An insured facing an excess judgment may assign its bad faith claim against the carrier to the plaintiff, typically alongside a covenant not to execute against personal assets. The plaintiff then pursues the insurer directly.
Assignability varies, with some states treating bad faith as a personal tort that cannot be assigned.
Alternative Names:
Bad Faith Assignment, Assigned Bad Faith Claim
Why it Matters?
This mechanism is how most third-party bad faith cases actually reach court, since an insured protected by a covenant has little incentive to litigate against its own carrier. It also changes the litigation dynamic entirely, because the plaintiff now controls a claim built on the carrier's handling of the case the plaintiff brought. Carriers scrutinize these arrangements for collusion, particularly where the stipulated judgment was set without adversarial testing.
Frequently Confused with
Related terms
Frequently asked questions
Why would an insured assign its bad faith claim?
Can bad faith claims always be assigned?
