What happens when an insurance company refuses to listen to its own experts and counsel? An aggressive lawsuit and an expensive bad faith award.
In this case, a vehicle driven by an employee of Bamford, Inc. caused a collision that injured another driver. Due to the seriousness of the injuries, Bamford, which was insured by Regent Insurance Company under a $6 million policy, found itself facing a potential exposure of $7.5 – $10 million.
During settlement discussions, Regent authorized up to $2.25 million of settlement authority, relying on the opinions of adjusters, independent counsel, and mediators that the true case value was reduced due to potential defenses and conservative Nebraska juries.
However, the court unexpectedly struck the potential defenses and found Bamford liable as a matter of law before trial. Regent, against new advice of its own counsel and primary adjuster, refused to provide additional settlement authority. The jury awarded a verdict of $10.6 million, and the parties settled for $8 million.
In a subsequent bad faith action, Bamford was awarded the excess portion of the judgment from Regent. Regent appealed, arguing that it had reasonably relied on advice regarding the case’s value and that the failure to settle was an honest mistake.
The U.S. Court of Appeals for the Eighth Circuit upheld the bad faith award, finding that “[a] reasonable jury could view Regent’s stark inaction – in the face of this seismic and unforeseen development in the case, and contrary to advice from its counsel and primary adjuster – as a complete and total refusal to consider the fiduciary duty it owed Bamford.”