"Clearly the obligation to accept a good-faith settlement within the policy limits is the law in Connecticut." Grand Sheet Metal Products Co. v. Protection Mutual Insurance Co., 34 Conn. Supp. 46, 49 (Conn. Super. Ct. 1977). Indeed, since the inception of this common law rule in 1933, see Bartlett v. Travelers’ Insurance Co., 117 Conn. 147 (1933), the insurer’s duty to settle within policy limits has been consistently upheld by Connecticut courts. Yet, for such a "clear" rule, a lack of appellate authority leaves policyholders wondering exactly what conduct by the insurer breaches this obligation.
It’s easy to see why the insurer’s duty to accept a good-faith settlement offer within policy limits has been the law in Connecticut for the past 80 years. Often times, the insurer has sole discretion over the decision to accept a settlement offer within policy limits. With the insurer controlling the defense of the suit, it may be tempting for the insurer to reject the offer in hopes that litigation will lead to a lesser recovery. This is especially true when the settlement offer is at the high end of policy limits.
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