The U.S. Fifth Circuit Court of Appeals affirmed a district court’s grant of summary judgment in favor of an insurer on an insured’s claim for breach of fiduciary duty arising from alleged mishandling of a settlement of an underlying action against the insured which resulted in an excess verdict. Hemphill v. State Farm Mut. Auto Ins. Co., 805 F.3d 535 (5th Cir. 2015).

An insured was sued by a third party after the third party was injured in a motor vehicle accident. The insured had a suspended driver’s license and initially claimed his girlfriend was driving. He later admitted to driving and, based on this information, the insurer’s investigator contacted the third party and, according to the insurer, the third party was advised of the policy limits. The insurer made several offers for less than policy limits as medical bills were obtained, but the third party rejected the offers. Two years later, a jury rendered an excess verdict against the insured. The insurer subsequently paid policy limits, and the insured sued the insurer, alleging that the insurer’s breach of fiduciary duty resulted in the excess judgment. The court found that, under Mississippi law, an insurer must act in the best interests of the insured, but that an insurer is not required to accept an offer merely because it is within policy limits. Rather, when such an offer is made, an insurer has a duty to evaluate the claim and settle if the offer is objectively reasonable. The court held that no breach could exist of the insurer’s duty in this regard as the plaintiff never made a settlement offer.

The court next evaluated whether an insurer has a duty timely to offer to settle a claim which greatly exceeds the policy limits, absent an offer. The insured argued that the insurer had a duty to make the offer earlier because the claim greatly exceeded the policy limits. However, the court rejected the insured’s argument and held that Mississippi law does not place a duty on an insurer to make a settlement offer absent a settlement offer by a claimant.