Opinion ID: 2590298
Heading Depth: 4
Heading Rank: 1

Heading: Failure to adequately inform is a proximate cause of an insured's damages

Text: If an insurer violates its duty of good faith and fair dealing by failing to adequately inform the insured of a reasonable settlement opportunity, the insurer's actions can be a proximate cause of the insured's damages arising from a foreseeable settlement or excess judgment. See Stark Liquidation v. Florists' Mut. Ins., 243 S.W.3d 385, 399 (Mo.Ct.App.2007) (holding that an insurer who denies coverage is liable for the reasonable settlement costs incurred by the insured); Noya v. A.W. Coulter Trucking, 143 Cal.App.4th 838, 49 Cal.Rptr.3d 584, 589-90 (2006) (holding that a reasonable settlement is presumptive evidence of an insurer's liability for breach of its obligations). In Neal v. Farmers Ins. Exchange, 21 Cal.3d 910, 148 Cal.Rptr. 389, 582 P.2d 980, 986 (1978), the California Supreme Court held that once an insurer violates its duty of good faith and fair dealing, it is liable to pay all compensatory damages proximately caused by its breach; however, punitive damages require proof of motive and intent to violate a duty. The insurer may challenge the reasonableness of a damages amount, but its breach of duty is a proximate cause of the insurer's reasonable damages. Noya, 49 Cal.Rptr.3d at 589-90. Here, according to Allstate's own computerized record dated April 12, 2001, Miller never saw Hopkins approaching the intersection, and nothing prevented him from seeing Hopkins. The record also notes that Hopkins' damages, as of that date, were approximately $45,000. As a result, Allstate recognized that Miller's case was a clear limits case, meaning damages already exceeded the policy limits, and authorized resolution of the matter as soon as possible. Given Allstate's recognition of Miller's excess liability, Allstate's failure to adequately inform Miller of Hopkins' settlement offer may have prevented Miller from obtaining a release from Hopkins. The trier of fact could therefore conclude that Allstate's actions were a proximate cause of the excess verdict against Miller.