Wisconsin Third-Party Failure to Settle & Excess Exposure

Distinguish the insured’s risk from the insurer’s payment

When an insurer controls settlement of a claim against its insured, the decision may affect personal exposure, a deductible or other retained funds. Identify who controls negotiations, who must contribute, the applicable limits and the available liability and damage evidence. A disagreement about value alone does not establish bad faith.

Roehl recognizes exposure within policy limits

Roehl Transport, Inc. v. Liberty Mutual Insurance Co., 2010 WI 49, paragraph 7, recognized a bad-faith claim by an insured with a liability deductible where the insurer controlled settlement and acted in bad faith toward the insured, even though the judgment was within policy limits. The case therefore should not be summarized as requiring an excess judgment in every settlement-duty dispute.

Evaluate the settlement opportunity and insured’s interests

Roehl’s discussion at paragraphs 49–50 connects the good-faith duty to the insurer’s control of settlement. Review the available liability evidence, likely damages, opportunities to negotiate, information needed for evaluation, and communications with the insured. The actual policy and procedural setting matter; the holding does not make every rejected demand an enforceable settlement obligation.

Document a concrete proposal

Keep the complete demand, supporting records, proposed release, recipients, delivery proof, requested response date and any conditions. Record requests for additional information, counteroffers, authority to settle and explanations of exposure. Review unresolved liens, other claimants, coverage issues and release scope. Do not assume that a stated deadline alone creates a valid offer or proves unreasonable handling.

Identify the person entitled to assert the claim

Roehl concerned the insured’s claim against its insurer. An injured claimant should not assume that the insurer’s settlement duty automatically gives that claimant the insured’s cause of action. Any assignment or other asserted basis for standing requires its own analysis. Contract benefits, settlement formation, bad faith and additional remedies should be evaluated separately.