Insurance bad faith liability

On Nov 15, 8:12 am, "Robert11" <rgs...@notme.com> wrote:
> Joe was involved in an auto accident (Mass.) and is being sued for pain and
> suffering, etc.
> Joe agrees that he was at fault.

I believe MA is a "comparative fault" state.  Even if Joe believes he did wrong, that still does not mean he was 100% wrong and the injured victim 100% in the right.  Reality is usually not that simple.   Of course, you say nothing about the facts of the crash (it's a hypothetical, right?) so we can't poke holes in Joe's factual _conclusion_ that he is 100% at fault, by looking at the _underlying_ facts that may provide contradictory indications.

> His auto policy limits will cover what the party is asking.

He was smart to carry high enough limits to meet expected losses.   Those who carry only the legally required minimum are in most states woefully under-insured.   But even a high-limits policy can't guarantee that a jury won't award even more than that in a particular case -- it's rare, but does happen (which is why it makes the news when it does).

> Joe wants them to pay, and be done with it, of course.

But if they do, his rates may go up, so his self-interest cuts both ways.  In any event, that decision is usually up to the insurance company to make -- only in very high-end-type liability situations (medical malpractice, frex) do insurance policies give the insured any formal say in whether to settle or not.

> However, the insurance company doesn't want to pay what is being asked, and
> is agreeing to go to trial.

You've got that backwards.  The ins. co. isn't "agreeing" to go to trial; rather, trial is the ultimate result that will inevitably occur if they _don't_ agree to settle _before_ trial.   It's settlement, not trial, that requires a voluntary agreement of the parties.   The law is there simply to provide a final, backed-by-force-of-the-state arbiter of those disputes which the parties cannot resolve themselves, out of court.

As an aside, those "tort reformers" who decry the "overloading" of our courts with civil lawsuits ought to keep this in mind.  It is the defendant, not the plaintiff, who controls whether a case or claim has to go to trial or not.  The defendant (thru his insurer) can say "yes" to an agreed, negotiated amount at any time, and the case is over.  If the defendant (thru his insurer) insistently says "no" even when all reasonable indications are that saying "yes" to some compromise figure would make the most sense, the plaintiff has literally no choice other than to take the case all the way to trial, and let the judge or jury decide both liability ("who wins") and damages ("how much").

Some insurers, I might add, say "no" even when they ought to say "yes" simply to save their _own_ pocketbooks in the long run, hoping they will win more often than they lose even if they hang an occasional loser like Joe out to dry, especially when they have already "poisoned the well" by tort-reform propaganda that makes typical jurors highly skeptical of any personal injury claim and less inclined to award reasonable sums for pain and suffering than they used to be (and it is quite common for even a successful plaintiff to be awarded only his medical expenses and lost wages, with a big fat zero for pain and suffering).

As a further, even more remote aside, isn't it peculiar how in war, only the loser can declare a war to be over, by surrendering?   The stronger side cannot simply declare "mission accomplished" and go home.   As long as the underdogs keep fighting, the war is not over.

> At the trial, Joe is found guilty,

The more accurate term is, he was found "liable" for civil negligence resulting in damages to the particular plaintiff.   One is found "guilty" of a criminal offense against the state.   There is not supposed to be any moral judgment in merely being found "liable"; it's just an unfortunate mistake, not a crime.   If you accidentally knock a knicknack off a shelf at a pottery store and break it, you are liable to pay the owner for it, but that doesn't mean you are a bad person.  OTOH if you come into the store swinging a baseball bat and wreck the inventory, to intimidate the owner into paying "protection", frex, that's a different story.

> and the other party is awarded More than
> the coverage in his policy.

As noted above, this is rare, but does sometimes happen.

> So, what happens:

As usual, "it depends."

> Could he have insisted that since his policy amount was adequate, the
> insurance company should have paid what was initially asked for ?

