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California Court of Appeals Clarifies Carrier's Duty to Settle

Winter 2013 Blog

Published in the ABTL Report, Vol. 22, No. 3, Winter 2013.

Insurers and insureds have long disagreed whether an insurer’s duty to settle is limited to the duty to accept a reasonable settlement offer made by a plaintiff, or whether the insurer has a duty to affirmatively seek a settlement within limits.  This issue was recently addressed in Reid v Mercury Insurance Co., 220 Cal.App.4th 262 (2013).  In Reid, the insurer recognized shortly after the accident that the exposure exceeded the $100,000 policy limits, but decided it needed a witness interview and the claimant’s medical records before making a policy limits offer.  It requested this information, but didn’t tell the claimant it was considering a policy limits offer.  While the claimant later testified he would have accepted $100,000 to settle at that time, his counsel did not make a policy limits demand.  A few months later, after getting the medical information, the insurer offered policy limits,  which the claimant promptly rejected. The matter went to trial and judgment was entered for $5.9 million, forcing the insured into bankruptcy.  

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Firm Highlights

Publication

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News

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INSIGHT: California Ruling in Wage-Hour Coverage Suit Offers Employers a Defense Hook

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News

Companies are paying big bucks to insure boards against liability as class-action suits soar

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Event

2020 Insurance Coverage Litigation Committee CLE Seminar

Join Erica Villanueva for a discussion on "Coverage Arguments that Work in Court but May Backfire at Mediation" at the 2020 Insurance Coverage Litigation Committee CLE Seminar. Details: In mediation, context is everything. Who are you...

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Event

2020 Insurance Coverage Litigation Committee CLE Seminar

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Publication

Time to Check Your Cyber Insurance

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Publication

Wine 'Smoke Taint' Blurs Insurance Coverage Distinctions

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Publication

Are Losses Resulting from Phishing Incidents Covered by Crime Policies Insuring Against Computer Fraud?

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