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Twin City Fire Insurance Company v. Burke2/18/2003
ion of the core issue of the primary carrier's good faith, absent a policy provision to the contrary. Continental Cas. Co. v. Royal Ins. Co., 268 Cal.Rptr. 193, 197 (1990). Until a primary insurer offers its policy limit, the excess insurer does not have a duty to evaluate a settlement offer, to participate in the defense, or to act at all. Id.; see also Keck, Mabin & Catevs. National Union Fire Ins. Co., 20 S.W.3d 692 (Tex. 2000). The excess insurer's conduct may be relevant to the core issue only to the extent that there are allegations it interfered with the settlement of the claim against the insured or misinformed the insured. See Continental Cas., 268 Cal.Rptr. at 196-97. General Star has made no such allegations.
Obviously, there are significant differences in the legal posture of Lee and the present case. In Lee, plaintiffs contended State Farm waived the attorney-client privilege when it argued that, after consulting its lawyers, it reached in good faith an objective and subjective conclusion that plaintiffs' claims were legally unfounded. But the present case essentially presents the proverbial "flip side" of Lee. Twin City's good faith conduct is not the relevant legal issue. The question. rather, is whether General Star acted in good faith. The subjective views and evaluations of Twin City's claims agents do not shed light on the question of General Star's good faith. Confidential communications between Twin City and its counsel therefore do not tell us whether General Star refused, in good faith, to settle the wrongful death claims within its policy limit. The issue in the present case is whether General Star made a good faith evaluation and acted properly in rejecting the settlement offer.
We therefore find no support, either factually or legally, for the idea that Twin City affirmatively put counsel's views in issue when it filed a bad faith action against General Star. Unlike the situation in Lee, General Star does not claim its refusal to settle was based on advice from Twin City's counsel. Thus, "recognition of the privilege would deny [General Star] access to proof without which it would be impossible for the factfinder to fairly determine the very issue raised by [Twin City]." Lee, 199 Ariz. at 62 28, 13 P.2dati 179 28. As Twin City correctly points out, General Star does not require the information Twin City obtained from its counsel regarding the wrongful death action to defend against Twin City's allegations that it acted in bad faith in refusing to settle the death action within the policy limit.
Nor has General Star otherwise established that Twin City affirmatively injected any advice it received from its counsel into the bad faith action. In its motion to compel, General Star argued that it was entitled to any information relating to counsel's evaluation of the claim because it could lead to the discovery of admissible evidence to support General Star's evaluation of the underlying litigation. It contended that if evaluations by Twin City's counsel were similar to its own, it would tend to establish that General Star acted reasonably under the circumstances. If, on the other hand, pre-verdict evaluations and communications by Twin City's counsel demonstrated that Twin City believed General Star was underestimating the likelihood of an adverse jury verdict, it could show that Twin City had unclean hands. The trial judge apparently agreed, finding that the information requested could negate a finding of bad faith.
We recognize, of course, both the relevance and pragmatic importance of the information sought by General Star. If, for example, Twin City's own counsel evaluated the case at a figure below the limit of General Star's p
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