duty to settle
{{primary|date=August 2019}}
In law, the duty to settle is an insurer's implied obligation to accept a settlement in a case against one of its insured parties if it is likely that a potential judgement against the insured will exceed policy limits. If a liability insurer exposes the insured to excess risk by failing to settle within policy limits, they may be liable for any damages incurred.{{Cite journal |last=Quinn |first=Michael Sean |date=2000 |title=The Defending Liability Insurer's Duty to Settle: A Meditation Upon Some First Principles |url=https://www.jstor.org/stable/25763479 |journal=Tort & Insurance Law Journal |volume=35 |issue=4 |pages=929–993 |jstor=25763479 |issn=0885-856X}}
United States law
Liability insurance policies in the United States typically make no express contractual promise to settle.Typical language is: "We may, at our discretion, investigate any ‘occurrence' and settle any claim or 'suit' that may result." {{sm|Peter J. Kalis et al., Policyholder's Guide to the Law of Insurance Coverage}} F-15 (Aspen Publishers Online 1997).
= California =
In California, "an insurer, who wrongfully refuses to accept a reasonable settlement within the policy limits is liable for the entire judgment against the insured even if it exceeds the policy limits."[https://scholar.google.com/scholar_case?case=13974532515441078311&q=comunale&hl=en&as_sdt=4,5 Comunale v. Traders & Gen. Ins. Co.], 50 Cal. 2d 654, 659–61 (1958) (ellipses omitted). California Insurance Code §790-790.15 states that the insurer has an obligation to attempt "in good faith to effectuate prompt, fair, and equitable settlements of claims in which liability has become reasonably clear."{{sm|Cal. Ins. Code}} [http://www.leginfo.ca.gov/cgi-bin/displaycode?section=ins&group=00001-01000&file=790-790.15 § 790.03(h)(5)] {{Webarchive|url=https://web.archive.org/web/20160516200420/http://www.leginfo.ca.gov/cgi-bin/displaycode?section=ins&group=00001-01000&file=790-790.15|date=2016-05-16}}.
A rationale for this duty is that "[w]hen an offer is made to settle a claim in excess of policy limits for an amount within policy limits, a genuine and immediate conflict of interest arises between carrier and assured."[https://scholar.google.com/scholar_case?case=11597490784555170138&q=merritt+reserve&hl=en&as_sdt=4,5 Merritt v. Reserve Ins. Co.], 34 Cal. App. 3d 858, 870 (1973). "An insurer who denies coverage does so at its own risk. Such factors as a belief that the policy does not provide coverage, should not affect a decision as to whether the settlement offer in question is a reasonable one."[https://scholar.google.com/scholar_case?case=12701738578718788769&q=johansen+cal&hl=en&as_sdt=4,5 Johansen v. California State Auto. Assn. Inter-Ins. Bureau], 15 Cal. 3d 9, 15-16 (1975) (citations and ellipses omitted). "It is the duty of the insurer to keep the insured informed of settlement offers."[https://scholar.google.com/scholar_case?case=12734399634269452649&q=kinder+western&hl=en&as_sdt=4,5 Kinder v. Western Pioneer Ins. Co.], 231 Cal. App. 2d 894, 901 (1965). "[A]n insurer potentially can be liable for unreasonably coercing an insured to contribute to a settlement fund."[https://scholar.google.com/scholar_case?case=14859133972975123124&q=aguerre&hl=en&as_sdt=4,5 Aguerre, Inc. v. American Guar. & Liab. Ins. Co.], 59 Cal. App. 4th 6, 15 (1997).
An insurer may not "discriminate in its claims settlement practices based upon" certain protected classes.{{sm|Cal. Code Regs}} [http://www.insurance.ca.gov/01-consumers/130-laws-regs-hearings/05-CCR/fair-claims-regs.cfm § 2695.7].
= Texas =
The Texas Supreme Court ruled in G. A. Stowers Furniture Co. v. American Indemnity Co., that insurers can be held liable for negligently refusing a settlement within policy limits.{{Cite journal |last=Thornton |first=Russell G. |date=2002 |title=Settling a Claim Within Policy Limits |journal=Baylor University Medical Center Proceedings |language=en |volume=15 |issue=3 |pages=336–337 |doi=10.1080/08998280.2002.11927862 |issn=0899-8280 |pmc=1276634 |pmid=16333461}}
References
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Category:American legal terminology
Category:Insurance law legal terminology
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