Johnny Smith accidentally runs a red traffic light and slams his pick-up truck into a motorcyclist, Drew Lenders. Sadly, Drew was not wearing a helmet and suffered significant head trauma and memory loss. Drew’s hospital bill alone is $50,000 He also missed 3 months from work and, therefore, lost about $12,000 in wages. Drew hires an injury attorney and formally demands the $50,000 policy limits from Johnny’s auto insurance, ABC Insurance Co., within 30 days. But believing that the motorcyclist should have been wearing a helmet, ABC Insurance allows Drew’s demand to expire and, instead, hires a biomechanical engineer to find out if Drew’s injuries would have been prevented had he worn a helmet. Meanwhile, Johnny files bankruptcy.
One year later, a jury awards $200,000 verdict against Johnny and in favor of Drew. ABC Insurance pays the $50,000. Because Johnny is not responsible for an excess judgment by virtue of his prior bankruptcy, is a bad faith claim against ABC Insurance even a viable cause of action? The answer is “yes.”