What Is Bad Faith Failure To Settle?
It’s when and insurance company will not reasonably settle a claim and damages its insured, or customer, in Missouri.
Bad Faith is “the intentional disregard of the financial interest of Insured in the hope of Carrier escaping the responsibility imposed upon by its policy.” Scottsdale Ins. Co. v. Addison Ins. Co., 448 S.W.3d 818, 828 (Mo. 2014)
It is well established that an insurer owes to its insured a duty to act in good faith in settling a claim against the insured and that the insurer may be liable to the insured when it breaches this duty.
An insurance company cannot gamble with the insured’s assets:
[Carrier] is not permitted to take a gamble on getting a favorable verdict rather than to make a settlement within the limits of the policy.
[W]here [Carrier]’s and [I]nsured’s interests conflict, [Carrier] cannot protect its own interests to the detriment of Insured’s interests, but instead, the [Carrier] must sacrifice its interests in favor of [Insured]’s.” Truck Ins. Exch. v. Prairie Framing, LLC, 162 S.W.3d 64, 95 (Mo. Ct. App. 2005)
The Legal Elements
- the liability insurer has assumed control over negotiation, settlement, and legal proceedings brought against the insured;
- the insured has demanded that the insurer settle the claim brought against the insured;
- the insurer refuses to settle the claim within the liability limits of the policy; and
- in so refusing, the insurer acts in bad faith, rather than negligently.
The existence of bad faith is a question of fact to be determined on a case-by-case basis. In situations where an insurer fails to inform the insured of settlement offers and the status of negotiations, the second requirement that the insured demand that the insurer settle the claim is not necessary to show bad faith.
Bad faith is [a state of mind] indicated by the Carrier’s acts and circumstances and can be proven by circumstantial and direct evidence.” Johnson v. Allstate Ins. Co., 262 S.W.3d 655, 662 (Mo. Ct. App. 2008)
My friend Debbie Champion and I did three great podcasts a bit ago on insurance coverage and bad faith. Here are links to them if you want to listen.
Typical Conduct Showing Bad Faith
- Not fully investigating and evaluating a third-party claimant’s injuries;
- Not recognizing the severity of a third-party claimant’s injuries and the probability that a verdict would exceed policy limits;
- Refusing to consider a settlement offer;
- Not advising an insured of the potential excess judgment or settlement offers; or
- Failing to properly communicate with Insured.
The tort of bad faith failure to settle creates liability to compensate [I]nsured when [I]nsured has been wrongly subjected to an excess judgment and to deter [Carriers] from failing to fulfill fiduciary duties to their Insureds. Shobe v. Kelly, 279 S.W.3d 203, 279 (Mo. Ct. App. 2009)
Remember that “an insurer’s ultimate settlement for its policy limits does not negate the insurer’s earlier bad faith refusal to settle and that an excess judgment is not essential to a bad faith refusal to settle action” Scottsdale Ins. Co. v. Addison Ins. Co., 448 S.W.3d 818, 821 (2014).
Remember that you have to try and get a verdict over the policy limit int he underlying case in order to for the insured to have a bad faith claim against the insurance company which they can then assign to you.
So how do you successfully ensure that you can prove bad faith? Well – hire me and I will do my best to make that happen. I cannot give away all my secrets 😉
There are many other issues such as 537.058 letters which enable you to get written demands into evidence in Bad faith trials. But there are other issues too, like 537.065 agreements, reservations of rights, Hammer letters, documenting bad faith, duty to defend, interpretation of insurance policies, etc. Rather than further getting in the weeds on this, give us a call at 314-542-2222 to discuss.