Author's Note: Page numbers have been inserted by hand because the software in which the article was published did not transfer to this article at all. Page numbers have been inserted here so as to avoid breaking up paragraphs of text.
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2. “Maybe, but not in this case”
In my earlier article, I said that I made this category expressly for what might also be called iffy cases: “Cases in which the Courts of a given jurisdiction have recognized that at least there might be a legal duty on the liability carrier to initiate settlement negotiations without a settlement demand, particularly where the insured’s liability is probable and the claimant’s likely damages are great,” followed by my list of six States at the time. Wall, “The American Law Institute and Good Faith Settlement Duties of Liability Carriers,” 37 Ins. Lit. Rptr. at 602-03.
Those six States and the cases in which the Courts recognized that holding a liability carrier liable for bad faith in settlement because it did not initiate settlement negotiations was at least a theoretical possibility, but that the possibility was not open in those particular cases, are:
a. California, Reid v. Mercury Ins. Co., 220 Cal. App. 4th 262, 278, 162 Cal. Rptr. 3d 894, 907 (Cal. 2d DCA, Div. 8, 2013), review denied (unreported) (Cal. January 21, 2014) (while allowing for the theoretical possibility that “a conflict may also arise, without a settlement offer, when a claimant clearly conveys to the insurer an interest in discussing settlement but the insurer ignores the opportunity to explore settlement possibilities to the insured’s detriment,” the Court concluded: “But nothing like that happened here.”);
b. Idaho, Morrell Constr., Inc. v. Home Ins. Co., 920 F.2d 576, 581 (9th Cir. 1990) (recognizing that a duty to initiate settlement negotiations may arise under Idaho law in some situations, but not as here before suit is filed);
c. Illinois, Haddick ex rel. Griffith v. Valor Ins., 198 Ill. 2d 409, 417 & n.1, 763 N.E.2d 299, 304-05 & 304 n.1 (2001) (recognizing what the Illinois Courts term an “exception” to a general rule in Illinois that liability carriers do not have to initiate settlement negotiations, but an “exception” would apply when liability insurers failed to initiate settlement negotiations even without a settlement demand where in general and basic terms the insured’s liability is clear and the claimant’s likely damages are great, holding that the exception did not apply in the case at bar), following with approval Adduci v. Vigilant Ins. Co., 98 Ill. App. 3d 472, 478, 424 N.E.2d 645, 649-50 (Ill. 1st DCA, 2d Div., 1981);
d. Ohio, Miller v. Kronk, 35 Ohio App. 3d 103, 106, 519 N.E.2d 856, 860 (Ohio 10th DCA, Franklin County, 1987) (“Settlement negotiations were never initiated by plaintiff Miller and, considering the facts of this case, Buckeye Union had no duty to initiate negotiations.” [emphasis added]);
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e. Pennsylvania, Puritan Ins. Co. v. Canadian Univ'l Ins. Co., 775 F.2d 76, 77-78, 82 (3d Cir. 1985) (Pennsylvania law; in bad-faith-failure-to-settle case brought by excess carrier against primary carrier, the Federal Circuit Court refused to allow the excess carrier’s claim in the absence of a demand from the claimant, including refusing to recognize any claim that the primary carrier should have initiated settlement negotiations: “Nor do we agree that on this record Canadian [the primary liability carrier] had an affirmative duty to initiate settlement negotiations with Donahue [the injured claimant]. The same factors that militate against a finding of bad faith in refusing to settle are relevant in this instance as well. An insurance carrier may be required to broach settlement negotiations under some circumstances but this case does not present them.”).
f. and Texas. As I previously stated, “Texas is a State in which the Supreme Court seems to have spent a great deal of time wrestling with this question. Texas is also listed in this Article as one of three ‘con’ jurisdictions due to a holding in another case, discussed below[.]” Wall, “The American Law Institute and Good Faith Settlement Duties of Liability Carriers,” 37 Ins. Lit. Rptr. at 603.
g. It may be said that the Courts in these cases “talk the talk, but do not walk the walk.” To this list of “Maybe, but not in this case,” I would now add a seventh case and State, Georgia, moving it from the list of “Pro” cases because although Georgia law apparently recognizes the possibility of a jury considering a bad-faith-in-settlement claim when the liability carrier has not initiated settlement negotiations and there was no settlement demand, still the possibility appears to be recognized only as dicta in Georgia. Delancy v. St. Paul Fire & Marine Ins. Co., 947 F.2d 1536, 1550-51 (11th Cir. 1991) (“Georgia law does not clearly require the insured to show that the insurer refused an offer within the policy limits to establish liability for tortious failure to settle, but it does not foreclose the argument that such an offer is required before the insured may recover”; assuming without necessarily deciding that the insured could state such a claim “if the insured alleges facts showing that the insurer knew, or reasonably should have known, that the case could have been settled within the policy limits,” but affirming summary judgment in favor of the liability carrier on the record of this case, which does not appear to have ever been cited by a Georgia State Court).
Other observers have since agreed with my original assessment of these cases, firmly assigning them to the category I originally said they belong in, “Maybe, but not in this case.”
As I have repeatedly observed, these decisions are iffy at best on the proposition at hand, which to expressly state it again is whether Courts would allow a claim of bad faith in settlement to go to the jury on the strength of facts which include the liability carrier’s failure to initiate settlement negotiations and there has not been a settlement demand within policy limits. Once again, it may be said that they “talk the talk” without “walking the walk.” They could justifiably be placed either in the “Pro” column or in the “Con” column. I choose to place them in neither but instead continue to recognize that they could go either way.
If each and every one of these cases is placed in the “Pro” column, then the decided cases are in favor of letting a liability carrier’s failure to initiate settlement negotiations go to the jury in a bad faith case, regardless of whether there was a settlement demand or not.
If all of these cases are placed instead in the “Con” column, then the cases are probably fairly evenly distributed between “Pro” and “Con.”
That being the situation, for purposes of the present comments I will eliminate these cases from my analysis of the decided case law on the proposition at hand, namely, whether a Court would allow a jury to decide the question of whether a liability insurer’s failure to initiate settlement negotiations in a given underlying case against an insured amounts to bad faith in settlement, in a case in which the claimant did not make a settlement demand within policy limits. In the final analysis, since the cases in this category can be taken to go either way, they are probably not much help in figuring out nationwide “majority” and “minority” lineups on that question.
(Emphasis added.)
NEXT: THE CONCLUSION OF BAD FAITH CONDUCT IN SETTLEMENT. TO BE CONTINUED ON CLAIMS AND BAD FAITH LAW BLOG .... THEN THE ALI LIABILITY INSURANCE LAW REPORTERS GET THE FINAL WORD.
This selection, "Section 24 of the Law of Liability Insurance Restatement, Draft No. 4 (August 4, 2017), Reporter’s Notes F and H, and the Decided Cases," 39 No. 17 Insurance Litigation Reporter 473 (October 5, 2017), is reprinted here with permission of Thomson Reuters. Any further reproduction without the express consent of Thomson Reuters is prohibited.
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