Bad Faith Blog

West Bend Mut. Ins. v. Norton, 940 N.E.2d 1176 (Ill. App. 3 Dist. 2010) An Illinois Appellate Court recently upheld summary judgment in favor of an insurer on the insured’s vexatious refusal to settle claim. The insured driver, Wanda Norton, was involved in a vehicle collision with Karyn Patterson. Norton was insured by West Bend and Patterson was insured by American Family. Norton hired counsel and filed suit against Patterson. Norton’s counsel sent a demand letter to American Family to settle for approximately $18,000. In response, American Family offered to settle Norton’s claim for $7,800. Norton rejected the settlement offer and filed suit.

Summary: Carrier’s diligent attempts to settle after it received a time sensitive policy limit demand demonstrated that it was not acting in bad faith. Plaintiff’s counsel refused to discuss the settlement contained in an overly technical and conditional demand letter while the carrier promptly acted (but failed) to achieve a settlement protecting its insured and did not act solely based on its own best interest.

Summary: The Seventh Circuit held an insurer, who controlled the defense of a lawsuit, had a duty of good faith to notify its insured of the “non-trivial probability” of a judgment in excess of the policy limit. Imagine this scenario. During his deposition plaintiff testifies extensively regarding a back injury which required a lumbar fusion as well as the substantial pain and suffering he has experienced for several years, and his inability to return to work as a construction worker.