Idaho Third-Party Failure to Settle & Excess Exposure

Settlement conduct must be analyzed through the insured’s exposure

When liability and damages may exceed available limits, preserve every settlement opportunity, evaluation and insurer response. The relevant issue is whether the insurer’s handling of the claim impaired duties owed under the liability policy and exposed the insured to an excess obligation.

Idaho follows a no-direct-action rule

Hettwer v. Farmers Insurance Co. of Idaho, 118 Idaho 373, 797 P.2d 81 (1990), rejects a third-party claimant’s attempt to sue the tortfeasor’s insurer directly for alleged bad-faith handling before the necessary liability relationship is established.

Jackson v. Crow explains the two-step path

Jackson v. Crow, 165 Idaho 113, 443 P.3d 447 (2019), explains that when the liability policy permits suit against the insurer after judgment, the claimant must first establish liability against the insured and only then proceed against the insurer as authorized by the policy. Do not treat a policy-limits demand alone as creating a direct third-party bad-faith cause of action.