Court Limits Damages for Bad Faith Violation

The insurer in this new condo defect case received a tender of defense from a general contractor under its additional insured endorsement to a subcontractor's policy.  About 14 months later, the insurance company accepted defense under a reservation of rights but otherwise did nothing in that time to investigate the claim. Division 1 held this delay constituted bad faith sufficient to estop the carrier from denying coverage.  For damages, the GC sought to hold the carrier liable for all of its exposure on the project, regardless of whether that exposure stemmed from the specific subcontractor at issue.  Division 1 rejected this argument. Copy of opinion also available here Download file