The plaintiff, as assignee of the insured’s rights, sued the tortfeasor’s insurer alleging that it acted in bad faith by failing to continue to pursue settlement. Specifically, the plaintiff argued that the insurer “had an ongoing duty to conduct settlement negotiations designed to reach the most favorable settlement terms available, regardless of policy limits.” He also argued that the insurer “breached this duty by failing to investigate the insured’s reasons for rejecting the settlement offers and to ‘keep fighting for settlement.’”
A Washington District Court and the United States Court of Appeals for the Ninth Circuit, who heard the case on appeal from a grant of the insurer’s motion for summary judgment, held that the insurer did not act in bad faith by failing to pursue settlement above the policy limits. The Court of Appeals reasoned that an insurer’s duty to attempt to effect settlement in good faith applies only to settlement within policy limits. The Court also ruled that an additional reason for dismissing the bad faith claim is that a claim for bad faith must be supported by evidence of deception, dishonesty or intentional disregard for the insured’s interest under Washington law. The plaintiff did not produce any evidence that the insurer’s conduct resulted in harm to the insured. There was also no indication that an additional offer would have resulted in a more favorable outcome for the plaintiff.
