holding that “there may be an obligation to defend” under an insurance policy, even though there is “no obligation to indemnify”
How later courts described this case
- holding that “there may be an obligation to defend” under an insurance policy, even though there is “no obligation to indemnify”
- insurer must defend a claim which “may potentially come with the coverage of the policy”
- An insurer undertaking the defense of an insured must act “with due care in representing the interests of the insured” and if it “is derelict in this duty, as where it negligently investigates the claim or unreasonably refuses an offer of settlement, it may be liable regardless of the limits of the policy for the entire amount of the judgment secured against the insured.”
- describing obligations undertaken by insurer, as to indemnify against liability and to defend insured against suits arising under the policy
Written by the judges who cited it.
The opinion
*61 Concurring Opinion by
Mr. Justice Eagen :
The cogent opinion of Mr. Justice Cohen does much to clarify the real obligations of an insurance company under the provisions of an automobile liability insurance policy as here involved. However, I think one area should be further clarified.
The majority opinion provides for recovery in excess of the policy limits where the insurer “negligently investigates the claim or unreasonably refuses an offer of settlement . . In Cowden v. Aetna Casualty and Surety Company, 389 Pa. 459 , 134 A. 2d 223 (1957), the following rules were laid down in this area of the duty to settle:
(1) The interests of insured and the insurer are balanced by requiring the insurer to treat the claim as if he alone were liable for the entire amount.
(2) When there is little possibility of.a verdict or settlement within the policy limits, the decision to expose the insured to' personal pecuniary loss must be based on a bona fide belief by the insurer, predicated on all of the circumstances of the case, that it has a good possibility of winning the suit.
(3) The insurer cannot hazard the well-being of the insured.
(4) Good faith requires that the. chance of a finding of nonliability be real and substantial and that the decision to litigate be made honestly.
The foregoing rules, I believe, establish a standard by which it can be determined whether the insurer exercised due care in a particular case. I would base the liability of the insurer for a breach of the duty to settle on the theory of negligence using the above rules as a standard and in that way eliminate the dichotomy between bad faith and negligence with regard to the duty to settle and the duty of handling the case with ordinary care.