2012 Fall - Q10

miermiermiermier
in Baer.Intro

Hi Graham,

I am looking at the answer you put in the battle cards for this one.

You mentioned "mall sue G/L insurer for the $3M" I just want to understand mall can actually sue up to $3M (shortfall between jury award and insurer's settlement), not up to $2M (excess amount beyond policy limit), right?

As per definition of absolute liability, "If settlement possible BUT rejected by insurer then insurer is liable for all costs (even in excess of policy limit". So should be able to sue up to $3M right? Since the exam question mentioned $2M, that's why I am not sure.

thank you.

Comments

  • chrisboersmachrisboersma

    They were offered $4m to settle. Insurer risked the insured's money and went to court.

    Lost @ $7m. Insurer paid $5m and customer owed/paid $2m

    customer sues for amount they owe/paid: $2m as the insurer was negligent in settling the claim. Note: the insurer already paid the extra $1m from $4m to $5m from the final ruling.

    SIDEBAR
    Note: this is actually a bad example and demonstrates that actuaries probably should be jumping into law right away. Canada didn't make an "outright" standard on going to court after receiving a near-limits offer (always pay if over limit). They only stated that in the case of Dillion v. Guardian that Guardian agreed the case would be close to limits (or over) and the presented offer was FAIR *and stubbornly refused to negotiate). Furthermore there was very minimal (no chance) the insured would not be at-fault. The judge explicitly stated they didn't have to go to the extreme of the US with regards to this issue (where these sorts of near limits offers make insurer's implicitly liable for excess awards). Regardless, this case will make most insurer's cautious with negotiations that could impact their insured's pocket book.

    There's no guarantee the sample mall case fits Dillion v. Guardian that effectively. If there was a high chance of failure of the suit AND/OR insurer believed the case would go much lower than $4m and they went to court and lost @ $7m the insured might not be able to make the argument of "bad faith" negotiations as they did in Dillion. The legal standard here is negligence (duty of care, breach, caused injury/costs). As long as the met their duty of care they would not be liable for the $2m

  • chrisboersmachrisboersma

    United States (Crisci v. Security Insurance of New Haven)

    amicus curiae argues that, whenever an insurer received an offer to settle within the policy limits and reject it, the insurer should be liable in every case for the amount of any final judgment whether or not within the policy limits.

    Dillion v. Guardian

    I find [the arguments related to Crisci v. Security Insurance] persuasive, but I do not have to decide what the standard is here, because in this case the Guardian [Insurance Company] is liable by any standard. Mr. Longum testified that just before the trial he believed the probable general damages of Bertrand to be $35,000, and the specials had been agreed upon at $7,959.95 (totaling $42,959.95).

  • grahamgraham

    Thanks chrisboersma.

    miermier: I have changed the BattleCard to say that the mall sued for 2m (not 3m). chrisboersma was right that the insurer would automatically pay the first 1m because that was within the policy limit. The issue was the difference between the award (7m) and the policy limit (5m)

    Thanks to both of you for pointing this out and clarifiying.

Sign In or Register to comment.