Mid-America Bank & Trust Co. v. Commercial Union Insurance Co.

In 1977, a 13-year-old boy was hit by a truck and suffered brain damage. The truck’s owner was sued to recover damages for the boy’s injuries. The truck was insured through Commercial Union Insurance Company (defendant) for bodily injury up to $50,000 per person and $100,000 per occurrence. That year, the boy’s representative tried settling the case for the policy limit, even though the boy’s injuries might have justified a greater recovery. After receiving the settlement offer, one of Commercial Union’s claims adjusters reported that there was a greater than 10 percent chance that the boy would win and recover up to $1,000,000. The adjuster recommended that Commercial Union reserve $50,000 for settlement. Almost three years passed, and Commercial Union did not acknowledge the settlement offer, so the boy’s representative renewed the offer. Without consulting with the truck’s owner, Commercial Union’s counsel responded with a take-it-or-leave-it counteroffer of $30,000. The boy was offended by the counteroffer and withdrew his offer. Commercial Union’s attorney then tried settling the case for $50,000. The boy refused the offer, and following a jury trial, the boy was awarded over $900,000. The truck’s owner assigned his claims against Commercial Union to the boy in exchange for the boy’s promise not to execute the judgment against him. The boy’s representative then sued Commercial Union for negligence and bad faith for failing to settle within policy limits. Commercial Union filed a third-party lawsuit against its attorney, whose estate’s representative, Mid-America Bank & Trust Company (plaintiff), was substituted as a third-party defendant in the underlying action. Following a trial, a jury awarded the boy the unpaid balance of his judgment. The circuit court entered the jury’s award and denied Commercial Union’s request for a directed verdict to set aside the jury’s verdict. Commercial Union appealed.