Bad Faith Failure to Settle Complaint

COMPLAINT FOR BAD FAITH FAILURE TO SETTLE AND BREACH OF IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING

Plaintiff [________________________________] ("Plaintiff"), by and through undersigned counsel, brings this Complaint against Defendant [________________________________] ("Carrier"), a [insurance company/corporation] duly licensed to transact insurance business, and alleges as follows:

I. JURISDICTION AND VENUE

1. This Court has jurisdiction over this action pursuant to [________________________________] (state statute: e.g., diversity jurisdiction, 28 U.S.C. § 1332, or general state court jurisdiction).

2. Venue is proper in this Court because [the cause of action arose in this county/defendant is located in this jurisdiction] pursuant to [________________________________] (state venue statute).

II. PARTIES

3. Plaintiff [________________________________] is a [resident of/business located in] [________________________________], and is the named insured [and/or assignee of rights] under the insurance policy at issue herein.

4. Defendant [INSURANCE CARRIER NAME] is a [state/foreign] corporation engaged in the business of issuing liability insurance policies and is duly licensed to transact insurance business in [________________________________].

III. FACTUAL ALLEGATIONS

A. The Underlying Claim

5. On or about [__/__/____], Plaintiff was involved in [motor vehicle accident/property damage incident/personal injury incident] at or near [________________________________] in [________________________________] [City/County], [State].

6. As a result of this incident, third party [THIRD-PARTY CLAIMANT NAME] ("Claimant") suffered [personal injury/property damage], for which Claimant asserted a claim against Plaintiff.

7. Plaintiff notified Carrier of this claim and potential liability within the time required by the insurance policy.

B. The Insurance Policy

8. At all times relevant hereto, Plaintiff was insured under a [liability/homeowners/commercial general liability] insurance policy issued by Carrier, Policy No. [________________________________], effective from [__/__/____] to [__/__/____] (the "Policy").

9. The Policy provided liability coverage with policy limits of $[________________________________] per occurrence and $[________________________________] aggregate.

10. The Policy is valid and in full force and effect, and Plaintiff has performed all conditions precedent required by the Policy.

C. The Third-Party Demand and Carrier's Refusal to Settle

11. After investigation and evaluation, Claimant, through [his/her/its] counsel, presented a written settlement demand to Carrier in the amount of $[________________________________] on or about [__/__/____] (the "Settlement Demand").

12. The Settlement Demand represented a within-limits settlement offer equal to [or less than] the full per-occurrence policy limits of $[________________________________].

13. Carrier rejected the Settlement Demand [or countered with an offer of $[________________________________]] without adequate investigation, without reasonable basis, and in disregard of Plaintiff's interests.

14. Carrier's rejection was not based on any good faith dispute over liability, damages, or the validity of the claim, but rather on [Carrier's desire to settle below fair value/Carrier's conflicts of interest/Carrier's desire to reserve funds/other improper motive].

15. Carrier failed to [adequately investigate the claim / properly evaluate liability / engage in meaningful settlement negotiations / respond timely to demands], and thus breached its duty of good faith and fair dealing.

D. Trial, Excess Judgment, and Damages

16. Because Carrier refused to settle the claim within policy limits, the case proceeded to trial [or arbitration/mediation].

17. On [__/__/____], a judgment [or award] was entered against Plaintiff in the amount of $[________________________________], which exceeds the policy limits by $[________________________________] (the "Excess Judgment").

18. As a direct and proximate result of Carrier's bad faith failure to settle, Plaintiff has been exposed to and suffered the Excess Judgment, for which Carrier is liable.

E. Assignment of Rights (if applicable)

19. [If applicable: Third-party Claimant has assigned to Plaintiff all rights to pursue this bad faith action against Carrier pursuant to a written Assignment Agreement dated [__/__/____].]

IV. CAUSES OF ACTION

COUNT I: BREACH OF IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING

20. Plaintiff incorporates by reference all preceding paragraphs as if fully stated herein.

21. Every insurance contract includes an implied covenant of good faith and fair dealing, whereby the insurer must act with fairness and in the insured's best interests when settling third-party claims.

22. Carrier owed Plaintiff a duty to act in good faith in evaluating and responding to the Settlement Demand.

23. Carrier breached this implied covenant by [refusing to settle within policy limits without reasonable cause / failing to investigate adequately / prioritizing its own financial interests over Plaintiff's exposure / acting with conscious indifference to Plaintiff's welfare].

24. Plaintiff has suffered damages as a result of this breach, including the Excess Judgment and related costs and expenses.

COUNT II: NEGLIGENCE IN CLAIMS HANDLING

25. Plaintiff incorporates by reference all preceding paragraphs as if fully stated herein.

26. Carrier, as a licensed insurer, owed Plaintiff a duty of reasonable care in investigating, evaluating, and settling third-party claims.

27. Carrier breached this duty of care by:

☐ Failing to conduct a reasonable investigation of the claim;

☐ Failing to properly evaluate liability and damages;

☐ Failing to communicate candidly and timely with Plaintiff regarding settlement opportunities;

☐ Refusing a within-limits settlement demand without reasonable justification;

☐ [Other specific acts of negligence].

