Bad Faith Blog

The Colorado Court of Appeals held that an excess carrier asserting an equitable subrogation claim against a primary insurer for a failure to settle a claim within the primary carrier’s liability limits steps into the shoes of the insured, and must plead and prove bad faith to recover against a primary carrier for failing to settle. In the underlying case, a medical malpractice suit was filed against a physician with two separate professional liability policies.

Summary: An employer’s excess insurer brought an action for bad faith against the primary insurer, which had defended the employer against a worker’s personal injury action that resulted in a settlement in excess of the primary insurer’s limits. The excess insurer alleged the primary insurer should have settled the case within the primary carrier’s policy’s limits. The trial court dismissed the claim finding it was not actionable when there was no excess judgment entered against the insured. The Court of Appeals reversed and remanded.

Summary: The Hawaii Supreme Court held that an excess insurance company can pursue an equitable subrogation bad faith cause of action against a primary insurer which had in bad faith failed to settle a claim within the primary policy limits.

The Supreme Court of Missouri handed down its much anticipated decision in the Scottsdale Insurance v. Addison Insurance case earlier in December. This decision will have a major impact on Missouri bad faith failure to settle cases for years to come.

An excess liability insurance carrier filed a state court declaratory judgment action seeking a declaration that a primary liability insurer was obligated to pay the entire judgment against the insured, as well as prejudgment interest and costs. After removal to federal court, the primary insurer counterclaimed seeking a declaratory judgment that the excess carrier was liable for equitable indemnity and equitable subrogation. The district court ruled that the primary insurer had a claim for equitable subrogation (not equitable indemnity), but that jury questions remained regarding whether the excess insurer had unreasonably refused to settle the underlying personal injury action within its policy limits.