14th Dec 2015

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In general

An insurance company at various times during litigation may make offers to the insured or on behalf of the insured on various subjects.  After made, the insurer may decide to withdraw whatever it was that was offered.  An insurer may withdraw a defense unilaterally without necessity of a declaratory relief judgment.  See § D85 DUTY TO DEFEND [§ D85:33 Withdrawal of defense: necessity of declaratory relief judgment].  Where a unilateral withdrawal of a defense will not cause an insurer to suffer detriment, the withdrawal of such defense is permitted.  See § D85 DUTY TO DEFEND [§ D85:34.1 When unilateral withdrawal will not be permitted estoppel]; § E37 ESTOPPEL [§ E37:16 Illustration: unilateral withdrawal from defense permitted by insurer after insurer defended for a substantial period of time]

Offer of settlement

An offer to settle by an insurance company is neither a concession of coverage nor a waiver of any right to contest coverage should the offer not be accepted.  [21st Century Ins. v. Superior Court (2015) 240 Cal. App. 4th 322, fn 4]  In 21st Century Ins. v. Superior Court, 21st Century Insurance issued three automobile policies to different relatives.  The first policy for $100,000 policy limits was issued to an additional insured who caused a serious accident.  The policy limits of $100,000 were offered in settlement, which offer was not accepted.  21st Century also issued two separate auto policies containing $25,000 policy limits.  These smaller policies contained the definition of an insured vehicle which would have excluded the driver under these policies due to the fact that the vehicle involved in the accident was not covered under the smaller policies.  Nonetheless 21st Century offered a total of $150,000 to settle the automobile accident case.  The plaintiff rejected this offer.  The insured then entered into a stipulated judgment, and thereafter the third party pursued 21st Century for bad faith in not offering a defense to the insured under the smaller policies.  In a subsequent bad faith action by the third party against 21st Century, 21st Century contended it owed no defense under these policies and therefore could not have been acting in bad faith.  The Court of Appeal agreed.  See § D85.01 DUTY TO DEFEND: SINGLE INSURER-OWING A DUTY TO DEFEND UNDER MORE THAN ONE POLICY [§ D85.01:2].

In addition to 21st Century not conceding coverage or waiving any right to contest coverage, discussed above, 21st Century would not have been a volunteer.  See § V11.01 VOLUNTEER [§ V11.01:2 “Protect its own interest”; definition]

References in bold are to Mr. Cornblum’s legal text CALIFORNIA INSURANCE LAW DICTIONARY AND DESK REFERENCE (2015), published by ThomsonReuters (1-800-344-5008 to order 2015 3-Volume text).

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