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.

A six-person jury returned a verdict against the Illinois State Medical Inter-Insurance Exchange Mutual Insurance Company (“ISMIE”) for bad-faith failure to settle. ISMIE argued on appeal that, among other things, trial of the bad faith claim to a six-person jury was unconstitutional. The First District Court of Appeals agreed and gave retroactive effect to an Illinois Supreme Court decision holding a recent statutory change limiting juries in civil cases to six people was unconstitutional.

Summary: Bamford filed suit against Regent to recover for bad faith after Regent refused to settle a car accident case within its $6 million policy limit leading to an adverse verdict and judgment for $10.6 million. At trial in the bad faith case, the jury awarded the Bamford approximately $2 million. On appeal, the court held that Bamford presented sufficient evidence that Regent acted in bad faith in failing to settle the plaintiffs’ claims within the policy limits.

Summary: The Virginia Supreme Court’s seminal case regarding bad faith failure to settle claims is State Farm Mut. Auto. Ins. Co. v. Floyd. That opinion defines bad faith failure to settle, clarifies the relationship between the insured and insurer, and determines the standard of proof required in such cases.

Summary: A judgment was entered against Andrews in excess of its policy limits. Amoco Production, as assignee of Andrews Trucking, brought an action against Gainsco, the insurer, for bad faith failure to settle. Gainsco had been presented an opportunity to settle within policy limits and refused. The trial court granted summary judgment in favor of Amoco finding Gainsco liable for third-party bad faith, but the Wyoming Supreme Court reversed and remanded to enter judgment in favor of Gainsco. The Court held that when a contract provision appeared to limit Andrews’ liability to the policy limits, Gainsco had a reasonable basis for rejecting a settlement offer slightly below the policy limit.