Court: Insurer Committed Bad Faith By Refusing To Settle On Behalf Of Only One Insured

An insurer committed bad faith when it refused a settlement offer that would have released only one of two insured defendants being sued in a fatal car-pedestrian accident, the Florida Court of Appeals ruled. The case is Contreras v. U.S. Security Insurance Co., 2006 WL 708567 (4th Dist. March 22, 2006).
The dispute arose out of a 1992 auto accident, when Arnold Blair Dale, who was speeding and had been drinking, hit and killed Flor Torres Osterman as she walked along the side of a road in Broward County. Dale and the owner of the car, Deana Dessanti, were sued. Both were covered by Dessanti’s auto policy because Dale was driving the car with her permission. The lawyer for Osterman’s estate demanded the policy’s $10,000 limits in exchange for a release of Dessanti and the insurer. The estate, understandably, was unwilling to release Dale, who had been charged with DUI manslaughter and leaving the scene of an injury accident.
The insurer refused the demand, saying that it would commit bad faith if it did not also secure a release of Dale. The case went to trial, and the plaintiff received a verdict of $1 million against Dessanti and Dale. Dessanti had declared bankruptcy, and the trustee assigned her cause of action for bad faith to the plaintiff. The Court of Appeals said the weight of authority from other jurisdictions is that “[o]nce it became clear that [plaintiff] was unwilling to settle with Dale and give him a complete release, U.S. Security had no further opportunity to give fair consideration to a reasonable settlement offer for Dale.” If the insurer would have accepted the settlement offer on behalf of Dessanti, the court said, U.S. Security would have avoided bad faith towards her. In a statement that is sure to cause a lot of debate, the court also indicated that, having exhausted its policy limits on behalf of Dessanti, the insurer’s duty to defend Dale would have ended.

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