8 V.S.A. § 4724(9):
8 V.S.A. § 4724(9) of the Insurance Trade Practices Act prohibits insurers doing business in Vermont from engaging in unfair claims settlement practices and provides that if any insurer performed any of the acts or practices prescribed by the subsection with such frequency as to indicate a general business practice, such acts of practices shall constitute an unfair or deceptive act or practice in the business of insurance. Where liability has become reasonably clear, an insurer is prohibited from withholding payment under one portion of a liability claim in order to influence settlement of another portion of liability claim.
Vermont Courts recognize a cause of action against an insurer for bad faith handling of third-party claims brought against the insured. Under policy provisions, the insured surrenders to the insurer the complete control and management of the lawsuit up to the limits of the policy coverage. “Since the company . . . has the power, through the control of settlement, to adversely affect the insured’s interests, it must necessarily bear a legal responsibility for the property exercise of that power. In Johnson, the Vermont Supreme Court held that an insurer’s legal duty is that of a fiduciary and when investigating and considering a settlement offer, the insurer must in good faith take into account the interests of the insured, and will be held liable for judgment in excess of the policy limits if it intentionally disregarded “the financial interests of [the insured] in the hope of escaping the full responsibility imposed upon it by its policy.”
If demand for settlement is made, the insurer must honestly assess its validity based on a determination of the risks involved. The insurer must fully inform the insured of the results of its assessment of the risks, including any potential excess liability, and convey any demand for settlement which have been made. The insurer’s duty to protect the insured is ongoing, and the insurer must inform the insured of significant developments as they arise.The question of whether an insurer acts in bad faith depends on the specific facts of each case, and is one for the trier of fact.
 8 V.S.A.§ 4724(9), 7(d).
 See Myers v. Ambassador Ins. Co., 508 A.2d 689, 690 (Vt. 1986); Johnson v. Hardware Mut. Casualty Co., 1 A.2d 817, 820 (Vt. 1938).
 Johnson, 1 A.2d at 820.
 Brown v. United States Fidelity & Guaranty Co., 314 F.2d 675, 678 (2d Cir.1963).
 Johnson, 1 A.2d at 491.
 Myers, 508 A.2d 556.
 Id.at 557.
 Brown, 314 F.2d at 680.
Chartwell Law represents the interests of insurers and employers, as such, we continue to continue to monitor the legal landscape. If you have any questions about issues associated with right of action for bad faith claims, our attorneys are available to help. Please contact your Chartwell Law attorney.