Opinion ID: 166418
Heading Depth: 2
Heading Rank: 1

Heading: Whether Duty to Settle Arises Through Reporting an Accident

Text: 19 Roberts contends a duty to settle arises before a claim is made through reporting a covered loss. Kansas imposes, under certain circumstances, a duty upon an insurer to initiate settlement negotiations even without an offer to settle being made by the claimant. Coleman v. Holecek, 542 F.2d 532, 537 (10th Cir.1976). Rather than this duty hinging on the existence of a claimant's settlement offer, a Kansas insurer's duty to settle arises if the carrier would initiate settlement negotiations on its own behalf were its potential liability equal to that of its insured. Id. 20 [T]he duty to consider the insured's interest arises because of a claim for damages in excess of the policy limits, not because a settlement offer had been made. City of Hobbs v. Hartford Fire Ins. Co., 162 F.3d 576, 584 (10th Cir.1998). The existence of a claim for damages in excess of the policy limits creates a conflict of interest between the insured and the carrier that requires the carrier to give equal consideration to the interests of the insured. Coleman, 542 F.2d at 537. Further, under Kansas law, [t]he insurer is obligated to initiate settlement negotiations regardless of the actions of the injured party. Smith v. Blackwell, 14 Kan.App.2d 158, 791 P.2d 1343, 1346 (1989). This obligation results from [t]he fiduciary relationship of the insurer and the insured[, which] imposes a duty upon the insurer to make reasonable efforts to negotiate a settlement of a claim against the insured. Id. However, the Kansas Supreme Court rejected the argument that any time an insurance agent acquires knowledge of some injury to a policyholder it becomes the company's duty to initiate an investigation and offer a settlement . . . without any claim being made. . . . Sloan v. Employers Cas. Ins. Co., Dallas, Texas, 214 Kan. 443, 521 P.2d 249, 251 (1974). Instead, the court found that the insured has some duty to give notice to his company of his loss, and of the fact that he is making a claim under his policy, before the company is obligated to move. Id. (emphasis added). As noted by Shelter, it seems odd to think that an insurer [(as part of its duty to the insured)] should beat the bushes to advise potential claimants to sue or make claims against their insured, especially if there is a possibility of an excess claim. Aplee. Br. at 14. The district court properly determined that an insurance company does not have a duty to the insured to initiate negotiations prior to a claim being made. 21