Monday, February 27, 2012

When Your Insurance Company Doesn't Have Your Back

You paid your Pittsburgh liability insurance premiums. One of your employees screwed up. Someone was injured badly. It looks like you could be held responsible for a lot of money at trial. But your insurance company is refusing to settle. If a verdict hits for more then your insurance coverage, you are on the hook for the rest. What happens then?  First, read my old post Pittsburgh Insurance Company Bad Faith Lawsuits.

Pennsylvania common law has long recognized that insurance companies providing liability insurance policies have a fiduciary (relationship where one party has an obligation to act for another's benefit) duty to act in good faith in their settlement or defense of third-party claims against their insureds. Pennsylvania also holds that a liability insurance carrier may be liable for verdicts that exceed the policy limits if it is found that the insurance company breached its duty to the insured.

In the “third-party” bad faith lawsuits, a liability insurer is not deemed to have acted in good faith just by showing that it acted with sincerity. On the other hand, an insurance company is not automatically liable in bad faith for any excess verdict. Also, an insurance company does not have to settle a case simply because there is a possibility that a verdict might exceed its policy limits. But, and this is on of the primary purposes of Pennsylvania’s Bad Faith Statute, an insurer’s contractual right to settle or defend is not a right to risk the insured’s financial well-being unless there is a real and substantial chance of a finding of non-liability. A liability insurer will be liable for an excess verdict if it unreasonably refuses an offer of settlement. To that end, an insurer’s decision to litigate rather than settle must be based upon a reasonable assessment of the circumstances and a real and substantial chance of a verdict in favor of the insured.

The critical standard- what so many lawsuits hinge upon- is whether the insurance company acted reasonably. I will talk more about what constitutes Bad Faith in Pennsylvania in my next post. Share this post :
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1 comment:

  1. It is a very informative and useful post thanks it is good material to read this post increases my knowledgepublic liability insurance quote

    ReplyDelete