In order to prove that an insurer breached its duty of good faith and fair dealing in failing to settle a third party’s action against an insured, the insured may present evidence of the following:
- the probability of the insured’s liability to the third party
- the extent of damages recoverable in excess of policy coverage
- the insurer’s failure to properly investigate the circumstances to determine the evidence against the insured
- the insurer’s rejection of advice of its own attorney
- the insurer’s failure to inform the insured of a settlement offer
- the amount of the financial risk to which each party is exposed in the event of a refusal to settle
- the insurer’s rejections of offers in settlement
- the insurer’s attitude to ”save something off the policy” or to refuse to pay policy limits regardless of the merits of the case
- the insurer’s offers of settlement substantially lower than the liability it reasonably could expect
- the entry of an excess judgment against the insured
Once an insured establishes that an insurer breached its duty of good faith and fair dealing in failing to settle, he must prove that the breach proximately caused his damages. This is usually a simple matter to establish that the insurer’s conduct was the cause of the excess judgment and other damages. Evidence that the insurer could have settled but did not supports a finding of causation.
In jurisdictions that regard an insured’s excess judgment claim as sounding in tort, he will have a broader range of damages than if the claim were regarded as contractual. The amount generally awarded is that of the excess judgment, which is the difference between the amount of the judgment in the third-party action and the amount of the policy limits, plus interest and costs. Other damages may be recoverable for emotional distress, attorney fees expended by the insured in defending the third-party action, and punitive damages. Need help about insurance problem after a car accident? Newport Beach car accident attorney is available to assist.
An insured’s cause of action against an insurer for breach of the duty to settle in good faith is assignable. Some courts hold that the cause of action may be assigned before judgment has been entered in the third party-action and without notice to the insurer.