Bad Faith If Insurer Refuses To Settle, Even If Policyholder Prevails At Trial

As a general rule, if a policyholder reasonably attempts to settle a case for an amount at or within the limits of its insurance policy, the insurance company must put the policyholder’s interests above its own.

Typically, if the insurance company does not accept a reasonable settlement within limits, then it may be responsible for a judgment amount in excess of the policy limits if the insurance company’s refusal to settle was unreasonable.

The insurance company’s failure to settle may result in a bad faith claim. But what if the insurance company refuses to settle and the policyholder prevails at trial?

According to a federal district court in New Jersey, if the insurance company’s decision not to settle was unreasonable, it may still be liable for bad faith.