Hilker v. Western Automobile Insurance Company

Summary

The Wisconsin Supreme Court affirmed a judgment holding an automobile liability insurer liable to its insured for bad faith in failing to settle claims within the $5,000 policy limit, resulting in judgments totaling $10,500 against the insured. The court held that an insurer which takes complete and exclusive control of claims owes implied duties of good faith: to investigate with reasonable (ordinary) diligence, to make an honest and intelligent settlement decision, and to inform the insured when a recovery exceeding the policy limit appears probable. It overruled the prior determination that an insurer cannot be the insured's agent, clarified on reargument that the label of the relation is immaterial because the contract's implied duties control, sustained the jury's bad-faith finding on the evidence, held the policy's one-year limitation clause ineffective under sec. 201.19 of the Statutes, and held the verdict-form objection waived. On reargument the court confirmed the mandate and disclaimed any intent to substitute ordinary care for good faith, explaining that ordinary care measures the investigation that must precede a good-faith decision.