Crisci v. Security Insurance Co

Brief Fact Summary. Mrs. Crisci’s (Plaintiff’s) sued her insurance company for failing to settle a case for the policy limit.

Synopsis of Rule of Law. In determining whether an insurer has given consideration to the interests of the insured, the test is whether a prudent insurer without policy limits would have accepted the settlement offer.

Facts. Plaintiff tenants, June Dimare (Dimare) and her husband, brought suit for physical injuries and severe psychosis when DiMare was hurt on the premises after she fell through a broken step and was left hanging fifteen feet above the ground. Plaintiff had an insurance policy with Security (Defendant) for $10,000.00. Security refused to settle the case for the policy limit even though the underlying claim was for $400,000.00. At trial, the jury awarded Dimare $100,000.00 and her husband, $1,000.00. Security paid its $10,000.00 policy limit. Plaintiff could not pay the remaining $91,000.00 in cash. Plaintiff brought suit against Security and was awarded $91,000.00. Security appealed.

Issue. Must an insurer consider both its own interests and the interests of the insured when deciding whether or not to settle a claim?

Held. Yes. Judgment affirmed.
* In every contract, including polices of insurance, there is an implied covenant of good faith and fair dealing that neither party will do anything that will injure the right of the other to receive the benefits of the agreement. The implied obligation of good faith and faith dealing requires the insurer to settle in an appropriate case.
* When there is a great risk of recovery beyond the policy limits so that the most reasonably manner of disposing of the claim is a settlement, which can be made within those limits, a consideration in good faith of the insured’s interest requires the insurer to settle the claim.
* In determining whether an insurer has given consideration to the interests of the insured, the test is whether a prudent insurer without policy limits would have accepted the settlement offer. A showing that the insurer has been guilty of actual dishonesty, fraud, or concealment is relevant to the determination whether it has given consideration to the insured’s interest.
* An insurer should not be permitted to further its own interests by rejecting opportunities to settle within the policy limits unless it is also willing to absorb loses which may result from its failure to settle. The insurer, which may reap the benefits of its determination not to settle, should also suffer the detriments of its decision.
* In this case, evidence is clearly sufficient to support the determination that Security breached its duty to consider the interests of Plaintiff in proposed settlements.

Discussion. Each contract carries with it an obligation of good faith and fair dealing. In this case, the evidence was clear that Security did not consider the interests of Plaintiff in its decision to go to trial. If Security went to trial, the most it would have to pay would be $10,000.00, the amount of the settlement offer. Security was not exposed to potentially more liability in going to trial. In fact, at trial, there was a chance Security would not have to pay anything at all. Security is liable to Plaintiff because it did not consider Plaintiff’s interest and the jury returned a verdict for more than the policy limit. Security breached the implied covenant of good faith and fair deal.