Court Opinion

ID: 9669588
Source: CourtListenerOpinion
Date Created: 2023-08-24 03:00:34.039677+00
Date Added: 2024-06-11T18:15:58.113720
License: Public Domain

MANSUR, Judge
(dissenting).
I respectfully dissent.
The majority insists that the cases establish a strict two-prong test requiring the insured’s clear liability for determining bad faith liability. The cases cited by the majority, however, stress that each case must be decided on its own facts. The prevailing concern should be whether the insurer gave “equal consideration” to the interests of the insured (or any subrogee) in rejecting a settlement offer within the policy limits. Because I believe that the particular facts of this ease, which reveal that St. Paul did not give equal consideration to the interests of Intertech and Northfield, warrant bad faith liability here, I would affirm the district court judgment in favor of Northfield.
Although some prior cases enunciate a test requiring clear liability, I do not believe that those courts intended to foreclose the possibility of liability in cases such as the one here, where there was a potential for millions of dollars in damages and an offer to settle for only $50,000. The implications of a strict “clear liability” requirement were not apparent in those other eases because they did not involve a refusal to settle for “nuisance value.” In fact, any language purporting to require the insured’s clear liability could almost be considered dicta, because in no case has such a standard been necessary to the outcome — i.e., in no Minnesota case, has an insurer acted in bad faith in considering a settlement, yet been relieved of liability to the insured or an excess insurer because the insured was not clearly liable in the underlying suit. Rather, every case turned on a consideration of all circumstances surrounding the insurer’s refusal to settle.
For example, in Peterson v. American Family Mut. Ins. Co., 280 Minn. 482, 160 N.W.2d 541 (1968), the supreme court held that no bad faith had been shown.' The court stressed that the insurer had informed the insured of an offer to settle within the policy limits, but the insured insisted on going to trial. Id. at 486, 160 N.W.2d at 544.
Similarly, in Larson v. Anchor Casualty Co., 249 Minn. 339, 82 N.W.2d 376 (1957), the insured was fully appraised of the potential for liability and of all settlement offers. The supreme court held that the insurer did not act in bad faith, but acted reasonably in taking the ease to trial. Id. at 356, 82 N.W.2d at 387.
Again, in Lawson & Nelson Sash & Door Co. v. Associated Indem. Corp., 204 Minn. 50, 282 N.W. 481 (1938), the supreme court held *64that the insurer was not liable for bad faith where the insured was fully informed of all facts pertinent to the case. Id. at 56, 282 N.W. at 483-84.
This court’s opinion in Iowa Nat’l Mut. Ins. Co. v. Auto-Owners Ins. Co., 371 N.W.2d 627 (Minn.App.1985), review denied (Minn. Oct. 18, 1985), is also distinguishable from the present case. In denying bad faith liability, we emphasized that the claim against the insured had been properly investigated, that the insurer’s trial strategy had not been deficient, that the insurer had exercised good faith with respect to settlement negotiations, and that the insured had been kept fully informed. Id. at 628-29.
In the preceding cases, the insurer was absolved of bad faith liability because the totality of the circumstances indicated that the insurer did not act in bad faith. It is also important to note that in each case, the court specifically noted that the insured had been kept fully informed of all significant developments, including settlement offers.
The present case is distinguishable from those cases in which the insurer was relievéd of liability. St. Paul’s failure to inform Northfield and Intertech about the $50,000 offer is especially reprehensible. The district court also specifically found bad faith in St. Paul’s reaction to the offer and its refusal to grant attorney McNeil any settlement authority. The court found:
The testimony of Kathleen “Casey” Long is particularly damning. Despite the fact that defense counsel McNeil felt that the Rupp demand of $50,000 was genuine, Ms. Long, on behalf of St. Paul, refused to grant to him any settlement authority. Her reasons for not doing so had nothing to do with how the California case had been tried to that point, nor to any other relevant matter. Rather, her decision was predicated upon her clear, stated dislike and/or distrust of Rupp’s attorney. Her action on behalf of St. Paul constituted a gross disregard of its insured’s interest. It was a reckless, if not deliberate, failure to place the interests of Intertech with its own on an equal footing. In short, it was an act of bad faith.
In addition to this reaction to the offer and the failure to inform of the $50,000 offer, St. Paul’s bad faith is demonstrated by its failure to inform Intertech or Northfield of the settlement with the hospital; its failure to reassess Intertech’s potential liability after that settlement; and its refusal even to open negotiations with attorney Harney after the $50,000 offer in light of the potential damages and St. Paul’s $150,000 reserve for the" case. Even the majority concedes that St. Paul acted in bad faith. These facts show that St. Paul’s actions went beyond a mere mistake in judgment. Proper consideration of all relevant facts leads to the conclusion that St. Paul should be liable for the excess portion of the judgment because it failed to give equal consideration to the interests of Intertech and any subrogees.
It is precisely facts such as those before us that demonstrate that public policy is not served by a strict adherence to a “clear liability” requirement in cases involving “nuisance value” settlement offers. It is self-evident that even a 99 percent likelihood of victory gives rise to a one percent chance of defeat; therefore, one could quite rationally argue that all cases have at least some settlement value, no matter how small. An insurer should be held liable if it truly acted in bad faith in rejecting a “nuisance value” settlement, even if it honestly believed it would win the suit against the insured. Under a strict “clearly liable” standard, an insurer could escape all liability, despite the most egregious conduct and a settlement offer of as low as $500, simply because the insured’s liability was a 50-50 proposition. I will concede that insurers should not be required to settle all frivolous suits. But courts must at least have sufficient latitude in assessing an insurer’s bad faith liability to base its decision on the totality of the circumstances.
The need for a broader test is more evident today than decades ago, when most of the reported cases on this issue were decided. A strict “clearly liable” standard does not comport with modern litigation, where settlement is more encouraged than in the past, and alternative forms of dispute resolution are emphasized and even mandated.
*65I do not believe, then, that prior precedent requires us to reverse here. The majority cites Iowa Nat’l in leaving this issue to the supreme court. In that case, the appellant sought to expand the scope of a primary insurer’s bad faith liability to encompass a claim that the insurer failed to negotiate better and obtain a settlement within the policy limits. Iowa Nat’l, 371 N.W.2d at 629. In effect, the appellant there argued for a new basis for liability — the insurer there could not be held liable for bad faith in considering an offer to settle within the policy limits because it had never received such an offer — and the court of appeals correctly decided that it was the supreme court’s role to create such liability. Northfield does not seek a similar extension here, for its claim is that St. Paul failed to exercise good faith in considering an offer within the policy limits. St. Paul’s bad faith is clear here; therefore I would affirm.1

. I agree with the majority that the district court's decision was not impermissibly based on hearsay. I would also reject St. Paul's argument that Northfield has failed to show causation here. The evidence admitted by the district court reasonably supports a conclusion that the plaintiff was willing to negotiate a settlement for a relatively small amount, and it is more probable than not that Northfield would not have sustained any loss had St. Paul seriously undertaken such negotiations. The district court’s conclusion that Northfield suffered $1.7 million in damages "as a result of St. Paul’s failure to exercise good faith” is not erroneous.