Liability insurance policies give the insurance company exclusive control over the defense and settlement of claims by anyone against their insured (An "insured" person is one who bought an insurance policy). Sometimes, lawsuits against insurance companies seek damages that exceed the limits of the person’s policy coverage. In that situation, the insurance company runs into a conflict of interest between their duty to the insured, and their desire to limit the amount of money they pay out.
Insurance Company’s Conflict Of Interest
When a person brings a lawsuit against an insurance company for damages over the limits of an insurance policy and there is an offer to settle the case at or just below the policy limits, a conflict of interest may arise for the insurance company. The insurance company will seek to minimize their overall payout, and may reject the settlement offer and take their chances in court.
Obviously, the person with insurance would prefer to just settle the matter and not be bothered by any further court proceedings. The insured bought the policy with stated limits and expects to have that amount available to pay a settlement, especially one within the policy limits. By the insurance company refusing to settle, the insured may be liable at trial for any amount over the policy limits.
Duty To Settle Within Insurance Policy Limits
When there is an offer to settle that is within the insurance policy limits, the insurance company has a duty of good faith to accept the offer if it is reasonable. The duty of good faith also requires the insurance company to give equal consideration to both the company’s and the insured’s best interests.
Do I Need An Insurance Attorney?
If you feel that your insurance company has handled your claim in bad faith, an experienced insurance law attorney can help. Additionally, an attorney can help if you feel your insurance company has cost you money or has not acted in your best interest.