Earlier this year, a state court issued an opinion in a car accident case involving where the insurance company’s settlement offer was at issue. The case highlighted some challenges that can arise during settlement negotiations in the aftermath of an accident. The court was asked to decide whether an insurance company acted “in bad faith” when their offer to settle included a broad release of all claims against the driver at fault, but gave the victim’s attorney the option to revise the terms.
Insurance companies are required by law to act “in good faith” when trying to settle in order to protect the financial interests of the people they insure. That means they should make timely and reasonable settlement offers that try to fully compensate victims, making it likely that they will agree to settle. Drivers buy liability insurance all the time because they expect the insurance company to protect them from financial liability. In some states, like Maryland, drivers are required to have a minimum amount of liability insurance to cover potential bodily injury and property claims that may result from accidents.
In a recent 11th circuit case, the injured party claimed that the driver’s insurance company acted in bad faith by sending an overbroad settlement agreement. The proposed settlement offer under the driver’s bodily injury policy included a release from liability for all claims while a settlement offer under their property damage policy was not yet made. The victim claimed that the release of all claims was too broad, allowing it to take advantage of unwitting victims who might not know what other claims they might want to make and chose not to settle. The insurance company argued that it did not act in bad faith. They maintained that the settlement offer agreement was only proposed and invited the injured victim to make changes to the language to make it a more appealing offer.