Washington insurers must always be aware of bad faith claims when extending settlement offers. This case looks at what actions an insurer can take to avoid a bad faith claim when evaluating the property damage a car sustains in a motor vehicle accident and extending a settlement offer.
Claims Pointer: Just because an insurer does not extend a settlement offer equal to the highest appraisal value, does not mean the insurer is acting in bad faith so long as the lower settlement offers are supported by evidence and other appraisals.
Lloyd v. Allstate Insurance Co., in the Court of Appeals of the State of Washington, Division I, No. 65618-0-I, — P3d —- (February 21, 2012).
As a result of a car accident, Jerry Lloyd’s 2005 Chevrolet Malibu Classic was totaled. At the time of the accident, Lloyd was insured by Deerbrook Insurance Company (Deerbrook). His automobile insurance policy covered the “Actual Cash Value” of his vehicle, less the $500 deductible. Lloyd reported the claim to his insurer the evening of the accident. Since Deerbrook is a subsidiary of Allstate Insurance Company (Allstate), Allstate handled his claim. At Allstate’s request, Lloyd took the vehicle to an auto shop for a damage appraisal. The damage appraisal was for $7,977.87, which exceeded the car’s value. Lloyd received two additional opinions on the appraisal and was given the same appraisal. Allstate also sent a technical representative to view the car. Initially, the representative failed to consider the car’s mileage and reported the “Total Condition Adjusted Market Value” at $8,510. After the representative read the odometer which reflected a higher mileage than originally used in the estimate, the car’s value was adjusted to $5,105.
Allstate’s adjuster offered Lloyd $5,102.18 after adding sales taxes and fees, and subtracting the $500 deductible. Lloyd rejected the offer. Allstate’s adjuster made a second offer of $6,654.63. Lloyd rejected the second offer stating that he needed between $9,000 and $13,000 to replace his vehicle. After the second rejection, Lloyd invoked the appraisal clause of his policy. Allstate’s appraiser and Lloyd’s selected appraiser agreed the car was worth $6,815.16, including applicable taxes and fees and the deductible. Lloyd received the check from Allstate and cashed it promptly. A few months later, Lloyd sued his insurer.
Among his allegations, Lloyd alleged his insurer violated its duty of good faith and fair dealing and breached the contract by extending unreasonably low settlement offers for the value of his car. He claimed these unreasonably low settlement offers forced him to invoke the appraisal clause, which caused him to incur additional expenses. Lloyd also argued that he is entitled to additional economic damages for loss of use and costs incurred during the time he was waiting for the settlement. Insurer moved for summary judgment and the trial court granted its motion. Lloyd appealed to the Washington Court of Appeals.
On appeal, Lloyd renewed his arguments that his Insurer breached its duty of good faith, breached the terms of the appraisal award, and engaged in unfair and deceptive trade practices. He renewed his argument that he was entitled to additional economic damages for having to invoke the appraisal process. The Court of Appeals determined the insurer’s actions were not unreasonable, frivolous or unfounded. The Court explained that the insurer promptly and thoroughly investigated the loss and the two offers were supported by market research. There was no evidence that the insurer behaved dishonestly, arbitrarily, or unreasonably in settling the claim. The Court of Appeals determined that the Allstate adjuster was a willing negotiator because he made two prompt and reasonable settlement offers. Thus, Lloyd’s claims to additional economic damages from the appraisal process were not adequately supported.
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