Eighth Circuit To Insurers: Settlement Evaluation Must Constantly Adapt To Litigation Developments

A recent decision of the US Court of Appeals for the Eighth Circuit taught an insurer a costly lesson about trying to avoid extra-contractual liability: Insurers must constantly reevaluate their settlement position throughout the claims process, especially when any of the following events occur: (1) a significant court ruling; (2) a request from the insured's counsel; and (3) new advice provided by the insurer's retained counsel. In Bamford, Inc. v. Regent Ins. Co., No. 15-1968, 2016WL2772585 (8th Cir. May 13, 2016), an insurer had to pay approximately $2 million over its $6 million limit for its failure to settle a claim for severe injuries resulting from an automobile collision, after its insured's defense was stricken and the insured was found liable as a matter of law.