ASSIGNMENT #2
ADR
Heather Libonati
Summary:
Travis Trucker, a truck driver for ABC, Inc. gets into an automobile accident
with Mary Motorist in Milwaukee, Wisconsin. Mary sustains severe injuries. and
Travis admits liability. Travis ‘s company ABC has auto insurance with an
insurance company called Stay Safe. The policy has a liability coverage limit of
$100,000,000 and ABC has a deductible of $250,000.
It’s obvious that Mary has a strong claim, Mary's medical bills alone run close to
$300,000 plus Mary’s pain and suffering. missed work.
The case goes to trail, and Mary wins in a settlement that’s slightly higher what
she had expected. Stay Safe pays $100,000 above the deductible, and forces ABC
to pay its entire deductible, the remaining $250,000.
ABC sues Stay Safe claiming that under Wisconsin law, the insurance company
had a duty to negotiate in good faith, therefore, ABC based its claims on the fact
that since the case was obviously worth more than $100,000, Stay Safe breached
its duty to negotiate in good faith on behalf it's the client ABC.
ABC requested that the courts force Stay Safe to pay the entire $250,000 as well as
pay for all of ABC’S attorney fee
Issue:
The issue here is whether or not the courts will find that ABC’s claims that Stay
Safe as (the insurer) had owed ABC as (the insured) the duty to negotiate in good
faith. that Stay Safe had breached that duty, by refusing Mary’s offer to settle for
$300.00 and had acted in bad faith. Or will Stay Safe be able to show that they did
not owe ABC the duty to act in good faith and that they should not be liable to pay
the entire $250.00 and attorney fees
Rule:
Established in” Roehl Transp., Inc. v. Liberty Mut. Ins. Co., 2010 WI 49, 325
Wis. 2d 56, 784 N.W.2d 542.”) Where the plaintiff (driver) was rear ended by the
Defendant Truck driver (Insured).
The plaintiff, (driver) filed suit against the (insured) and the (insurer) for damages.
The jury found the defendant (insured) liable to the plaintiff (driver) and entered a
damage award against it, totaling a large sum that took up the defendant's entire
deductible.
On appeals, the (insured) brought a bad faith action against the (insurer), basing
their claims on the (insurer’s) failure to settle the Plaintiff (driver’s) personal injury
claim. Although, the award for damages did not exceed the (insurer’s) policy
limits, it was a large enough sum that forced the (insured) to use up their entire
deductible, however, just because a policy limit has been extinguished, constitutes
the claims of acting in bad faith. Under Wiscon Law the three types of bad faith
claims are recognized
“(1) An insured may bring a bad faith action against an insurance company
for failing to settle the claim with a third-party claimant when the ultimate
judgment exposes the insured to a judgment in excess of the policy limits. This
type of claim is known as a third-party bad faith claim.
(2) An insured may bring a bad faith action when the insurer unreasonably and in
bad faith withholds payment of the claim of its insured. This type of claim is
known as a first-party bad faith claim.
(3) A claimant may have a bad faith action against an insurance company based on
the insurance company's failure to reimburse the claimant for a worker's
compensation claim.”
The courts found that due to the (insurer's) control over settlement of the driver's
claim it had shown its bad faith conduct towards the (insured). The courts had
based their decision
“The court of appeals recognized the bad faith claims as cognizable under
Wisconsin law. The court of appeals stated that the duty of good faith serves to
balance the interests of the insured against its insurer, which may be tempted to
avoid the costs of defense via a quick settlement and thereby sacrificing the
insured's deductible.
Therefore, the insurer had breached its duty to the insured under
“, Wisconsin bad faith law; observing that "the implied duty to act in good faith
is different from the explicit contractual duty" and "the tort exists for breach of a
'duty devolve[ed] upon the insurer by reasonable implication from the express
terms of the contract.”
“The courts held that an insurer. has a positive fiducially duty to take the
initiative and attempt to negotiate a settlement within the policy coverage When an
insurance company breaches that duty, a cause of action for bad faith is cognizable
in Wisconsin.”
The court's decision” that when an insurer acts in bad faith by denying benefits, it
is liable to an insured in tort for any damages which are the proximate result of that
conduct, and
attorney fees should be included in compensatory damages when bad faith causes
the insured to incur legal expenses because he was forced to retain an attorney to
obtain the benefits of his insurance policy.
