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What is an insurance company’s duty to settle?

On Behalf of | Jul 14, 2023 | Insurance Law |

The most likely reason you purchase insurance, such as automobile insurance, is to protect yourself if you are in an accident and get sued. You pay your premiums to your insurance company and count on them to defend you in litigation.

Once litigation is underway, negotiations usually take place. If there is no question that you are liable for the incident, your focus may be settling the matter for as reasonable a price as you can.

However, what if your insurance company disagrees and wants to keep negotiating, or even wants to proceed to trial? You then run the risk of being held liable for even more damages than if you would settle.

When your insurance company has a duty to settle

Nevada courts recognize that this could be a problem and impose a duty to settle on insurance companies. The duty to settle is only triggered if the proposed settlement amount is within the limits of your policy.

In addition to being within the limits of your policy, your insurance company generally has a duty to settle your claim when the settlement offer is reasonable and there is a substantial likelihood that any trial verdict would exceed your policy limits.

Your insurance company should communicate with you through all stages of the claim negotiation and litigation process. This means they should tell you about any settlement offers they receive.

What happens if they don’t settle?

If your insurance company refuses to accept a settlement offer against your wishes, they could find themselves facing many problems. Failing to settle against a policyholder’s wishes is typically considered bad faith, a breach of their fiduciary duty and potentially even negligence.

The insurance claim process is stressful and complex enough without worrying that your insurance company is not going to abide by your wishes. You have legal rights that can be asserted if you find yourself in this situation.


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