In Wise v. Hyundai Motor Company, a passenger died in an automobile accident and her estate sued the owner of the car, the driver of the car, and various insurance companies. This lawsuit was originated in Monroe County, Pennsylvania and implicated Pennsylvania law. Of interest here was that the estate of the decedent sent a policy limit demand to the insurance company of the driver and owner of the car (USAA).

USAA’s counsel replied, “offering” the policy limit of $115,000. At no point, in either the letter to USAA’s counsel or the reply, was the word “settlement” used. Plaintiff’s counsel never responded to the policy limit offer. From that point, USAA’s counsel was minimally involved in the matter, as the case primarily focused on products liability against Hyundai.

Four years after the policy limit demand, decedent’s estate settled with the products defendants and subsequently asserted a bad faith claim against USAA for failure to defend the driver and owner of the car, as USAA did not participate in any pre-trial proceedings or offered an expert and thus, arguably, could not assert a defense at trial. Decedent’s estate asserted this is cause for a bad faith claim. USSA, in response, moved to enforce the earlier $115,000 “settlement.”

The court held that, he policy limits were demanded and offered in return, and as such there was a settlement.  Although optimally there would be evidence that plaintiff send a letter accepting the policy limit offer, the course of conduct of the parties can also establish acceptance. The course of conduct showed that USAA had minimally been involved in the litigation after the policy limit offer, did not engage in discovery, and circulated a letter to all counsel stating USAA would not be involved in the litigation as the full policy limits had already been tendered. As such, all parties acted with the belief that settlement had been reached – including the plaintiff and the court therefore agreed to enforce the settlement.

Thanks to Matt Care for his contribution to this post and please write to Mike Bono if you would like further information.