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WPI 320.05 Insurer's Failure to Act in Good Faith—Failure to Investigate and Explore Settle...

6A WAPRAC WPI 320.05Washington Practice Series TMWashington Pattern Jury Instructions--Civil

6A Wash. Prac., Wash. Pattern Jury Instr. Civ. WPI 320.05 (7th ed.)
Washington Practice Series TM
Washington Pattern Jury Instructions--Civil
April 2022 Update
Washington State Supreme Court Committee on Jury Instructions
Part XV. Insurance Bad Faith
Chapter 320. Insurance Bad Faith Actions
WPI 320.05 Insurer's Failure to Act in Good Faith—Failure to Investigate and Explore Settlement
The duty of good faith requires an insurer to:
[(1) Perform a reasonable investigation and evaluation of a claim against its insured;]
[(2) Affirmatively make a good faith effort to settle the claim, if its investigation discloses a reasonable likelihood that its insured may be liable. This includes an obligation to conduct good faith settlement negotiations sufficient to ascertain the most favorable terms available and make an informed evaluation of the settlement demand;]
[(3) Evaluate settlement offers as though it bore the entire risk, including the risk of any judgment in excess of the policy limits;]
[(4) Timely communicate its investigations and evaluations, and any settlement offers, to its insured;] [and]
[(5) If the settlement demand exceeds the insurer's policy limits, communicate the offer to its insured, ascertain whether the insured is willing to make the necessary contribution to the settlement amount, and exercise good faith in deciding whether to pay its own limits.]
An insurer who fails to fulfill [this duty] [any of these duties] fails to act in good faith.
Use this instruction when an insured claims the insurer failed to use good faith efforts to explore settlement or settle within policy limits in a case in which the insured was exposed to an excess verdict.
This instruction is based on the principles set forth in Truck Insurance Exchange v. Century Indem. Co., 76 Wn.App. 527, 887 P.2d 455 (1995), which summarized Washington law regarding bad faith failure to settle. See also Smith v. Safeco Ins. Co., 112 Wn.App. 645, 650–51, 50 P.3d 277 (2002) (slightly restating the Truck Insurance Exchange principles and adding factors to use with regard to breaches of duty), reversed on other grounds, 150 Wn.2d 478, 78 P.3d 1274 (2003). The WPI Committee has restated these principles in order to more concisely and clearly state the applicable law for jurors. Also, the instruction has been rephrased in terms of “reasonableness,” rather than “diligence,” for consistency with other instructions in tort cases. See WPI Chapter 10 (Negligence); see also WAC 284-30-330(4) (referring to “reasonable” investigations).
The duty to investigate and explore settlement arises out of the duties to defend and pay indemnity. St. Paul Fire & Marine Ins. Co., v. Onvia, Inc., 165 Wn.2d 122, 129, 196 P.3d 664 (2008). These are continuing duties. See Moratti v. Farmers Ins. Co., 162 Wn.App. 495, 254 P.3d 939 (2011) (the appellate court also approved an instruction based on WPI 320.05). In Truck Insurance Exchange, Division I of the Court of Appeals held that a primary insurer could be held liable for a bad faith failure to settle a case on appeal. While an excess carrier has no direct cause of action for bad faith against the primary carrier, it is equitably subrogated to the rights of the insured.
Several other cases have addressed the duty to investigate and explore settlement. Hamilton v. State Farm Ins. Co., 83 Wn.2d 787, 523 P.2d 193 (1974) (bad faith failure to settle within $10,000 limits when verdict was $45,000; the “no limit” jury instruction was approved, and the court held that a flat refusal to negotiate under circumstances involving substantial exposure to liability and limited insurance can constitute bad faith); Burnham v. Commercial Cas. Ins. Co., 10 Wn.2d 624, 117 P.2d 644 (1941) (not bad faith to fail to settle within $5,000 policy limits when the verdict was for $21,400; the court stated that insurer was not liable “in the absence of negligence or bad faith”); Tyler v. Grange Ins. Ass'n, 3 Wn.App. 167, 473 P.2d 193 (1970) (bad faith failure to settle auto claim within $10,000 policy limit when the verdict was $29,087.40; the court held that the “no limit” standard should be adopted, and recognized the hybrid—negligence and bad faith—nature of an insurance bad faith cause of action).
The remedy for a bad faith failure to investigate and explore settlement is coverage by estoppel, a presumption of harm, and insurer liability for any excess verdict plus interest. Besel v. Viking Ins. Co., 146 Wn.2d 730, 736–37, 49 P.3d 887 (2002); Safeco Ins. Co. v. Butler, 118 Wn.2d 383, 393, 823 P.2d 499 (1992); Greer v. Nw. Nat'l Ins. Co., 109 Wn.2d 191, 203 n.6, 743 P.2d 1244 (1987) (citing 40 A.L.R.2d 168 (1955)).
[Current as of September 2018.]
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