The Duty to Settle
The Duty to Settle
Courts imply a "duty to settle" on the part of the insurer into almost all American liability insurance contracts. This Demonstration creates a rich model in which to explore the effects of this on the likely outcomes of lawsuits. For each of the 20 sample lawsuits, you may specify the policy limit, coverage probability, litigation costs, and attachable assets of the insured as well as factors related to the strength of the duty to settle: (a) the size of the "as-if" policy the insurer must pretend it has in determining whether a settlement offer is reasonable, (b) the size of the "as-if" policy the insurer will be deemed to have written if it rejects a "reasonable" settlement offer, and (c) whether the insurer may discount for coverage issues the size of the "as-if" policy the insurer must pretend it has. The top panel of the Demonstration outputs a graph showing the plaintiff's expected position for each settlement offer it makes and superimposes on that graph information relating to the distribution of judgments in the underlying lawsuit, the policy limit and the zone of settlement offers that a court will deem reasonable. The parameters you set are shown in a table at the bottom of the Demonstration.