• Federal Court in North Carolina Dismisses Claims for Bad Faith and Unfair and Deceptive Trade Practices for Claims Arising Outside Of North Carolina
  • January 31, 2013 | Author: George B. Hall
  • Law Firm: Phelps Dunbar LLP - New Orleans Office
  • A federal court in North Carolina recently dismissed claims against an insurer for bad faith, unfair and deceptive trade practices and punitive damages arising out of a dispute over the insurer’s obligation to defend and indemnify the insured against a series of international employment disputes. Martinez v. Nat’l Union Fire Ins. Co., 2012 WL 5993754 (E.D. N.C. Nov. 30, 2012).

    After the insured’s Brazilian operations ceased, multiple employees sued in Brazilian courts, eventually obtaining judgments against the insured. The insured submitted a claim to her insurer under a policy providing coverage for employment practices liability applying to claims made “anywhere in the world.” The insurer denied coverage based on its interpretation of Brazilian law, leading the insured to file suit for declaratory judgment in North Carolina, seeking recovery for breach of contract, bad faith and unfair and deceptive trade practices. The insurer moved to dismiss the latter two claims.

    The bad faith and unfair and deceptive trade practices claims were brought under North Carolina law. The court held that the insured could maintain such claims under North Carolina law only if she actually suffered injury in North Carolina. The court held that because the insured alleged that the insurer’s claim decision was made in New York, that she received correspondence regarding the decision in New York and that her financial injury was suffered in Brazil, she failed sufficiently to allege that North Carolina was where she actually suffered harm. Moreover, the court found that the honest dispute between the parties with regard to interpretation of Brazilian law could not plausibly constitute bad faith or an unfair and deceptive trade practice, but rather was (at most) a claim for breach of contract. The court dismissed the bad faith and deceptive trade practices claims.