Court: making an offer doesn’t mean insurer acted in good faith

If an insurance company makes an offer to settle your claim, is that enough to show good faith? Or must they make an actual effort to settle the matter?

In a recent case from outside of Arizona, the court ruled that it takes more than a single action by an insurance company before it can claim to have attempted to handle a claim in good faith. A California appeals court has ruled that Mercury Casualty Co. acted in bad faith by never following through on its sole settlement offer.

According to The Recorder, the underlying case involved two pedestrians who were injured in a 2010 accident. They sued the driver, who was insured with Mercury. The insurer offered to settle the claims for $15,000 each. The plaintiffs agreed to accept the offer, but only if the settlement would not detract from any court-ordered restitution they would receive from the driver.

Instead of replying to the request, Mercury stalled for weeks, causing negotiations to break down. The plaintiffs later sued Mercury through the driver and were awarded $3 million in damages.

Mercury appealed, claiming its initial offer was proof that it had acted in good faith. But the appellate court found that the fact it did not act in bad faith in the beginning did not mean it had entirely lived up to its obligations throughout the interactions with the plaintiffs.

Though this ruling does not apply in Arizona, it shows how difficult it can be to define insurance bad faith, and why you need an experienced attorney to help you make your case.