Established in Lakeside Foods, Inc. v. Liberty Mut. Fire Ins. Co., 2010 WI App
120, 329 Wis. 2d 270, 789 N.W.2d 754)
On appeals the (insured) sought the review of the court's judgement in favor of the
(insurer) bringing forth the action by alleging breach of duty to defend and bad
faith on an insurance contract.
(Insured) purchased a commercial general liability insurance policy from (insurer),
The insurance policy covered, among other things, third-party claims of personal
injury resulting from the (insured) products or work.
The insured company was a food packaging company based in Manitowoc,
Wisconsin, who went in to an agreement with a firm to seal and process selfheating containers. The firm is the owner of self-heating technology and is utilized
by another company that is the manufacturer of the self-heating containers.
The insured co. had begun to fill the orders as its part to the agreement, at this time
the (insured) also began filling orders for one of the firm's customers.
About one year later the firm had informed the (insured) that they had filed a
lawsuit and sought relief in excess of $ 2 million dollars alleging that the
containers caused personal injury and property damage to customers.
At that point the(insured) notified the (insurer) had informed the (insurer) of the
lawsuit and requested that the (insurer) notify the (insured) of its position as to
coverage as soon as possible.
The (insurer) replied to the next day, advising that whey would be doing a
coverage investigation. Approximately two and one-half months after the initial
tender, (insurer) informed (insured) it had accepted its duty to defend because the
cross-complaint alleged damages or injury to third parties caused by products.
However, the (insured) served its rights to withdraw from the defense, and to seek
reimbursement and allocation of defense costs for uncovered claims, and requested
that the insurer’s counsel be substituted with the (insured’s) replacement for
counsel that would adhere to the terms and conditions. The Insured stating,
“As to the right to withdraw from the defense if the pleadings were confined
to claims for which there was no potential for coverage. Liberty advised if
Lakeside continued with its choice of lead counsel, Michael Best, it would be at
Lakeside's own cost.”
The courts had found that according to Wisconsin law that the although the insurer
contends the only is issue in the case to be (insurer’s) liability to the question of
paying attorney fees, that that obligation stems from the breach of the duty to
defend and acting in bad faith.
The contract between the(insured) and (insurer) states,” "all operations of
the named insured." The policy provides: "We will pay those sums that the insured
becomes legally obligated to pay as damages because of 'bodily injury' or 'property
damage' to which this insurance applies. We will have the right and duty to defend
the insured against any 'suit' seeking those damages." The policy applies to "bodily
injury" and "property damage" only if it is "caused by an 'occurrence' that takes
place in the 'coverage territory'[.]" The "coverage terrorry" is defined by the policy
as "[t]he United States of America (including its territories and possess.”
Once the insured had objected to the right to choose their own counsel due to the
insured's belief of proper representation on their behalf , when the insurer did not
address the issue properly and delayed action the duty to n bad faith when they
state that they are willing to take their chances and defense the breach occurred
and the insurer would be liable to attoy fees..
Application:
When applied to our case as established in Roehl the insurer had the duty to
negotiate on behalf of the insured, like ABC who ‘s detectable is considered to be
an inordinately large amount, although the awarded judgement does not exceed the
policy , under those circumstances as in Roehl, Stay Safe breaches the duty of
acting in good faith when Stay Safe refuses to negotiate and rejects offer.
When there was an objection on behalf of the insured as to the insurer’s appointed
counsel, when the insurer is entitled to the power to defend the insured and does
not address the insures claims in a timely matter and had not come to an
agreement that is in the best interest of the insured. Shows as to a breach of the
duty to defend, and acting in bad faith,as to the terms of the
Should ABC object to Safe Stays appointed council based on the fact that it was
not in ABC best interest to reject the offer made to settle, and that by ignoring the
insured’s pleas to accept the offer to settle, due to the insurer’s entitled right to the
defend the i the insurer, by refusing and taking chances on going to trial . breaches
the duty to defend and is acting in bad faith.
Conclusion
Due to Stay Safe acting recklessly in the decision to reject the offer from Mary to
settle out of court breaches the duty that is owed the insured to negotiate and act in
good faith as well as breaches the duty to defend. Therefore, shows that Stay Safe
has acted in bad faith and will be liable to pay ABC’s attorney fees .
“