- Court: 9th Circuit Court of Appeals Archives
- Area(s) of Law: Insurance Law
- Date Filed: 06-11-2012
- Case #: 10-56422
- Judge(s)/Court Below: District Judge Chen for the Court; Circuit Judges Pregerson and Graber
- Full Text Opinion
Yan Fang Du brought suit against Allstate Insurance Company and its subsidiary, Deerbrook Insurance Company, (collectively “Deerbrook”) following an accident caused by Deerbrook’s insured. Du filed a personal injury suit against the insured and received a judgment. Deerbrook paid the available amount under the policy, which was considerably less than Du’s awarded. The insured assigned his bad faith claim against Deerbrook to Du in exchange for a covenant not to execute the judgment. Du argued that Deerbrook breached the implied covenant of good faith and fair dealing owed to its insured when Deerbrook did not attempt to settle after the insured’s liability in excess of the policy limit became reasonably clear. Du appealed the district court’s rejection of her request to instruct the jury that it could consider Deerbrook’s failure to effectuate a settlement in determining whether Deerbrook breached the implied covenant of good faith and fair dealing. The district court concluded that an insurer has no duty to initiate settlement discussions in the absence of a settlement demand from the third-party claimant, and that the instruction was not based on any factual foundation. The Ninth Circuit concluded that under the implied covenant of good faith and fair dealing, the duty to settle includes the duty to effectuate settlement even in the absence of a demand. Therefore, the instruction was consistent with California law; however, the district court correctly ruled that no factual foundation existed for such instruction. AFFIRMED.