Bad Faith Liability May Be Premised on an Insurer's Failure to Effectuate Settlement When Insured's Liability Was Reasonably Clear

Posted in: Assignment of Claim, Auto Insurance, Case Updates, General Liablity, Insurance Bad Faith June 20, 2012

The Ninth Circuit Court of Appeals in a recent decision held that an insurer’s duty of good faith and fair dealing, which is implied in every contract of insurance, may be violated by the insurer’s failure to attempt to effectuate a settlement within policy limits after liability of its insured has become reasonably clear.  In essence, the Court found that an insurer’s unreasonable refusal to attempt to effectuate settlement after the evidence reasonably indicates that the insured’s liability will be in excess of the policy limits constitutes bad faith.

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