Previously, we told you about SRM, Inc. v. Great American Ins. Co., No. 14–6160 where the Tenth Circuit said there was no duty of an excess carrier to initiate settlement discussions (See post here) Now the Fifth Circuit has ruled there is no duty on a primary insurer to initiate settlement discussions, even where liability is clear and the damages exceed policy limits. The case is Hemphill v. State Farm. Hemphill ran a stop sign, injuring the Taylors. First, he claimed his girlfriend was driving, as Hemphill’s license was suspended, and he also claimed the accident was the Taylor’s fault. When Hemphill came clean, State Farm accepted liability for the accident and began its damages investigation. State Farm made various settlement offers to the Taylors, culminating in an offer to settle the claims for $50,000 each, which was the policy limits. The Taylors did not accept and made no counteroffers. Two years later, Mr. Taylor got a judgment against Hemphill for $2.8 Million. State Farm gave Taylor its $50,000 limit, plus some interest.
Hemphill sued State Farm, claiming that the excess judgment was State Farm’s fault, for failing to settle. Mississippi law says that an insurer must consider settlement offers made within policy limits, but in this case, there was no such settlement offer. The Fifth Circuit found no Mississippi cases which held that an insurer has a duty to make a settlement offer when the claimant has not made a settlement offer. Further, the undisputed evidence showed that State Farm told the Taylors what its limits were before the lawsuit was filed. Hemphill didn’t provide binding authority that State Farm had a duty to timely disclose the policy limits in writing via a certificate of coverage. Summary judgment was affirmed.
Hemphill also complained of State Farm’s failure to advise Hemphill of his potential excess exposure and of his right to retain independent counsel. But the evidence shows that Hemphill already knew of the potential excess exposure and had consulted an independent attorney for financial protection. Thus, Hemphill independently knew the information that he complains State Farm did not advise him about. Thus, summary judgment was proper as there was no dispute that the excess judgment was not caused by State Farm’s failure to advise Hemphill of his potential excess exposure and right to retain independent counsel.