Bad Faith Within the Deductible: Wisconsin Court Sets Major Precedent.

   In a decision of potentially major precedential value, the Supreme Court of Wisconsin unanimously approved the expansion and application of the Bad Faith Tort of Failure to Settle when the Insured is exposed by the Liability Insurance Company's alleged Bad Faith conduct, to liability within the Insured's Deductible:  Roehl Transport, Inc. v. Liberty Mutual Insurance Co., Download Roehl Transport, Inc. v. Liberty Mutual Insurance Co. (Wis. Case No. 2008AP1301, Opinion Filed June 22, 2010) PUBLIC ACCESS OFFICIAL OPINION also published as 325 Wis. 2d 56, 784 N.W.2d 542 (2010)(Westlaw subscription required to access via Westlaw).

   The Court's narrow holding is as follows:

   Roehl Transport, an insured with a deductible for its liability coverage, has a cognizable bad faith claim against its insurance company when the company has control over settlement of a third-party claim and engages in bad faith conduct toward the insured, even though the judgment does not exceed the policy limits.

Roehl Transport, Inc. v. Liberty Mutual Insurance Co., 784 N.W.2d at ¶7, p. 547.

   The reasoning which informed this holding is the same reasoning as has always been employed by Wisconsin Courts in Bad Faith Cases, as the Supreme Court saw the question:

   For the very reason our cases have concluded that an insurance company becomes liable for the tort of bad faith when it fails to act in good faith and exposes its insured to liability over policy limits, we likewise conclude that an insurance company may be liable for the tort of bad faith when the insurance company fails to act in good faith and exposes the insured to liability for sums within the deductible amount.

Id. at ¶57, 784 N.W. 2d at 555.  [Emphasis added.]

   In sum, as the Supreme Court of Wisconsin saw the answer to this question:

When a conflict exists between the interests of an insurance company and the interests of an insured, and the insurance company has control over the claim, the insurance company has a duty to act in good faith to protect the interests of the insured.  When an insurance company breaches that duty, a cause of action for bad faith is cognizable in Wisconsin.

Id. at ¶112, 784 N.W.2d at 563.  See also Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" § 3:01, "Requirements for Fulfillment or Enforcement of Good Faith in Settlement:  A Working Definition of Third-Party Insurance and a Standard for Measuring Insurer Conduct" (Shepard's/McGraw-Hill First Edition; West Publishing Co. Second Edition and 2010 Supplement).

   It does not take omniscient powers to predict that this decision is likely if not certain to have great precedential value to other Courts faced with similar situations in other jurisdictions. 

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Comments

[Florida Insurance Agency]

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