RECENT DEVELOPMENTS IN PROPERTY INSURANCE COVERAGE LITIGATION

"19 On appeal, the New York Appellate Division concluded that the insurable interest provision, which provided in relevant part that "[i]n the event of a covered loss, the defendant [would] not pay for more than an insured person's insurable interest in the property," was not ambiguous.20 The court further found that the plain language of the insurable interest pro vision limited the insured's recovery "to the extent of [the] person's insurable interest.\n The Missouri Supreme Court has held that the appraisal process is not appropriate for resolving questions of coverage.219 D. Bad Faith The Washington Supreme Court held that, in the context of first-party bad faith claims handling cases, courts must apply a presumption that no attorney-client privilege exists.220 In Cedell v. Farmers Insurance Co. of Washington, the policyholder sued its insurer for bad faith claims handling, alleging the insurer made unreasonably low offers on its fire loss claim and was unresponsive.221 When the insurer produced in discovery a "heavily redacted claims file," the policyholder filed a motion to compel, alleging privilege claims are inapplicable in first-party bad faith cases.222 Reasoning that "[f]irst party bad faith claims by insureds against their own insurer are unique and founded upon two important public policy pillars: that an insurance company has a quasi-fiduciary duty to its insured and that insurance contracts, practices, and procedures are highly regulated and of substantial public interest," the court ruled that there is a presumption of no attorney-client privilege in such cases.223 The court ruled, however, that the insurer can "overcome the presumption of discoverability" upon an "in camera showing" that "the attorney was providing counsel to the insurer and not engaged in a quasi-fiduciary function. "224 In order to ensure that communications with counsel regarding coverage remain privileged, Cedell will require insurers to restrict attorneys from performing claims handling functions or, at minimum, segregate their claims handling work from their coverage work.225 In another case involving an insurer's alleged undervaluation of its insured's claim, the Tenth Circuit held that an insurer's underpayment of a claim by $200,000 raised the inference that the insurer had been "less than diligent in investigating" the policyholder's fire loss claim, thereby breaching the implied obligation of good faith and fair dealing under Utah law.226 In Blakely v. USAA Cas