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Asermely v. Allstate Insurance Company5/5/1999
is Court has held that an insurance company has a fiduciary obligation to act in the "best interests of its insured in order to protect the insured from excess liability * * * [and to] refrain from acts that demonstrate greater concern for the insurer's monetary interest than the financial risk attendant to the insured's situation." Medical Malpractice Joint Underwriting Association of Rhode Island v. Rhode Island Insurers' Insolvency Fund, 703 A.2d 1097, 1102 (R.I. 1997). This fiduciary obligation extends not only to the insurance company's own insured, but also, as in this case, to a party to whom the insureds have assigned their rights.
It is not sufficient that the insurance company act in good faith. An insurance company's fiduciary obligations include a duty to consider seriously a plaintiff's reasonable offer to settle within the policy limits. Accordingly, if it has been afforded reasonable notice and if a plaintiff has made a reasonable written offer to a defendant's insurer to settle within the policy limits, the insurer is obligated to seriously consider such an offer. If the insurer declines to settle the case within the policy limits, it does so at its peril in the event that a trial results in a judgment that exceeds the policy limits, including interest. If such a judgment is sustained on appeal or is unappealed, the insurer is liable for the amount that exceeds the policy limits, unless it can show that the insured was unwilling to accept the offer of settlement. The insurer's duty is a fiduciary obligation to act in the best interests of the insured. Even if the insurer believes in good faith that it has a legitimate defense against the third party, it must assume the risk of miscalculation if the ultimate judgment should exceed the policy limits.
In summary, we sustain the plaintiff's appeal on count 1, vacate the summary judgment on that count, and remand for a trial on the issue of whether the plaintiff made a bona fide written offer to settle within the policy limits. We deny and dismiss the plaintiff's appeal on counts 3 and 4 of her complaint. The case is remanded to the Superior Court for proceedings in accordance with this opinion.
Justice Goldberg did not participate.
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