By Thomas R. Newman
The covenant of good faith and fair dealing that is implied by law in every liability insurance policy requires the insurer to concern itself with the interests and welfare of the insured as well as its own interests and welfare, and in so doing “the insurer at the very least must itself consider and determine whether or not a settlement offer is in the best interest of the insured.” Garner v. American Mut. Liability Ins. Co., 31 Cal. App. 3d 843, 847-848, 107 Cal. Rptr. 604, 607 (3d Dist 1973). If it is, as where liability is clear and the injuries or damages are likely to result in a judgment in excess of the policy limits, some courts have held that the insurer has an affirmative duty to initiate settlement negotiations. Goheagan v. American Vehicle Ins. Co., 107 So. 3d 433, 438 (Fla. Dist. Ct. App. 1012); Noonan v. Vermont Mut. Ins. Co., 761 F. Supp. 2d 1330 (M.D. Fla. 2010)(Florida law); SRM, Inc. v. Great Am. Ins. Co., 798 F.3d 1322, 1323 (10th Cir. 2015)(Oklahoma law)(“a primary insurer owes its insured a duty to initiate settlement negotiations with a third-party claimant if the insured’s liability to the claimant is clear and the insured likely will be held liable for more than its insurance will cover”).
Continue reading Insurer’s Duty to Initiate Settlement Discussion
The California Court of Appeal for the Fourth District, Division Two, in 21st Century Ins. Co. v. Superior Court (Tapia), ___ Cal.App.4th ___ (No. E062244, September 10, 2015), recently confirmed some of the important protections for defending insurers against stipulated judgments that were established in the Hamilton and Safeco decisions and limited the application of other decisions that have been relied on by claimants and policyholders seeking to get around the Hamilton rule against bad faith actions premised on such stipulated judgments. Continue reading Protections Against Defended Policyholder Manufacturing Bad Faith Case Via Stipulated Judgment Confirmed By California Court
In McMillin Companies, LLC v. American Safety Indemnity Co. (4th Dist. Div. 1, No. D063586, January 22, 2015 (published in relevant part)), the California Court of Appeal for the Fourth District has provided some meaningful guidance on how a trial court should handle issues that regularly come up in cases where an alleged additional insured claims breach of the duty to defend by multiple insurers, including explaining the significance of an insurer’s unsuccessful attempt to obtain summary judgment on the duty to defend, the significance of other insurer settlements on claims against the remaining insurer, and the procedure for applying an offset to the policyholder’s claim for such settlements.
Continue reading California Guidance on Complex Duty to Defend Disputes over Additional Insured Status
On June 4, 2013, the federal Second Circuit Court of Appeals issued an important decision addressing when underlying insurance will be deemed exhausted for purposes of the attachment of higher layers of excess insurance. In doing do, the court sharply limited an influential 1928 precedent, Zeig v. Massachusetts Bonding & Insurance Co., 23 F.2d 665 (2d Cir. 1928). Zeig, written by Judge Augustus Hand, is often cited as the leading case standing for the proposition that, if an excess policy ambiguously defines “exhaustion,” settlement with an underlying insurer will constitute exhaustion of the underlying policy for purposes of the attachment of the excess coverage.
Continue reading Second Circuit Limits Zeig v. Massachusetts Bonding & Insurance Co.
The Federal Ins. Co. v. Steadfast Ins. Co, et al decision last week from the Second District Court of Appeal for the State of California provided helpful clarification for insurers regarding the scope of coverage under the “personal injury” coverage part of a general liability policy by finding that insurers had no duty to defend a complaint for federal housing discrimination against California apartment owners.
Continue reading Housing Discrimination Is Not Personal Injury