Where an insurance company fails to accept a reasonable settlement demand within the limits of the applicable insurance policy, it can be responsible for the entirety of a judgment entered against its insured. In order for that to happen, the demand must be reasonable, and the insurer must have a reasonable opportunity to evaluate and assess the demand. See CACI 2334. In addition, there must be a finding that the insurer’s conduct was unreasonable. See Pinto v. Farmers Insurance Exchange (2021).

An essential element is that the demand “not deprive the insurer of an adequate opportunity to investigate and evaluate its insured’s exposure.” See Graciano v. Mercury General. Until now there have been no express judicial or legislative standards of when and how those demands should be made. At the early stages of a case, more time would be necessary. A few weeks or even a few days might be seen as enough time if the parties were on the precipice of or in trial.

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