Claims and Bad Faith Law Blog

'TO MAKE A REASONABLE OFFER AFTER LIABILITY IS REASONABLY CLEAR.'

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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BAD FAITH IN SETTLEMENT NEGOTIATIONS; “WASTING” POLICY DEFINED.

In Jenkins ex rel. CLJ Healthcare, LLC v. Prime Ins. Co., No. 23-4113, 2024 WL 4040386 (10th Cir. Sept. 4, 2024), the Tenth Circuit Court of Appeals applied the bad faith law of Utah which, in pertinent part, matches the majority view held by courts across the United States.

          The Tenth Circuit panel dealt with bad faith claims that boiled down on appeal to two ultimate facts:

1. Prime [the liability carrier] failed to tell CLJ [the policyholder] how much coverage was available.
2. Mr. Jenkins [the injured plaintiff] demanded $100,000 in settlement, but Prime counter-offered for less without telling CLJ that it could contribute to the settlement.

Prime, 2024 WL 4040386, at *6.  As interpreted by the panel, Utah law required the entry of an excess judgment in the underlying case:

    The district court concluded that the bad-faith claim would be untimely under a theory involving either contract or tort. On appeal, CLJ characterizes its bad-faith claim as a tort based on Prime's duty as a fiduciary.  So we address timeliness of the claim under a tort theory.

Prime, 2024 WL 4040386, at *6.  The appellate panel concluded that the bad-faith claim was potentially timely under a tort theory, and accordingly reversed the trial court’s summary judgment for the carrier in this case.

          It is worth noting before closing, that the Tenth Circuit panel in Prime was confronted with an underlying medical malpractice action against what it called “a physicians’ company,” CLJ.  The policy at issue in the case was “a wasting policy, where the amount for indemnity is reduced by the amount spent on defense costs.”  Prime, 2024 WL 4040386, at *1 (emphasis by the Court). 

The statute of limitations defense in third-party cases involving alleged bad faith in settlement negotiations is addressed in 1 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 5:20, Statutes of limitation (West Publishing Co. 3d Edition & 2024 Supplements).

Please read the disclaimer.  ©2024 Dennis J. Wall.  All rights reserved.  Check out my Substack newsletter.

LITIGATION AND PREVENTION OF INSURER BAD FAITH MARICOPA & PA. HYPERLINKS.

 

 

Dennis J. Wall, No Good Cause, No Dispute, No Protective Order, Maricopa County Lawyer 11 (Maricopa County Bar Ass'n Oct. 2021), Download Article Published Maricopa Lawyer. Oct 2021.

Dennis J. Wall, Access by Nonparties to Discovery, Despite Stipulated Protective Orders:  Just the Beginning?, 24 Civ. Litig. Update 7 (Pa. Bar Ass'n Civ. Litig. Section Fall 2021), Download CivilLitFall2021.

Both articles ©Dennis J. Wall.  All rights reserved.