the court’s July 30, 2015 order (Mkt. Lofts Cmty. Ass’n v. Nat’l Union Fire Ins. Co., 2015 U.S. Dist. LEXIS 100691 (C.D. Cal. July 30, 2015) finding a duty to defend the Underlying Action (Market Lofts Cmty. Ass’n v. 9th Street Market Lofts, LLC, et al., Case No. BC472621 (California Superior Court, County of L.A.)).

National Union’s argument that its interpretation of policy language was “reasonable” does not matter since Jordan v. Allstate Ins. Co., 148 Cal.App.4th 1062 (2007) held that “notwithstanding the reasonableness of the insurer’s interpretation of the policy language leading to the original denial” cannot justify the “resulting claim denial … in the absence of a full, fair and thorough investigation of all of the bases of the claim that was presented.”

After reviewing O’Brien’s deposition testimony presented by National Union , “the Court finds that a reasonable juror could find that Defendant failed to conduct an adequate investigation prior to denying coverage.”  Mkt Lofts, 2016 U.S. Dist. LEXIS 64014, at *8.