Eighth Circuit Confirms Focus on Global Settlement is Not Bad Faith

In Purscell v. Tico Insurance Co., the U.S. Court of Appeals for the Eighth Circuit affirmed summary judgment in favor of the insurer on a bad faith claim. The insured sued his motor vehicle carrier for alleged bad faith failure to settle third-party claims made against him following an automobile collision. The court held that the insurer did not breach the duty to act in good faith.

The case involved claims from multiple parties – two people who were injured and one who was killed. The policy had limits of $25,000 per person and $50,000 per accident. The two injured parties wanted to settle for the full $50,000 within weeks of the accident. The insurer, however, did not accept the offer immediately because it had not completed its investigation. The wrongful death claimant later also sought to settle for $50,000. After completing its investigation, and receiving no response from the insured about a global settlement, the insurer interpleaded the policy limits. Eventually a judgment in excess of the policy limits was entered against the insured.

On appeal, the insured argued that by failing to accept the early settlement and instead pursue a global settlement, the insured acted in bad faith. The insurer contended it had no opportunity to settle within the limits because the early settlement offer was withdrawn before it had a reasonable opportunity to settle. The court, applying Missouri law, held that focusing on a global settlement is not evidence of bad faith. Instead, the Court recognized that filing the interpleader action once it could not reach a global settlement was appropriate. The court explained, “an interpleading stakeholder cannot logically be subjected to a claim alleging bad faith refusal to pay.” Thus, the Eighth Circuit affirmed the summary judgment.