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Badillo v. Mid Century Insurance Co.6/21/2005
o the handling of a third-party claim made against the insured, i.e., the situation involved here, that case is expressly overruled, but only to such extent. In our view, under Christian and later cases, the minimum level of culpability necessary for liability against an insurer to attach is more than simple negligence, but less than the reckless conduct necessary to sanction a punitive damage award against said insurer. In PART VII, infra, we discuss the minimum level of culpability necessary to warrant a punitive damage recovery against an insurer for breach of the duty of good faith and fair dealing.
Insurers argue here they cannot be held liable for breach of the duty of good faith and fair dealing because they tendered the policy limits and never received an unconditional settlement offer from Smith's attorneys. Put another way, insurers assert insured had to show the third party (i.e., Smith or her representatives) made an unconditional offer to settle within policy limits and insurers refused the offer; i.e., that liability for a failure to settle within policy limits always requires that the insurer received an unconditional settlement offer from the third-party claimant and that the unconditional offer was refused. Insurers allege the absence of either an unconditional settlement offer or an insurer's refusal to pay policy limits defeats an insured's claim for breach of the duty of good faith and fair dealing. We have been unable to unearth any Oklahoma decision that has held the mere tender of policy limits to a third-party claimant and/or the lack of an unconditional settlement offer from the third party, will always be sufficient to defeat an insured's claim for breach of the duty of good faith and fair dealing and, in effect, relieve an insurer of compliance with its duty to safeguard the interests of its insured, irrespective of other salient circumstances or considerations.
Although during settlement negotiations or discussions with Smith's attorneys, insurers, of course, had no duty to actually offer or pay, with their money, more than the limits of the policy, evidence submitted is sufficient to support a reasonable finding insurers did not approach the matter or make decisions concerning it, as if they alone were responsible for the entire amount of the claim being made by Smith. Evidence exists to show insurers did little, if anything, between the time of the statement request and the Berry/Wallis telephone call to work out some alternative, e.g., an affidavit, in lieu of a face-to-face statement encounter with Smith's lawyers. Instead of trying to work something out, Wallis sent the statement-refusal letter telling Burton to send back the $10,000.00 policy limits check if she no longer wished to settle, a settlement she denied having ever entered into. Rather than only involving offering the policy limits or responding to unconditional settlement offers, the duty of good faith and fair dealing in this third party situation required insurers to reasonably respond to reasonable requests from Smith's lawyers in an effort to settle the case for the protection of their insured, the person whose financial life or health was hanging in the balance. Whether they did so, in our view, was for the jury to consider, a consideration that could include asking the question, would someone whose own financial health or life was at stake have acted in the manner that insurers did?
The statement request also implicated the extent to which insurers were required to consult, communicate with and inform their insured regarding that request and its potential impact on settlement negotiations/discussions insurers were involved in, as it was insured's assets and his potential bankruptc
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