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Pinto v. Allstate Ins. Co.

Fact questions existed as to whether insurer's failure to offer reasonable settlement in negligence action constituted bad faith, where progress of negligence trial and warnings of defense counsel indicated that jury verdict likely would exceed policy limits; insurer could not escape bad faith liability solely because its insured was insolvent and lacked ability to pay any judgment against him.

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The full case caption appears at the end of this opinion.

We confront on this appeal whether an insurance company acted in good faith when it refused to settle a negligence claim against its insured. Because of thecompany’s refusal, judgment was entered against the insured for the amount by which the plaintiff’s award exceeded the policy limits. Although an insurance companyhas a contractual obligation to defend its insured, it also has a contractually defined limit of exposure to plaintiff’s suit. An insurer has an economic incentive not tosettle, hoping a jury will bring in a verdict for less than the policy limits. But when such hope goes awry, as it did here, the insured is the loser, being personallyresponsible for the excess. These conflicting interests between the insurer and the insured cause them to rub against each other like unmoored rowboats on a placidpond.

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