There is a tension between properly investigating a claim against a Policyholder, on the one hand, and actively engaging in negotiations to settle that claim.
Without taking "a reasonable amount of time to properly investigate a claim before engaging in settlement negotiations," a Liability Carrier may be acting in Bad Faith. See Merrett v. Liberty Mutual Insurance Co., 2013 WL 1245860 *3 (M.D. Fla. March 27, 2013).
"However, it is also true" that where damages are great and liability is probable in the case against the Policyholder, in some jurisdictions at least the Liability Carrier has an affirmative duty to initiate settlement negotiations. Merrett v. Liberty Mutual Insurance Co., 2013 WL 1245860 *3 (M.D. Fla. March 27, 2013).
This article will offer a resolution whenever a Judge or Jury in a Bad Faith Case is likely to view Damages as great and Liability as probable. The situation described here means that it is more likely than not that the underlying Damages will be held by the Court or found by the Jury in the Bad Faith Case to be great, and that the Court will hold or the Jury in the Bad Faith Case will find that Liability in the underlying case was probable.
When these described outcomes in the Bad Faith Case occur in a particular Bad Faith case, it also means that the Court and Jury view the underlying Damages and Liability exposure as so clear without further investigation that the Good Faith duty of settlement initiation will probably be held or found to have been triggered in that case.
In that event, in jurisdictions recognizing the duty of settlement initiation, initiation quite simply trumps investigation -- or a Court is likely to hold and a Jury to find that initiation trumps investigation in the particular case.
Here, it is submitted, is a resolution of the tensions between the Liability Carrier's Good Faith duties of investigation and initiation: When Damages are reasonably known to be great, and Liability is reasonably known to be probable, the Liability Carrier's prudent course is to initiate and not to insist that instead there is a need to investigate in that situation.
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