The Tenth Circuit Rejects Excess Insurers' Implied Duty To Investigate And Initiate Settlement Negotiations

Interpreting Oklahoma law, the US Court of Appeals for the Tenth Circuit recently held that the duty of good faith and fair dealing does not require that an excess insurer, unlike a primary insurer, affirmatively investigate the claims against the insured and initiate settlement negotiations if the insured's liability is clear and a judgment in excess of its policy limits is likely. SRM, Inc. v. Great Am. Ins. Co., No. 14-6160, 2015 WL 5011719 (10th Cir. Aug. 25, 2015), slip. op. available at https://www.ca10.uscourts.gov/opinions/14/14-6160.pdf.

The appeal stemmed from an automobile collision that left one dead, three injured, and caused extensive property damage. Slip. op. at 2. From the beginning, the truck company's defense team, paid for by its primary insurer, concluded that there was no chance for a defense verdict. Id. at 3. The truck company's separately-retained attorney determined that the company's liability would exceed the...