There are many factors in deciding the question of whether there is bad faith in settlement.
The factors have been summarized concisely as follows:
Whether or not an insurer has adhered to the standard of good faith usually depends upon circumstances and elements involved in a particular case. Kunkel [v. Utd. Sec. Ins. Co. of N.J., 84 S.D. 116, 168 N.W.2d 723, 727 (1969)]. There is an array of factors to consider in determining whether an insurer's refusal to settle is equivalent to a breach of its good faith duty. Helmbolt [v. LeMars Mut. Ins. Co., 404 N.W.2d 55, 57 (S.D. 1987)]. These factors include:
(1) The strength of the injured claimant’s case on the issues of liability and damages; (2) attempts by the insurer to induce the insured to contribute to a settlement; (3) failure of the insurer to properly investigate the circumstances so as to ascertain the evidence against the insured; (4) the insurer's rejection of advice of its own attorney or agent; (5) failure of the insurer to inform the insured of a compromise offer; (6) the amount of the financial risk to which each party is exposed in the event of a refusal to settle; (7) the fault of the insured in inducing the insurer's rejection of the compromise offer by misleading it as to the facts; and (8) any other factors tending to establish or negate bad faith on the part of the insurer.
"While not a 'mere checklist,'" it has also been said, "insurers are at a minimum required to investigate the facts, warn the insured of a possible excess judgment and advise how to avoid one, keep the insured apprised of settlement opportunities, and settle where reasonable."[2]
[1] Sacred Heart Health Serv's v. MMIC Ins., Inc., No. 4:20-CV-4149-LLP, 2023 WL 3742544, at *28 (D.S.D. May 31, 2023).
[2] Colello v. GEICO Gen. Ins. Co., ___ F. Supp. 3d ___, No. 6:22-cv-1262-RBD-RMN, 2023 WL 6850954, at *2 (M.D. Fla. Oct. 13, 2023), app. docketed, No. 23-13689 (11th Cir. Nov. 6, 2023).
FACTORS THAT JUDGES AND JURIES CONSIDER IN THIRD-PARTY BAD FAITH CASES AND IN FIRST-PARTY BAD FAITH CASES ARE EXPLORED IN TWO VOLUMES BY Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith (West Publishing Co. 3d Edition, 2024 Supplements in process).
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