Wisconsin Supreme Court: Settling Within Policy Limits Does Not Preclude a Bad Faith Claim Against Insurer
When an insurer assumes the duty to defend, there was a time it could take comfort that settling the case within the policy limits would extinguish a possible bad faith claim by the insured. But, with the growing popularity of high deductible plans, insurers can take comfort no longer. On June 22, 2010, the Wisconsin Supreme Court held unanimously in Roehl Transport, Inc. v. Liberty Mutual Insurance Company Case No. 2008AP1303, that an insurer may be liable for bad faith when its appointed counsel mishandled a case, resulting in a settlement in excess of the insured’s deductible. An insurance company’s potential liability for bad faith thus includes exposing the insured to liability for sums within the deductible amount.