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Rogan v. Auto-Owners Insurance Co.8/13/1991
r $4,000.00); Farmers Ins. Exch. v. Henderson, 82 Ariz. 335, 313 P.2d 404 (1957) (insurer's failure to terminate litigation in good faith by settlement renders it liable for full amount of judgment).
We hold that when an insurer denies coverage in bad faith, it is not liable for the amount of a judgment entered against its insured that exceeds the policy limits absent a refusal of a reasonable settlement offer, unless the insured can establish other causal connections between the insurer's act and the excess judgment.
Because Auto-Owners never refused a settlement offer, and there is no claim that the Parkers' trial counsel was incompetent, Auto-Owners is not liable for the amount of the judgment entered against the Parkers in the Gila County lawsuit that exceeds the $300,000.00 policy limits.
Conclusion
We reverse the trial court's grant of judgment notwithstanding the verdict against Auto-Owners for $600,000.00. No settlement offer was ever presented to Auto-Owners, and absent rejection of a settlement offer, Auto-Owners is not liable for the amount of the judgment against its insured that exceeds the policy limits.
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