Claim for Bad Faith Against Insurance Company
When faced with a claim for bad faith, it is a defense where the insured is able to demonstrate there was a reasonable justification to deny coverage. Casson v. Nationwide Insurance Company, Del. Super., 455 A.2d 361, 368 (1982).
"Therefore, the question is whether at the time the insurer denied liability, there existed a set of facts or circumstances known to the insurer which created a bona fide dispute and therefore a meritorious defense to the insurer's liability." Id. Tackett v. State Farm Fire and Casualty Insurance Company, Del. Supr., 653 A.2d 254, 266 (1995).
To prevail on a claim of bad faith, where the insured seeks punitive damages, the Delaware Supreme Court has ruled there must be a showing that the insurer's breach is particularly egregious." 653 A.2d at 265.
The standard by which a determination is made whether punitive damages have merit, the analysis found in tort actions is applied.
Punitive damage is only appropriate if after a close examination of defendant's conduct it is found to be 'outrageous,' because of 'evil motive' or 'reckless indifference to the rights of others." Id. (quoting Jardel v. Hughes, Del. Supr., 523 A.2d 518, 529 (1987)).
"Mere inadvertence, mistake or errors of judgment which constitute mere negligence will not suffice." Id.