Equitable Estoppel Halts Insurer’s Success In Bad Faith Claim

By Jim Bryan

Demonstrating that equitable estoppel can create genuine obstacles for insurers, the court in the Middle District of North Carolina denied a carrier relief to which it would have otherwise been entitled based upon the carrier’s prior conduct.

Vytas and Lee Anne Bankaitis sued Defendant Allstate Insurance Company in state court for breach of contract, deceptive trade practices, unfair claims settlement practices and bad faith. Plaintiffs alleged, among other things, that after a fire loss Allstate was aware of the breadth of the damages claimed and refused to provide sufficient value in replacement cost of Plaintiffs’ home. Plaintiffs also alleged that Allstate knew it intended to deny the claim for additional damages, failed to tell Plaintiffs, required them to file multiple claims for the same loss and effectively placed their claims beyond the applicable statute of limitations. Allstate removed the action to the U.S. District Court and filed its motion to dismiss contending Plaintiffs’ “causes of action for breach of contract and bad faith were untimely filed and thus subject to dismissal for failure to state a claim.” Bankaitis v. Allstate Ins. Co., No. 2017 WL 168907 (M.D.N.C. Jan 17, 2017).  Allstate did not move to dismiss the deceptive trade practice claim (where the statute of limitations is four years), and Plaintiffs conceded on Allstate’s motion to dismiss the unfair claim settlement practices claim under N.C.G.S. 58-63-15(11) because such statute does not create a private right of action. The U.S. District Court found that, while Plaintiffs’ claims for breach of contract and bad faith would ordinarily  be barred pursuant to the applicable statute of limitations, Plaintiffs established equitable estoppel sufficient to withstand dismissal of their claims at this stage of the litigation.

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