Surety Bad Faith Bill is Defeated in Rhode Island
Friday, June 20, 2014
AIA state counsel has confirmed that the Senate Judiciary Committee will not move SB 2392, the surety bad faith bill, this year. The bill would have allowed any obligee, principal or claimant that is under any fiduciary bond to file a claim against the surety on the bond for wrongfully, and in bad faith, refusing to pay or settle a claim. The bill would have allowed the claimant to seek both compensatory and punitive damages, as well as reasonable attorneys' fees and the costs of the suit.
SFAA and Travelers met with the committee leadership in the Rhode Island Senate to discuss the impact of this legislation. The committee seemed to understand that in the surety three-party claims context, that there likely would be a bad faith suit in every probate bond claim.
The committee chair asked us for data regarding probate bond claims in Rhode Island. As promised at our meeting, the Chair brought SB 2392 back to committee for further consideration and SFAA responded with the requested data. The data generally showed that sureties have paid claims on probate bonds, and that there was one large probate claim in Rhode Island for which the surety later took down the reserves. This claim likely was the genesis of this legislation. The reasons that the sureties gave this year in Rhode Island as to why bad faith h does not work in the three-party claim situation, and the data we provided, convinced the committee that whatever the actual or perceived problem, bad faith in all cases is not the answer.
Interested SFAA members can obtain a copy the data we provided in Rhode Island on the Members Only part of our website.
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