28. This breach was a substantial factor in causing the Excess Judgment against Plaintiff.

COUNT III: VIOLATION OF [STATE] UNFAIR INSURANCE PRACTICES ACT

29. Plaintiff incorporates by reference all preceding paragraphs as if fully stated herein.

30. [Insert applicable state statute name and section] prohibits insurers from [engaging in unfair settlement practices / failing to settle claims reasonably / engaging in deceptive practices].

31. Carrier violated [statute] by refusing the within-limits Settlement Demand and failing to settle Plaintiff's claim in a timely and reasonable manner.

32. As a result, Plaintiff is entitled to civil remedies under [statute], including [statutory damages/actual damages/attorney's fees], as provided by law.

COUNT IV: TORTIOUS BREACH OF CONTRACT

33. Plaintiff incorporates by reference all preceding paragraphs as if fully stated herein.

34. The implied covenant of good faith and fair dealing in Plaintiff's insurance policy is a material term of the contract.

35. Carrier's wrongful and intentional breach of this covenant, causing Plaintiff to suffer the Excess Judgment, constitutes tort conduct independent of mere breach.

36. Plaintiff is entitled to tort damages, including punitive damages and attorney's fees.

V. DAMAGES

Plaintiff has suffered, and continues to suffer, the following damages as a direct and proximate result of Carrier's bad faith failure to settle:

37. Excess Judgment: $[________________________________]
    (The amount by which the judgment exceeds policy limits)

38. Economic Damages:

☐ Post-judgment interest at [statutory rate] from [__/__/____];

☐ Court costs and litigation expenses: $[________________________________];

☐ Investigation and expert fees: $[________________________________];

☐ Other documented economic losses: $[________________________________].

39. Non-Economic Damages:

☐ Emotional distress and mental anguish;

☐ Reputational harm;

☐ Loss of business opportunity [if applicable];

☐ Aggravation and inconvenience.

40. Attorney's Fees and Costs: Pursuant to [state statute/contract provision], Plaintiff is entitled to recover reasonable attorney's fees and costs incurred in prosecuting this action.

41. Punitive Damages: [If applicable per state law] Carrier's conduct was willful, oppressive, and in reckless disregard of Plaintiff's rights, warranting an award of exemplary/punitive damages in an amount appropriate to deter similar conduct.

42. Prejudgment Interest: Plaintiff is entitled to prejudgment interest on all damages at the rate provided by [state law] from [date of excess judgment/date of demand rejection] until entry of judgment herein.

VI. JURY DEMAND

43. Plaintiff hereby demands trial by jury on all issues triable as a matter of right.

VII. PRAYER FOR RELIEF

WHEREFORE, Plaintiff respectfully requests that this Court enter judgment in favor of Plaintiff and against Defendant as follows:

1. For the Excess Judgment in the amount of $[________________________________], together with prejudgment interest;

2. For economic damages, including post-judgment interest, court costs, and litigation expenses, in an amount to be proven at trial;

3. For non-economic damages, including emotional distress and reputational harm, in an amount to be proven at trial;

4. For attorney's fees and litigation costs as provided by law;

5. For punitive damages [if applicable] in an amount sufficient to punish Defendant and deter similar conduct;

6. For such other and further relief as the Court deems just, proper, and equitable.

VERIFICATION

I, [PLAINTIFF NAME], declare under penalty of perjury under the laws of [STATE], that I am the Plaintiff in the above-captioned action, that I have read the foregoing Complaint, and that all matters and facts stated therein are true and correct to the best of my knowledge and belief.

I declare that this declaration is true and correct.

Executed on [__/__/____] at [________________________________], [STATE].

_________________________________
[PLAINTIFF SIGNATURE]
[PLAINTIFF PRINTED NAME]

SIGNATURE BLOCK (COUNSEL)

_________________________________
[ATTORNEY NAME]
[STATE] State Bar No. [__________]

[LAW FIRM NAME]
[ADDRESS]
[CITY, STATE ZIP]
[TELEPHONE]
[EMAIL]

Attorney for Plaintiff [NAME]

SOURCES AND REFERENCES

Landmark Cases (Bad Faith Duty to Settle)

• Crisci v. Security Ins. Co., 66 Cal. 2d 425 (1967) — California's foundational bad faith case recognizing insurer's duty to settle third-party claims within policy limits.
• Comunale v. Traders & General Ins. Co., 50 Cal. 2d 654 (1958) — Established that breach of implied covenant of good faith gives rise to tort damages.
• Stowers Furniture Co. v. American Indem. Co., 15 S.W.2d 544 (Tex. Comm'n App. 1929) — Texas seminal case on insurer liability for failure to settle within limits.

Federal and State Statutes

• California: Ins. Code § 790.03 (unfair/deceptive insurance practices); § 790.04 (unfair settlement practices)
• Texas: Ins. Code § 541.060 (unfair settlement practices); § 2709.008 (bad faith)
• Florida: Stat. § 624.155 (civil remedies); § 627.409 (unfair claims settlement practices)
• New York: Ins. Law § 2601 (unfair methods, acts, or practices)

Additional Authority

• Restatement (Second) of Torts § 908 (punitive damages for certain tortious breaches)
• Restatement (Third) of Insurance § 3 (insured's implied covenant in settlement decisions)