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Offer to settle for policy cap leads to insurer acting in bad faith

While the following story doesn't involve the state of Minnesota, it is still a piece of good news for people everywhere because it shows how insurance companies who deploy bad faith tactics with their clients are being held to task.

The case is from California, where two pedestrians were injured in a car accident in 2010. The insurance company in question, Mercury Casualty Co., allegedly tried to settle the claim made by the two pedestrians for the policy cap of $30,000, but the pedestrians argue that their attempts to settle the matter were not in good faith. In fact, Mercury's tactics come on the heels of an industry wide criticism in California where insurers offer to settle claims for the policy limit but then don't follow through. No matter what their effort was, though, the mere act of saying they will settle for the cap leave them "home-free" in any later litigation.

A California appellate court held Mercury to task -- and vicariously other insurance companies in the state -- saying that the offer to settle for the policy cap was just one step it had to take. The court also said Mercury owed the pedestrians $4 million.

This was an important decision. Insurance companies are always going to try to push the limits of what is morally acceptable when it comes to the legal and financial liabilities. In this case, a "good faith" effort to settle for the policy cap was followed by bad faith effort to actual fulfill their obligations, all so the insurance company could safeguard themselves in later litigation. Thankfully, behavior like this is being seen and checked against. A ruling like this is a good sign for people all over the country as it sends the signal that bad faith tactics are unacceptable.

Source: Recorder, "Court Gives Plaintiffs New Ammo in Bad-Faith Cases," Vanessa Blum, Aug. 18, 2016

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