This is the story of a case which did not contain a demand to settle for policy limits, and still the liability carrier was found to have acted in bad faith in settlement. This case is scheduled for much greater treatment later this year in a major insurance journal, but it can be said here that this was a case of a request by an injured claimant for disclosure of policy limits and the injured claimant clearly stated that he was interested in exploring settlement within the liability carrier's policy limits before suit was filed against the liability carrier's insureds. But his was not a demand for settlement, it was a demand for disclosure of policy limits.
Our story here begins not at the beginning, but in the middle. After a Consent Judgment of $5 Million was entered without collusion in the underlying case, a liability insurance carrier, Metropolitan, filed an action for declaratory relief in the U.S. District Court for the Eastern District of California.
Met asked the Federal Court to declare whether it acted in good faith and dealt fairly with its insureds.
Before he filed the underlying case against Met's insureds, an injured claimant sent a letter to Met. He did not make a settlement demand at that time. Instead, he asked Met to disclose its policy limits within 15 days of the letter because he wanted to know his options of settlement vs. a lawsuit.
In addition, in the letter he asked Met to respond to his sister at her separate address rather than to his home address, partly because he incurred brain injury among other injuries in the underlying accident and he wanted his sister to explain Met's response to him. Also, he must have been concerned about something Met also knew, which is that he had already spent a lot of time being treated in the hospital.
Met's applicable policy limit was $250,000.00 per injury, but Met did not tell him that. Faced with a brain-injured claimant who was representing himself, people at Met sent him a form letter that it used to communicate with injured claimants represented by an attorney.
After the 15-day deadline to state its policy limits, Met sent its letter -- a month after the claimant's letter.
Met sent its letter to the injured claimant's home address and not to the sister's address, which the injured claimant gave to Met in his letter to Met in the first place.
In a bench trial, the Federal District Court declared that Met acted unreasonably in response to a reasonable letter that requested disclosure of policy limits with a reasonable time deadline. This finding led automatically to the legal conclusion that Met acted in bad faith in this case and so Met was required to indemnify its insured who was liable for the full amount of the stipulated $5 Million underlying judgment, without regard to its policy limits of $250,000.00.
It must be said again, that this was never a case with a demand to settle for policy limits. This was a case which featured only a request by an injured claimant for disclosure of policy limits where the injured claimant clearly stated that he was interested in exploring settlement within the liability carrier's policy limits before suit was filed against the liability carrier's insureds. But his was not a demand for settlement, it was a demand for disclosure of policy limits.
As noted earlier, this case is scheduled for future in-depth treatment in a major insurance publication. It can be said here as to the applicable law, that the Federal Judge followed case law decided in Federal Courts and in California State Courts holding that a jury could nonetheless find a liability carrier in bad faith under California law where the injured claimant gave the liability carrier a reasonable opportunity to settle the claim within policy limits. In such cases, when settlement opportunities are believed to exist, the liability carrier must act to make settlement happen if it can, on behalf of its insureds.
So, this is where the first part of the story ends here. Met was against paying the $5 Million Judgment, until it was for it. When the underlying judgment was satisfied, part of the deal was to make the Federal Judge's decision go away. The case is Metropolitan Property & Casualty Insurance Co. v. Hedlund, 218 F. Supp. 3d 1075 (E.D. Cal. 2016), appeal voluntarily dismissed by order approving stipulation for dismissal, No. 16-17102 (9th Cir. April 6, 2017), order granting "Unopposed" motion to vacate the court's judgment and findings of fact and conclusions of law, 2017 WL 2609602, at *1 (E.D. Cal. "Dated: April 28, 2017 Filed 05/01/2017 DATE: May 18, 2017"). The emphasis is in Met's original Motion to Vacate, but the meaning of the three dates when the Order granted Met's motion is unknown at this time.
Next: Can You Make a True Claim Handling Story Go Away? Please Read The Disclaimer. ©2017 by Dennis J. Wall. All Rights Reserved.
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