The insurance co. has a good faith obligation to try to do that.  If they didn't at least make an honest effort to do so, Joe might have a bad faith claim against them.   But that is a tort claim against his own insurer, not a contract claim under his policy.

The odd twist in your hypo is that judgment was awarded for even more than the plaintiff asked for in his initial complaint.  This is extremely rare and in some states the court would not even grant it, but would limit the plaintiff to the amount he originally asked for when filing suit (plus interest, costs, etc. and any after-accrued liabilities in a contract claim).   In other states, such as MD, a complaint's "ad damnum" (amount asked for in judgment) can be freely amended, even after the verdict, to conform to the evidence and the verdict.

Unless I misunderstand what you mean by "what was initially asked for".   In the course of pre-suit negotiations, a claimant will start from an initial negotiating demand, in anticipation of eventually reaching some compromise with the (usually lower) initial offers from the insurer; but that does not limit the amount the claimant can ask for in the ad damnum of his complaint when he does eventually have to file suit (if the insurer is unwilling to settle first).

In a case with large damages, a plaintiff will usually ask for "policy limits" as an initial negotiating position.  If that is only a small fraction of the total damages, the claimaint is unlikely to be willing to go lower, because in doing so he would give up the possibility of winning an excess judgment (and which might leave the plaintiff's lawyer open to malpractice liability against his own client, for selling his case short)

When a complaint (suit) is filed in an amount _over_ policy limits, the insurer (in most states) is obligated to inform the insured of that fact, and also inform him of his right to obtain independent counsel to protect his interests.  Even though the insurer retains and pays the lawyer who will actually try the case for defendant, defendant's independent counsel in an excess case can "oversee" the insurance lawyer and can also put pressure on the insurer to settle within policy limits.   But none of that stuff is likely to happen if the ad damnum of the lawsuit's complaint is within policy limits; then, the whole thing is in the hands of the insurer.

> Was there any obligation for the insurance company to have settled up for
> an amount
> that was within his coverage ?

There's a duty to try, if it reasonably appeared likely the verdict could be for more than limits.  The insurer, in every state AFAIK, has a duty to deal with its own insureds in good faith.  If settlement within policy limits was a reasonable possibility and if liability is clear-cut enough that the insurer had no reasonable basis for refusing to attempt settlement, the poor (under-insured) defendant who got left holding the bag may have what's called a "bad faith" claim against his own insurance company, after a verdict in excess of his policy limits is handed to the plaintiff.

In practice, what often happens is, after the first trial of the underlying claim, the insured judgment debtor may "assign" his now-arisen bad-faith claim against the insurer to the victorious plaintiff, in exchange for a promise by the plaintiff not to execute on the excess judgment against any of debtor's personal assets other than his insurance coverage. The plaintiff (with that assignment agreement in hand) then tries to get the court to force the insurer to award him, as assignee of the original insured defendant, the damages that were caused _to_the_insured_ by the insurer's own tortious (bad faith) behavior, i.e. the amount that the insured debtor was found liable for in excess of policy limits.  IOW, if the plaintiff does this right and gets lucky, the insurer may have to pay the full verdict even if it is in excess of policy limits.

> That it never should have gone to trial since his coverage was adequate, and
> therefore he should not have to be liable for the difference ?

That, in essence, is the basis for the insurer's bad faith liability to its insured: the insurer forced a case to go to trial where it never should have because if they were being reasonable they would have settled before trial, within policy limits.

But that doesn't mean "defendant is not liable for the difference".  The verdict is what it is, and defendant is liable to the plaintiff whether or not he gets his insurer to cover the excess verdict.  Indeed, the fact of that now-existing liability is an essential element of Joe's bad-faith claim against his insurer, since without that liability existing and hanging over his head, Joe would not have suffered any damages from the insurer's wrongful actions.

> BTW:  is this essentially the same group as the unmoderated one:  misc.legal

No.   This one is moderated.   The other one isn't.

If you don't know what kind of difference that makes, read and compare.

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