No Immunity for Bad Faith in UM and UIM Claims

In a case decided yesterday against 21st Century Insurance Company, by the California Court of Appeals, 2nd District, the insured had obtained an underinsured motorist arbitration award well in excess of insurer’s offer, and alleged in the complaint that the insurer acted in bad faith by making an unreasonable offer and by retaining an examining physician with the intention that he prepare a report that falsely minimized the seriousness of the insured’s injury so that the insurer could subsequently contend that its offer was based on a good-faith belief that insured was not seriously injured.  The Court held that a triable issue existed as to whether the offer was made in good faith on the basis of a genuine dispute and that the insurer’s exercise of its contractual right to arbitrate an underinsured motorist dispute did not relieve it of the obligation to deal with the insured in good faith.  The Court further held that the statute mandating that insurers offer uninsured and underinsured motorist coverage to all purchasers of motor vehicle liability coverage does not immunize insurers against tort liability for bad faith handling of UM and UIM claims.
     Brehm v. 21st Century Insurance Company – filed September 16, 2008, Second District, Div. Seven

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