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14 W. St. U. L. Rev. 229 (1986-1987)
Independent Insurance Adjusters Liable for Bad Faith: Fair or Farce

handle is hein.journals/wsulr14 and id is 235 raw text is: Independent Insurance Adjusters Liable For Bad Faith: Fair Or Farce? INTRODUCTION The general principles of bad faith insurance have been developing in California since the 1950s and 1960s. For example, in 1960, one court held that in every insurance contract there is an implied obligation to exercise good faith when a settlement is under consideration.' In 1958, the California Supreme Court held that when an insurer has acted in bad faith in settling a claim against its insured, it is liable to its insured for the entire amount recovered against the insured, including any amount in excess of the policy limits.2 More recently, relying on California Insur- ance Code section 790.03(h)(13),a the California Supreme Court held that an insurer can also be liable to third parties for bad faith practices if it fails to accept a reasonable settlement offer.4 Of course, an insurer has a right to protect its own interest in determining whether an offer of set- tlement is reasonable, but must not sacrifice the interest of the insured and must give the insured's interest at least as much consideration as its own.5 Good faith requires that the insurer conduct a diligent investiga- tion to ascertain the facts upon which the claim is predicated, communi- cate the information gathered to the insured, and keep the insured informed of settlement offers so that he may protect his interests.6 Most of the early cases dealt with situations in which an insurance company was the sole defendant. However, the central issue to be ad- dressed in this Note is whether bad faith claims can be extended to reach insurance company employees, agents, and in particular, independent adjusters. 1. Davy v. Public Nat'l Ins. Co., 181 Cal. App. 2d 387, 5 Cal. Rptr. 488 (1960). 2. Comunale v. Traders and Gen. Ins. Co., 50 Cal. 2d 654, 328 P.2d 198 (1958) (bad faith is shown when an insurer fails to accept a settlement offer which is reasonable under all the circumstances). 3. CAL. INS. CODE § 790.03(h)(13) (West Supp. 1986). 4. Royal Globe Ins. Co. v. Superior Court, 23 Cal. 3d 880, 592 P.2d 329, 153 Cal. Rptr. 842 (1979). 5. Ivy v. Pacific Auto. Ins. Co., 156 Cal. App. 2d 652, 659-60, 320 P.2d 140, 145-46 (1958) (insurer must act in good faith when confronted with possibility that liability may exceed policy limits). 6. Id. at 660, 320 P.2d at 146.

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