The duty to settle requires an insurer controlling the defense to give the insured's interests at least equal consideration to its own when evaluating settlement. Unreasonable refusal of a within-limits demand breaches that duty.
Damages are typically measured by the excess judgment.
Alternative Names:
Failure to Settle, Duty to Settle Breach
Why it Matters?
The duty exists because the insurer controls settlement while the insured bears the excess risk, which creates a structural conflict the doctrine corrects. Some jurisdictions impose the duty even absent a formal demand where a reasonable settlement opportunity was apparent, which means an insurer cannot rely on the absence of a demand as a defense. Documented evaluation and communication with the insured are the practical protections.
Frequently Confused with
Related terms
Frequently asked questions
Is a settlement demand required to trigger the duty?
How are damages measured?
