This author suggested, in an earlier May 2016 Bad Faith blog article, that an insurer can measure on a “strength scale” its insurance coverage defenses while it defends its insured against underlying claims and lawsuits under a reservation of rights. The “strength scale” of coverage defenses, especially when subject to ongoing updates, can become a useful decision-making tool during settlement negotiations. An insurer has a legitimate basis to assess its coverage defenses as part of the settlement process when the coverage issues may render it unclear whose money will be used to pay for a judgment or settlement: the insurer’s money, the insured’s money, or combined contributions of both. “Bad faith” case law can be scarce, in many jurisdictions, regarding…
