Old habits die hard. Most insurance adjusters are trained to aggressively defend and investigate claims so the insurance company they work for will pay as little as possible. The energy insurers put toward limiting personal injury compensation, is enormous. As discussed below, that effort can be flipped to the benefit of the plaintiff in a personal injury litigation dispute.
Rather than fight insurers head on, why not use their own energy against them…. judo style? Brilliant, you think, but how? To help you understand I first need to explain the relationship between the bad actors’ insurance company (“insurance company”) and the bad actor.
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The bad actor’s insurance company owes the bad actor two duties when the bad actor is sued:
- The duty to defend ( hire lawyers to defend the suit); and,
- The duty to indemnify ( pay the claim up to the policy limits the bad actor purchased) ;
The moment the insurance company hires lawyers to defend the bad actor, the bad actor generally loses the power to negotiate a settlement. In other words, the decision to settle and for what amount transfers to the bad actor’s insurance company the moment the insurance co. hires lawyers to defend the bad actor. The insurance company has settlement control (not the bad actor)in this situation.
Oregon courts have held that the bad actor’s insurance limits will no longer apply if the bad actor insurance company is negligent exercising its discretion whether or not to settle and for how much. See, Santilli v. State Farm 278, Or 53 (1977). If the bad actor’s insurance company conduct is motivated by its own self- interest at the expense of the interest of the bad actor, the insurance company may be liable for punitive damages in any subsequent action brought by the bad actor against his insurance company.
2 Classic Sting Scenarios
#1 Claim Exceeding Limits
Claim value approaches policy limits. At that point, a conflict develops: Bad actor will want to settle within limits so bad actor does not have to pay any amount from his pocket. His insurance company will be tempted to fight. After all the bad actor will pay for a verdict exceeding limits, not his insurance company.
#2 Underlying Punitive Damage Claim
Complaint alleges intentional conduct justifying punitive damages. Insurance policies generally do not cover punitive damages. Just as the first situation, the bad actor will want to settle within limits while the insurance company will be tempted to fight. After all the bad actor will pay for a verdict outside coverage, not his insurance company.
Letters to the Next Jury
When presented with sting scenario, the attorney for the innocent injured person, should write the letters to the bad actor’s insurance company… pleading to protect the rights of its own insured, the bad actor. Although such letters are sent to the attorney or adjuster for the bad actor’s insurance company, such letters are designed as evidence of the insurance company’s self- interest at the expense of its own insured—- in subsequent litigation the bad actor may bring against his own insurer.
Opportunity Knocks
If the insurance company makes a decision to the financial detriment of the bad actor, the bad actor will be very angry at his insurance company. He may even be open to negotiation with the injured party to their mutual benefit– -and extreme disadvantage to the stung insurance company. At this point, I say no more. I want to leave insurers wondering what comes next.
