Opinion ID: 1448289
Heading Depth: 1
Heading Rank: 20

Heading: Damages Caused By NPIC's Rejection of Settlement

Text: When NPIC denied coverage and rejected settlement, Americold could have allowed NPIC to defend it. Assuming a bad faith coverage denial and a reasonable settlement offer, if a judgment were entered against Americold over the policy limits at trial, that judgment would clearly be traceable to NPIC's breach of its good faith settlement obligation. After the verdict, Americold could have assigned its rights against NPIC to plaintiffs in exchange for a covenant not to execute. Plaintiffs could have sought to enforce the judgment against NPIC. Instead, Americold avoided the uncertainty of trial and negotiated a settlement that eliminated the possibility Americold would ever have to pay any money, a rational course of action. However, attributing the settlement amount above the policy limits to NPIC's breach, if Americold was never in danger of having to pay, is an open question. Liability up to policy limits would be attributable to NPIC's wrongful denial of coverage. Liability above policy limits is less clearly attributable to NPIC's conduct. If the settlement amount is reasonable and NPIC's rejection was in bad faith, the settlement could be regarded as the amount needed to restore Americold to the same position it would have been in had NPIC performed its obligations and settled the case for policy limits. At the time the policy limits settlement offer was extended, plaintiffs' claims could have been satisfied by that amount. The settlement amount negotiated later is the amount needed to satisfy the plaintiffs' claims at that time. Why should the insured be put through a trial, if a reasonable settlement can be negotiated? The insured should not be forced to endure a trial, risk an excess judgment, and then attempt to negotiate a trade of an assignment of rights against the insurer for a covenant not to execute, in order to avoid excess liability. A claimant may be more willing to negotiate with the insured before undertaking the risk and expense of a trial. A reasonable, noncollusive settlement may reflect the value of plaintiffs' claims as accurately as a jury verdict. Based on the above reasoning, the consent judgments could be enforceable against NPIC, if NPIC's denial of coverage and rejection of the policy limits settlement offer were in bad faith and the amount of the consent judgments is reasonable.