Insurance Company Duty to Initiate Settlement

Insurance Bad Faith

In the case of Welford v. Liberty Insurance Corporation, No.: 3:15-cv-333/RV-CJK, 2016 WL 3360431 (N.D. Fla. June 2, 2016), the court considered the issue of whether an insurance company has an obligation to initiate settlement discussions or negotiations. In this case, a driver hit and killed a pedestrian. This accident was witnessed by a permissive user of the insured. After the accident, the insured contacted their insurance company and reported the incident even though there was no contact with the insured’s vehicle. The driver who actually struck the pedestrian blamed the driver of the insured’s car for erratic driving, which they claim, caused the accident. The story goes that the other driver said the permissive user of the insured’s car was traveling slowing on a dark country road when the second vehicle attempted a pass. During that pass attempt, the other driver said that the permissive user sped up to block the pass. This happened several times until the other driver hit three children, killing two and seriously injuring another. (Consequently, it is illegal to speed up when being passed under section 316.083, Florida Statutes.)

Liberty Insurance Corporation had policy limits of $10,000 per person and $20,000 per accident. After a lawsuit was filed, Liberty Insurance immediately paid its $20,000 policy limits collectively to all claimants upon learning of the lawsuit. The policy limits were rejected by the claimants and the case went to trial. The jury entered a verdict finding the permissive user of the insured’s vehicle 38% responsible for the accident with over a million dollars in damages. The net judgment against the insured was well beyond the $20,000 policy limits and an insurance bad faith case ensued.

The case landed in federal court in the Northern District of Florida and Liberty Insurance Company filed a motion for summary judgment that the insurance company had not breached any duty as a matter of law. The federal judge in the case found that the insurance company was not in bad faith because of the offer of policy limits early in the case.