California Court Releases Insurers From Strict Duty To Settle

Larry Golub was quoted in an October 23, 2013, article published by Law360 about a California appeals court decision, Paul Reid v. Mercury Insurance Co., which held that insurers generally don’t have to launch settlement discussions with those injured by their policyholders in high stakes cases, freeing insurers from the greater bad faith liability.

This ruling put to bed confusion that was stirred up by the Ninth Circuit's ruling in Du v. Allstate Insurance Co. which said California insurers must proactively work toward a settlement when it's clear that the policyholder is liable, even if claimants have not made a settlement demand.

Golub told Law360 that it would have been helpful for the appeals court to rule that claimants must make a formal settlement demand before insurers have a duty to settle.

Insurance companies often hold off on responding to claimants' requests for policy limits because they need more information, especially in cases where there are multiple injured parties and there is little insurance available, Golub said.

He explained that an explicit rule requiring formal settlement demands would ensure that all parties act in good faith.

There should be a bright line rule because there are going to be disputes," Golub said. “It's easy for the insured or the insured's attorney to make a settlement demand formally, and there's no question."

For more information on the decision, see this blog's discussion No Settlement Offer, No Bad Faith Liability for Insurer.

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Comments (1) Read through and enter the discussion with the form at the end
Annie Craven - October 29, 2013 7:50 PM

Thanks for the information. We all want to feel safe and protected, it's good to know that there are clear cut rules that help the insured.

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