International Insurance v. American Empire Surplus Lines Insurance

Opinion

BAXTER, J.

—Can a liability insurer assert the insured’s “comparative bad faith” as an affirmative defense in a bad faith action brought against it for *394breach of the covenant of good faith and fair dealing? In this case a liability insurer breached its duty of good faith and fair dealing owed its insured manufacturer by unreasonably failing to settle an injured third party’s action against the insured within policy limits, thereby exposing the insured to a verdict awarding the injured party compensatory and punitive damages far in excess of policy limits. On appeal the insurer did not…