Update – Tort of Bad Faith in Reinsurance

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Recently, I blogged about a case where the court rejected an argument that the tort of bad faith applied to a reinsurance agreement. The losing party in that case petitioned the federal court to certify the question to the Alabama Supreme Court.

In Alabama Municipal Insurance Corp. v. Munich Reinsurance America, Inc., No. 20 cv 300-MHT (M.D. Ala. Apr. 12, 2021), the cedent moved the federal court to certify to the Alabama Supreme Court the question of whether Alabama recognizes the tort of bad faith in the reinsurance context.

In rejecting the motion, the court held that certification would be neither necessary nor appropriate. The court pointed out that it had plenty of Alabama cases to review and was quite confident that the Alabama Supreme Court would not extend the tort of bad faith to reinsurance given the court’s restrictive application of the tort. As the court said, “[c]ertifying the question now would not save the court or the parties any time, energy, or resources. Quite the opposite—it would delay the case further, preventing the court from moving forward in its consideration of the remaining claims.”

The court also noted that it was unwilling to grant the motion after it had dismissed the cedent’s bad faith claims from the case. The court said it would not allow the cedent “a second chance at victory” on a motion to certify filed only after the court had already carefully considered the relevant state law and made an informed judgment.

What will the federal circuit court say?

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