Insurers facing policy limits demands must act cautiously under even the best of circumstances to avoid threats of bad faith. The situation becomes far more complicated when the insurer receives a policy limits demand and it insures multiple and/or additional insureds. Complete chaos can ensue when an insurer has multiple and/or additional insureds, and the claimant's counsel is only willing to release one insured and/or additional insured for the insurer's available policy limits.

The insurer in this scenario is stuck between the proverbial rock and a hard place. The insurer can settle on behalf of one insured and face a bad faith claim from the other insured(s), or it can refuse to settle altogether and face a bad faith action from all of its insureds. There is limited case law addressing this issue, but a majority and minority view are presented here.

Majority View: Permits Insurers to Tender Policy Limits in Favor of Less than all Insureds