Claims and Bad Faith Law Blog

SETTLING CLAIMS WITHOUT WAITING FOR DEMANDS FROM THE INJURED PARTIES.

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In 2023, the Kansas Supreme Court said that the old view that a liability insurance company is immune from bad faith in settlement if the injured party has not made a settlement demand, is an inaccurate assessment of Kansas law.  In Granados v. Wilson, ___ Kan. ___, 523 P.3d 501 (2023), the Kansas Supreme Court pointed out what holding to the contrary had failed to see:

Whether the injured party has demanded compensation or filed a claim with the insurer may be a fact relevant to deciding whether the insurer breached its implied contractual duties of reasonable care and good faith. But that inquiry is reserved for the trier of fact.

    Granted, if the duties of reasonable care and good faith do not, under any set of circumstances, require an insurer to explore settlement before a third-party files a claim or demands compensation, then a court could declare that principle as a matter of law. {Citation omitted.]  But we hesitate to conclude that the implied contractual duties of reasonable care and good faith never require such conduct.

Granados, 523 P.3d at 512 (emphasis by the Supreme Court of Kansas).

The view that liability insurance carriers cannot be sued for their alleged bad faith in settlement unless the injured parties have made settlement demands, is explored in § 3:14, Demand From Third Party, in 1 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH (Thomson Reuters 3d Edition, 2023 Supplements in process).

Please read the disclaimer.  ©2023 Dennis J. Wall.  All rights reserved.

SHOULD AN INSURANCE CARRIER INITIATE SETTLEMENT NEGOTIATIONS? EVER? NEVER?

 

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In at least one jurisdiction, Kansas, the question of a liability insurer initiating settlement negotiations is not a question of duty but a question of fact under all the circumstances:

    Under this hypothetical, both the insurer and insured know liability is clear and the claim filed by the insured exceeds policy limits, creating a conflict of interest that requires the insurer to exercise reasonable care and to act in good faith. [Citation omitted.]  They also know the claim can be settled within policy limits if they act quickly, even though the third party has not made formal demand. We cannot conclude, as a matter of law, that the insurer could never breach the duties of reasonable care and good faith by failing to explore settlement under these (or any other possible set of) circumstances simply because the third party has not yet made a formal demand. See, e.g., Keeton and Widiss, Insurance Law § 7.8(c), 889-90 (1988) (“In most circumstances the insurer, having reserved to itself the right to control the defense and the decision whether to agree to a settlement, should be obligated to explore the possibility of a settlement even in the absence of actions by the third-party or an express request by the insured.”).[1]

 

[1]Granados v. Wilson, ___ Kan. ___, 523 P.3d 501, 513 (2023) (emphasis added).

The Granados decision is explored along with other cutting-edge decisions which address a Duty to initiate settlement negotiations in 1 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 3:16 (Thomson Reuters 3d Edition, 2023 Supplements in process).

Please read the disclaimer.  ©2023 Dennis J. Wall.  All rights reserved.