This is a list of Frequently Asked Questions or "FAQs" about situations addressed by the Courts across the United States involving Claims of Third-Party Bad Faith in Settlement or Not.
COPYRIGHT DENNIS J. WALL 2010. Reprinted With Permission.
LIABILITY INSURERS SETTLING THIRD-PARTY CLAIMS:
by
Dennis J. Wall, Esquire
Dennis J. Wall
Attorney At Law
A Professional Association
Telephone: (407) 699-1060
Facsimile: (407) 699-1065
Email: DJW@dennisjwall.com
Author, "Litigation and Prevention of Insurer Bad Faith" (Second Edition Shepard's/McGraw-Hill; 2009 Supplement West Publishing).
Co-Author, "CATClaims: Insurance Coverage for Natural and Man-Made Disasters" (Thomson/West 2008; 2009 Supplement).
Insurance Claims And Issues Web Log:
Access through American Bar Association web site at
http://www.abajournal.com/blawgs/insurance_claims_and_issues/
Insurance Claims and Bad Faith Law Blawg:
Access through American Bar Association web site at
http://www.abajournal.com/blawg/insurance_claims_bad_faith_law_blog/
COPYRIGHT © DENNIS J. WALL 2010
All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopy, recording, or any information retrieval system, without permission in writing from the author.
INSURANCE GOOD FAITH AND FAIR DEALING
1. I have heard Liability Insurance called "Third-Party" Insurance. What does that mean and what are some examples?
Third-party insurance just means Liability Insurance. Under any Liability Insurance Policy, there is a claim of loss or damage; an injured claimant or creditor; and the Policyholder's insurance company.
Third-party or Liability Insurance is written and purchased to provide protection against the expense of defending yourself and against the expense of indemnifying or paying a judgment held by, or settlement with, an injured claimant, within the limits of the Liability Policy.
Some examples of Liability Insurance generally, are physicians' medical errors and omissions policies; attorneys' legal errors and omissions policies; Commercial or Comprehensive General Liability ("CGL") policies; and many types of Director's and Officer's Policies.
Further examples are explored in the many articles available online at www.dennisjwall.com.
2. Why is there a duty of Good Faith and Fair Dealing in settling claims against a Policyholder under a Liability Insurance Policy?
There is nothing so much like a General on a battlefield, as a Liability Insurer controlling a Policyholder's defense against an injured claimant's lawsuit. Liability Policies typically provide that the Liability Insurer has control over defense and settlement of every claim covered under these policies.
Courts across the nation are in general agreement that because of the Liability Insurer's control over defense and settlement of claims against the Policyholder, the Liability Insurer is held by the law to a standard of extracontractual Liability if that insurance company does not act in Good Faith and Deal Fairly with its Policyholders.
"Extracontractual" in this sense means beyond the contracted policy limit. In other words, failure to act in Good Faith, i.e., acting in Bad Faith in settlement, can subject a Liability Insurance Company to pay money beyond its policy limit.
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3. What about Liability Insurance Policies where the Policyholder has some say in settling or not settling, what is the standard of Good Faith and Fair Dealing for the Liability Insurance Company then?
The provision of a Liability insurance contract which gives the insured control over settlement decisions because the policy requires the insured's consent to settlement, is called a "pride provision". Such provisions are found for example in professional errors and omissions policies. In general terms, the Liability insurer's exposure for ignoring such a contractual provision and settling without obtaining the insured's consent in a given case, is to a breach of contract claim by the Policyholder. The insurance company in such a case is generally exposed to the risk of payment for the same damages to reputation and for mental anguish which the insured intended to prevent when she, he or it purchased a pride provision.
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It is against public policy for any insurance or self-insurance policy to contain a clause giving the insured the exclusive right to veto any offer for admission of liability and for arbitration pursuant to s. 766.106, settlement offer, or offer of judgment, when such offer is within the policy limits. However, any offer of admission of Liability, settlement offer, or offer of judgment made by an insurer or self-insurer shall be made in good faith and in the best interests of the insured.
Fla. Stat. § 627.4147(1)(b)1 (2009). [Emphasis added.]
COPYRIGHT DENNIS J. WALL 2010. Reprinted With Permission.
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