Under Wyo. Stat. Ann. § 26-13-124 (a), “a [p]erson is considered to be engaging in an unfair method of competition and unfair and deceptive act or practice in the business of insurance if that person commits or performs with such frequency as to indicate a general business practice and of the following claims settlement practices: . . . (vi) [n]ot attempting in good faith to effectuate prompt, fair, and equitable settlements of claims in which liability is reasonably clear; (viii) [c]ompelling insureds to institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in actions brought by insureds;. . . (xi) [m]aking known to insureds or claimants a policy of appealing from arbitration awards in favor of insureds or claimants for the purpose of compelling them to accept settlements or compromises less than the amount awarded in arbitration; . . . and (xiii) [f]ailing to promptly settle claims, where liability has become reasonably clear, under (1) portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage.”
The duty of good faith and fair dealing which is implied by law to inhere in every insurance policy runs from the insured to the insurer. Herrig v. Herrig, 844 P.2d 487 (Wyo. 1992). Breach of this duty may give rise to a cause of action for third party bad faith or first party bad faith. Id. Furthermore, a cause of action for “third party” bad faith will lie when an insurer fails in bad faith to settle a third-party claim within policy limits against its insured. Id.
The Herrig court held that third-party claimants, however, have no direct cause of action against an insurer for bad faith under § 26-13-124, even in the context of intra-family suits, because the duty of good faith and fair dealing runs only from the insurer to the insured. Herrig, 844 P.2d at 492. Third-party claimants may not assert a private cause of action since no implied private actions existed under § 26-13-124. Herrig, 844 P.2d at 494.
Wyoming courts have declined to extend a cause of action for bad faith for failure of the insurer to initially settle a claim which is followed by a judgment or settlement within its policy limits. Jarvis v. Farmers Ins. Exch., 948 P.2d 898 (Wyo. 1997). The Jarvis court reasoned that an insurer does not have an absolute duty to settle a claim within policy limits, although it may not refuse to do so in bad faith. Jarvis, 948 P.2d at 901 (citing to Allstate Ins. Co. v. Campbell, 334 Md. 381 (1994)). The court further stated that while an insurer has a duty to enter into good faith negotiations where “reasonable and feasible” to settle a claim within policy limits, there is no requirement that it rush to the settlement of a claim against an insured to avoid an excess judgment. Id.
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.