In Washington state, even when an insurer is defending under a reservation of rights, if the insurer rejects a demand to settle within limits, the insured can settle for any reasonable amount, including amounts in excess of the policy limits. By either wrongfully denying a defense or refusing to settle within limits, an insurer loses all coverage defenses and its policy limits and must pay any reasonable settlement or judgment amount. In addition, if it is found to have done either of those things in bad faith, that judgment or settlement becomes the presumptive floor for any bad faith damages, which may be trebled. (Credit: Joseph Sohm/Shutterstock) In Washington state, even when an insurer is defending under a reservation of rights, if the insurer rejects a demand to settle within limits, the insured can settle for any reasonable amount, including amounts in excess of the policy limits. By either wrongfully denying a defense or refusing to settle within limits, an insurer loses all coverage defenses and its policy limits and must pay any reasonable settlement or judgment amount. In addition, if it is found to have done either of those things in bad faith, that judgment or settlement becomes the presumptive floor for any bad faith damages, which may be trebled. (Credit: Joseph Sohm/Shutterstock)

Insurers operating in Washington state must navigate such distinct challenges as exposure to extra-contractual liability for breach of the duty to settle, even when the insurer is defending the insured.

Want to continue reading?
Become a Free PropertyCasualty360 Digital Reader

  • All PropertyCasualty360.com news coverage, best practices, and in-depth analysis.
  • Educational webcasts, resources from industry leaders, and informative newsletters.
  • Other award-winning websites including BenefitsPRO.com and ThinkAdvisor.com.
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.