In most ways, Bamford, Inc. v. Regent Insurance Co., No. 15-1968 (8th Cir. May 13, 2016) is a typical bad faith failure to settle case. There was a demand to settle within the insured’s limit. The insurer did not accept it. The case went to trial. There was an excess verdict. Litigation ensued over whether the insurer’s decision, to allow the case to go to trial, was in bad faith, under the applicable state standard. But despite its typicality, I chose Bamford for inclusion here for a reason -- the court showed its hand, as to what really set it off, in reaching its decision that the insurer’s failure to settle was in bad faith.

The facts giving rise to the claim are tragic. For convenience, I’ll let the court tell them: “In May 2009, Michael Packer, a Bamford employee, was involved in a two-vehicle collision with a vehicle driven by Bobby Davis. During the accident, a steel pipe stored on the roof of Packer’s vehicle became dislodged and ultimately penetrated Bobby’s left thigh, through his abdomen and pelvis, and out his right buttock, pinning him inside his vehicle. Bobby was trapped for between thirty and sixty minutes until paramedics arrived and were able to cut the pipe and extract him. He suffered a number of serious injuries and underwent extensive medical treatment to save his life and treat his injuries. Bobby’s brother, Geoffrey Davis, was a passenger in Bobby’s vehicle and suffered minor injuries. His claims against Bamford were settled and are not relevant to this appeal. Packer burned to death inside his vehicle.”

Bamford had a commercial automobile liability policy with Regent Insurance with a total policy limit of $6 million. While counsel for Bobby believed that the case was worth more than $6 million, he consistently offered to settle for the $6 million policy limit. While Regent’s internal valuations went up over time, Regent never agreed to settle. [The opinion is lengthy and sets out, in detail, the many, many demands and offers that went back and forth between Regent and the plaintiff’s counsel. I’ll skip over as much of this negotiation as possible.]

In addition to its belief that the case was not worth $6 million [“Nothing is worth more than $2 million in Nebraska,” per a Regent executive], Regent was also unwilling to meet the demand because of a belief that it may have had a defense to liability – Bamford’s driver, Packer, may have had a seizure, and lost consciousness, thereby causing the accident. Defense counsel believed that the loss of consciousness defense had a 25% chance of success (subsequently reduced to 10%).

Then something big happened. The court granted Bobby’s request to strike the loss-of-consciousness defense AND, went further, finding Bamford liable as a matter of law. As a result, the only issue at trial would be the amount of damages to which Bobby and his family were entitled.

The closest that the parties ever came to settlement was the day before trial. Plaintiffs demanded $3.9 million and Regent countered with $2.05 million. The case went to trial and the jury returned a verdict for $10.6 million. The case was settled for $8 million during the pendency of the appeal.

Bamford filed an action against Regent, alleging that Regent breached its fiduciary duty and acted in bad faith in refusing to settle the claim. Bamford requested damages in the amount it had contributed to the settlement as well as certain fees. Following a five-day trial, the jury returned a verdict for Bamford, awarding its requested damages of $2,037,754.33.

In affirming the decision, the Eight Circuit made many critical observations about Regent’s handling of the claim. Notably, the court stated:

“Here, the jury could have concluded that Regent—by relying on valuations received from mediators, counsel, and internal adjusters—reasonably embraced a low value for the Davises’ claims early in the case, but ultimately acted in bad faith in failing to reassess the value of the claims in light of case developments and advice from its own players that the low value was inaccurate. Regent’s failure to adjust its valuation following the district court’s grant of partial summary judgment strongly supports such a conclusion.

Again, the district court did not merely grant the Davises’ request to strike the loss-of-consciousness defense. The court went much further and found Bamford liable as a matter of law. For nearly two years, Nolan [defense counsel] and Robin [Regent adjuster] had counted on a tempering of damages when the jury heard the purportedly sympathetic facts that would be introduced to support this defense, such as Packer’s history of seizures and use of seizure medication. They had also believed that the loss-of-consciousness defense, which would have provided Bamford a complete bar to liability, had a slight chance of success. In the wake of the district court’s ruling, the jury would hear neither the purportedly sympathetic facts supporting a medical emergency nor other evidence that could moderate its view of Bamford’s culpability. Rather, the jury would be instructed that Bamford was negligent as a matter of law and liable for the Davises’ injuries. In response to this major development in the case, Nolan and Robin requested authority to make a $3 million settlement offer, both for strategic purposes and because, in Robin’s view, the offer would have led to a settlement in the $3 million range. Not only did Regent deny such authority, it failed to increase its reserve even one penny from the previously-set amount of $2.25 million. A reasonable jury could view Regent’s stark inaction—in the face of this seismic and unforseen development in the case, and contrary to advice from its counsel and primary adjuster—as a complete and total refusal to consider the fiduciary duty it owed Bamford.”

The take-away from this case is easy to see and worth remembering. This was not just a case of an insurer deciding – wrongly -- to take a case to trial. In other words, the excess verdict was not simply the result of the insurer getting its valuation and/or liability assessment wrong. If that were all it was, then the insurer may not have been found to be in bad faith (although it still could have been). Rather, what drove the court’s decision was that the insurer failed to reassess the settlement value of the case, in light of adverse case developments and advice from its own people.