Sample Bad Faith Letter in Car or Truck Accident Case

Steven C. Johnson, Esquire
Johnson & Daniels
4601 Main Street, Suite 225
Bowie, Maryland 20715

Re: Hancock v. Mintz, et al.
Case No. CAL06-02794; Circuit Court for Prince George’s County, Maryland
Dear Mr. Johnson:

Please accept this correspondence as Plaintiff’s formal written demand for your client’s available policy limits in this case. It is my understanding that your client has $300,000 in coverage available for this loss. Taking into consideration the clear negligence established by your insured’s left-hand turn in front of our client and given the extent of our client’s injuries, it seems difficult to argue that a verdict against your client would not likely be greatly in excess your client’s available policy limits.

We expect you to offer the full $300,000 policy limit to protect your client’s best interests and insulate him from an excess judgment. Our client will accept the $300,000 as full and final settlement of all claims.

You should expect that we intend to present evidence and arguments at trial to the Jury that this case is clearly worth a significant amount of money and will be asking the Jury to award an amount more than your client’s available policy limits. As such, please put your client on notice that because the claim is more than his available policy limits, any attachable personal assets he may have would be at risk, and his wages would be in danger of being garnished when an excess verdict is entered against him.

I trust that you will promptly convey this demand to your client and the representatives of his insurer. I would assume that you join us in this position because it is your duty to protect your client and his best interests. If you have not already done so, please notify GEICO that we believe their failure to offer the available policy limits to protect their insured is operating in bad faith. GEICO’s failure to provide limits would be demonstrative of greater concern for GEICO’s monetary interests than the financial hardship and devastation to their insured.

Tips on Each Insurance Company

Your client should be advised to retain separate counsel to represent his interests in this matter. I have enclosed three additional copies of this correspondence (one for GEICO, one for your client and one for the attorney your client has retained to represent him for his excess exposure).

Please let me know GEICO’s response to this settlement demand within the next 30 days. I look forward to hearing back from you.

Very truly yours,

Laura G. Zois

Bad Faith Factors to Be ConsideredIn State Farm v. White, 248 Md. 324, 236 A.2d 269 (1967), the Maryland Court of Appeals set forth factors to consider when determining whether it was bad faith not to tender the policy limits or make a higher settlement offer. Many other states use similar factors.  These include:

  1. The severity of the plaintiff’s injuries giving rise to the likelihood of a verdict greatly more than the policy limits;
  2.  Lack of proper and accurate investigation of the circumstances surrounding the accident;
  3.  Lack of skillful evaluation of the plaintiff’s disability;
  4.  Failure of the insurer to inform the insured of a compromise offer within or near the policy limits;
  5. Pressure by the insurer on the insured to make a contribution towards a compromise settlement within the policy limits, as an inducement to settlement by the insurer; and
  6.  Actions which demonstrate a more significant concern for the insurer’s monetary interests than the financial risk attendant to the insured’s predicament.

More Maryland Third-Party Bad Faith Research

  • Maryland law recognizes a tort cause of action where an insurer refuses in bad faith to settle a third-party’s claim within the policy limits against the insured.” Mesmer v. Md. Auto. Ins. Fund, 353 Md. 241, 257(1999).
  • An insurer has a duty to enter into good faith negotiations ‘where reasonable and feasible’ to settle a claim within policy limits. Allstate Ins. Co. v. Campbell, 334 Md. 381(1994).  The court in Campbell also noted that the insurer is obligated by a “continuing duty to negotiate in good faith to settle the claim within policy limits.”
  • Maryland courts recognize what anyone handling personal injury cases notices after about five seconds:  policy provisions that give an insurer exclusive control over the defense and settlement of claims run a significant risk of a conflict of interest. Accordingly, a fiduciary duty must be imposed on the insurance company. Fireman’s Fund Ins. Co. v. Continental Ins. Co., 308 Md. 315 (1987).

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