Delaware Supreme Court determines that a claim that an insurer acted in bad faith by failing to settle a third-party claim accrues when an excess judgment against the insured is final and non-appealable.

Joining courts from other jurisdictions, the Delaware Supreme Court sided with the insured that, for the purposes of the statute of limitations, a claim for bad faith on the part of the insurer, by failing to settle a third-party claim, accrues when an excess judgment against the insured is final and non-appealable. The court reasoned that such a holding advances the policy objections of: (1) reducing the possibility of a conflict of interest between the insurer and the insured; (2) protecting the insurer from claims for failing to settle frivolous claims if the third-party claimant was willing to settle within the policy limits; and (3) saving the insured litigation costs if no excess judgment is ordered by a court. Further support for the holding came from Delaware’s settled principle that indemnity claims do not accrue until there is a final judgment and the analogy that insurance claims are a type of indemnity claim.

_{Case Law Alerts, 2^nd Quarter, April 1, 2016}

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