Bad Faith: Insurer’s Refusal Of Policy-Limits Demand Ends With Excess Judgement

 Friday, January 22, 2021

 JD Supra

As the Fifth Circuit reminded us in a December 21 decision, primary insurers can find themselves in excess insurers’ shoes if they reject settlement demands within their policy limits.

In American Guaranty & Liability Insurance Co. v. ACE American Insurance Co., the Fifth Circuit upheld a lower court ruling requiring a primary insurer that rejected a $2 million policy-limits demand to pay the entire judgment because ‘a prudent insurer would have accepted’ the settlement demand.

Before trial, the primary insurer rejected a $2 million policy-limits demand that would have insulated the excess insurer from liability.

During jury deliberations, the primary insurer rejected another $2 million policy-limits demand after two adverse evidentiary rulings ‘aggravated [the insured’s] greatest known weaknesses in this case.’

The primary insurer did so even though its own case manager recognized the possibility of an excess verdict due to the adverse evidentiary rulings.
Litigation
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