Reid v. Mercury Insurance

Opinion

GRIMES, J.

SUMMARY

This case involves an insurer’s duty to its insured to settle a third party claim within policy limits, when liability is clear and there is a substantial likelihood of a recovery in excess of policy limits. The question is whether the insurer, in the absence of any demand or settlement offer from the third party claimant, must initiate settlement negotiations or offer its policy limits, and if so how quickly it must do so, to avoid a claim of bad faith failure to settle.

In this case, the insured’s liability was clear almost immediately after the collision. The…