The Eighth Circuit determined that filing an interpleader action in the face of multiple claims against the policy holder did not constitute bad faith. Purscell v. Tico Ins. Co., 2015 U.S. App. LEXIS 10438 (8th Cir. June 22, 2015).
Ben Purscell's vehicle collided with another vehicle, in which Tim and Amy Carr were riding. The Carrs were injured, and Purscell's passenger, Amy Priesendorf, was killed. Before the accident, Priesendorf had stretched her leg over and put her foot on the accelerator, on top of Purscell's foot. As the other car approached, Purscell swerved to avoid an accident, but the two vehicles collided.
Purscell had a policy with Infinity Assurance Insurance Company. The policy limited liability to $25,000 per person and $50,000 per accident for bodily injury. Infinity put the full $50,000 per accident limits on reserve, with $25,000 designated to Priesendorf's fatality and $25,000 designated to the Carrs.
The Carrs demanded policy limits. Infinity wrote that it needed to complete its investigation to determine whether there was coverage due to Priesendorf's conduct. The Carrs then withdrew their settlement offer before the investigation could be completed. Infinity then learned that Priesendorf's parents intended to pursue a wrongful death claim against Purscell.
Purscell requested Infinity to settle the Carrs' claims within policy limits. The letter from Purscell's attorney did not reference the wrongful death claim by Priesendorf. Infinity responded by explaining that Priesendorf's parents were also asserting a claim, and the claimants were in negotiations over dividing the full policy limits. Purscell's attorney did not respond. The Priesendorfs subsequently made a formal settlement offer.
Less than a month later, Infinity filed a petition for interpleader. Meanwhile, the Carrs' suit proceeded to trial and the jury found Purscell and Priesendorf were equally guilty, assessing fifty percent responsibility to each. The jury awarded Tim Carr $830,000 in damages and Amy Carr $75,000 in damages.
In the interpleader action, the court approved settlement of the Priesendorf wrongful death claim for $7,764.50 in exchange for a full release. The court then apportioned Infinity's $50,000 limits among the parties as follows: $7,764.50 for Priesendorf's parents, $25,000 to Tim Carr, and $17,235.50 to Amy Carr. This left a substantial judgment against Purscell and in favor of the Carrs in excess of his policy limits.
Purscell sued Infinity for bad faith. The district court granted summary judgment against Purscell, concluding that Infinity did not act in bad faith when it failed to accept the Carrs' early settlement offer for a number of reasons, including: (1) knowing of the fatality and Purscell's potential liability in the wrongful death suit independent of the Carrs' claims for policy limits; (2) Infinity's need to complete a full investigation on coverage issues; and (3) lack of a specific deadline from the Carrs for when the offer would be withdrawn if not accepted.
The Eighth Circuit affirmed. Infinity's focus on settling all three claims was not evidence of bad faith. It was in Purscell's interest to have all three claims against him settled within the policy limits. When a global settlement could not be reached, Infinity appropriately filed an interpleader action. Further, Infinity did not have a reasonable opportunity to settle Tim Carr's individual claim within policy limits. The Carrs unexpectedly withdrew their only settlement offer shortly after making it, without giving Infinity a reasonable opportunity to investigate and evaluate their claims.