Insurer May Be Punished Even If It Defends And Settles Suit Within Policy Limits Based on the Testimony of an “Expert” who Concluded a Subrogating Insurer Will Always Accept a Policy Limits Demand

Read the full article at https://www.linkedin.com/pulse/california-allows-bad-faith-failure-settle-even-when-barry/?published=t and at https://zalma.com/blog plus more than 3650 posts.

I have never been a fan of the tort of bad faith. In Planet Bingo LLC v. The Burlington Insurance Company, E074759, California Court Of Appeal (March 18, 2021) extended the tort for failure to negotiate a settlement of a subrogation claim because it should known the subrogating insurer would accept a policy limits settlement.

ZALMA OPINION

This decision has expanded the tort of bad faith to failure to settle a suit because an “expert” concluded that a subrogation demand far in excess of the insurer’s policy limits was “really” an offer to settle within limits because of the custom and practice of the industry. This ruling opens a Pandora’s Box of bad faith torts and punitive damages when an insurer does, as did Burlington, everything required of it by the policy and both defended and indemnified its insured. An expert’s contention that Burlington should have negotiated a settlement immediately.