In Rhodes v. USAA Cas. Ins. Co., plaintiffs brought suit alleging the insurer had acted in bad faith by refusing to meet their settlement demand of $175,000 on their underinsured claim sooner than it did. To prove such a claim, the first prong of the bad faith statute (the insurer lacked a reasonable basis for denying benefits) was analyzed as to whether the insurer lacked a reasonable basis for not paying plaintiffs’ settlement demand sooner.
The court examined the timeline of events to determine whether or not the insurer acted reasonably. The first statement of demand was made on May 10, 2002, for $175,000. Over the next year and a half, the insurer made several settlement offers ranging from $5,000 up to $100,000, all of which plaintiffs rejected. On December 4, 2003, plaintiffs again demanded $175,000, and on December 22, 2003, the insurer agreed to settle for the same. Approximately three weeks later, the parties signed the release agreement and the insurer tendered the settlement proceeds.
The court held plaintiffs failed to meet their burden to show clear and convincing evidence, noting case law provides that even where liability is clear, where the value of the claim is not clear the insurer acts reasonably in investigating the claim. The court relied in part on evidence provided by the defendant as to the amounts generated by its claim evaluation software, Colossus, in making its ruling. The software indicated the claim was worth only marginally more than the $65,000 plaintiffs had already received from other insurance companies on the claim, which the court found made the insurer’s initial offer of $5,000 reasonable. Furthermore, the insurer received multiple expert reports indicating some of plaintiff’s injuries were not caused by the accident which gave rise to the claim; once the insurer received a report confirming a causal relationship between plaintiff’s injury and the accident, a settlement was reached in less than six months. As such, the court found the passage of time under the circumstances of the case reasonable, and that plaintiffs failed to prove the actions of the insurer’s personnel and its attorney were unreasonable.
Date of Decision: July 18, 2013
Rhodes v. USAA Cas. Ins. Co., Case No. 2004 GN 2279 (C.C.P. Blair July 18, 2013) (Brown, Jr., J.).