A Lesson In Bad Faith Claims And Jury Instructions
RLF Nazareth, LLC v. York RSG (International) Limited; Certain Underwriters at Lloyds, 2026 WL 1587556 (3rd Cir. 2026)
This case arose out of hurricane damage to property in St. Thomas. RLF owned a main building and three cottages, all of which were damaged by Hurricanes Irma and Maria. Lloyds insured the property, but a dispute developed over whether the cottages were covered under the policy. Lloyds first used an adjuster who looked only at the main building and estimated a loss below the policy deductible. After RLF challenged that result and hired its own adjuster, Lloyds had the property inspected again, this time including the cottages, and raised the estimate. The parties still disagreed, and RLF sued for breach of contract, negligence, and bad faith. Later, the case went to appraisal, and Lloyds paid the appraisal amount that the court said was owed under the policy.
After that payment, the case narrowed to one issue only: bad faith.
RLF argued that the trial judge should not have let the jury consider whether Lloyds breached the policy, because RLF believed that issue had already been decided earlier. RLF also argued that the jury instructions may have made the jury think RLF had to prove additional unpaid damages even though Lloyds had already paid the appraisal award. The Third Circuit rejected both arguments. It explained that the earlier rulings had not fully resolved whether Lloyds wrongfully denied coverage as to the cottages, which was the key part of RLF’s bad faith theory at trial. The court also held that the jury instructions, read as a whole, correctly stated the law and did not mislead the jury.
For policyholders and insurers, the takeaway is straightforward.
Even if a contract claim has been paid or becomes moot, facts about an alleged breach may still matter if a bad faith claim remains.
This decision also shows how careful courts are with jury-instruction challenges on appeal, especially when no timely objection was made at trial. If the full charge fairly explains the law, an appellate court is unlikely to reverse just because one sentence could be read in isolation to create confusion.
This post is for informational purposes only and does not constitute legal advice. If you have questions about your specific situation, you should contact a lawyer for assistance. Nothing herein is intended to create any attorney-client relationship between you and DLM LAW.
