1. The conflict between the insurer's interest in paying as little as possible and the insured's interest in avoiding excess judgments gives rise to the duty to settle in third-party lawsuits.
2. The California Supreme Court has held that insurance settlement negotiations are properly a balance between the insured's ability to pay and the insurer's willingness to settle within policy limits.
3. The California Supreme Court has emphasized that in determining whether to accept a settlement offer, an insurer is properly guided by the limits imposed by the policy and a desire to reduce the amount of future settlements.
4. To mitigate the risks in rejecting a settlement offer, an insurer may reserve its right to dispute coverage, but then accept the offer to protect its insured against exposure to an excess judgment.
5. In the recent case of <i>Archdale v. American International Specialty Lines Insurance Company</i>, the court held that the source of a liability insurer's duty to settle arises only from an express covenant of good faith and fair dealing.
6. In the classic coverage-refusal case, the carrier is deemed to be acting at its own risk for any excess judgment and additional damages if the insurer's coverage determination is later found incorrect.
7. After rejecting a claimant's "reasonable" offer, a subsequent acceptance of that amount will discharge the insurer's liability for bad faith.
8. Courts will hold a carrier liable for incorrectly determining coverage only if there is some showing of underlying culpable conduct, such as unreasonableness or bad faith.
9. In California, a claim for a breach of an implied covenant of good faith and fair dealing gives rise to both contract and tort damages.
10. Where an insurance carrier's declination of coverage is found to have been made in bad faith, the insured is entitled to recover tort damages, including punitives.
11. Even if an insurer denies coverage, an insured must still honor its contractual obligation to notify the insurer of developments in any pending liability lawsuit.
12. When a carrier declines coverage and thereafter spurns a settlement offer, the insured is then free to strike the best deal it can with the claimant.
13. A deal reached between the insured and a claimant after a spurned settlement offer cannot be binding on a carrier that was not at least tangentially involved in negotiating the terms of the deal.
14. A carrier that has declined to cover its insured in a liability lawsuit may be wise to consider contributing to a settlement to mitigate its risk of a subsequent bad faith lawsuit.
15. In California, an insurer may accept a policy-limits demand from the claimant and then, after the underlying lawsuit is resolved, seek to recoup the settlement amount from its insured.
16. In <i>Blue Ridge Ins. Co. v. Jacobsen</i>, the California Supreme Court held that an insurer may settle with the claimant, then seek recoupment of that payment from its insured following a determination that there was no coverage.
17. In a case involving both covered and noncovered claims, a carrier’s duty to settle extends to the noncovered portions of the injured party’s claim.
18. At least one California court has reasoned that an insurer's assumption of the economic risk that its insured may be incapable of reimbursing it for the settlement payment serves an important societal interest.
19. In a mixed case involving both covered and noncovered claims, the reasonableness of the carrier’s settlement offer is measured by the insured’s potential exposure for all claims involved.
20. An insured whose carrier defends it is always free to settle on its own with the claimant without incurring liability, as long as it gives notice to its carrier.