In Urban v. Zurich Am. Ins. Co., 752 F. Supp. 3d 310 (D. Mass. 2024), a U.S. District Judge in Massachusetts considered whether the liability insurance carrier defendant had violated Massachusetts statutes by failing to make a reasonable offer after the policyholder’s-insured’s liability had become reasonably clear.
As to whether the policyholder-insured’s liability was reasonably clear at any point during the underlying claim, this case involved the possibility of a jury finding of comparative negligence. The Court pointed out that “[w]hile comparative negligence can, in some cases, prevent liability from becoming reasonably clear,” insurance carriers have an obligation to make a reasonable settlement offer, which they cannot avoid “by hiding behind the gamesmanship of anticipated success at trial.” Urban, 752 F. Supp. 3d at 341.
As to the reasonableness of the carrier’s offers, the Court noted that under Massachusetts law (as under the law in most if not all U.S. jurisdictions) all insurance carriers are subject to the following legal standard: “Reasonableness can be measured by looking to the undisputed evidence indicating the damages suffered against the offer tendered.” Urban, 752 F. Supp. 3d at 344 (emphasis added).
The Court in this case awarded double damages against the defendant carrier in the amount of “$2,841,358.26, plus attorneys’ fees” because it failed to make a reasonable offer after the liability of its policyholder-insured had become reasonably clear in the underlying case. Urban, 752 F. Supp. 3d at 346.
Third-Party Bad Faith case law on the issues discussed in this article is collected in Volume 1 of the Third Edition of LITIGATION AND PREVENTION OF INSURER BAD FAITH § 3:28 (Thomson Reuters West Publishing Co., with 2025 Supplements in process). First-Party Bad Faith case law on these issues is collected in Volume 2, § 9:14.
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