Facts: Petitioner Robert Besel was injured in an automobile accident caused by Mark Ralston. Ralston’s automobile insurer, respondent Viking Insurance Company of Wisconsin, subsequently refused to pay Besel’s medical bills as they exceeded the coverage limits of Ralston’s policy, leading Besel to reach a separate settlement with Ralston in which Ralston agreed to assign all of his claims against Viking Insurance Company to Besel in exchange for Besel agreeing not to execute the $175,000 judgment he had obtained against Ralston. This enabled Besel to file suit directly against Viking Insurance Company seeking payment of the judgment. However, the Superior Court for Spokane County limited the amount of damages awarded to Besel to the coverage limits of Ralston’s policy. Besel appealed to the Washington Court of Appeals, which held that Besel’s recovery was not necessarily limited to the stipulated coverage limits but remanded determination of the precise amount of recovery to the trial court. Viking Insurance Company appealed this decision to the Supreme Court of Washington.

Question(s): If an insurer acts in bad faith by refusing to effect a settlement and the insured independently negotiates a settlement, is the insurer liable for the amount of the settlement?

Conclusion: Justice Charles W. Johnson’s opinion for a unanimous Court concluded that Viking Insurance Company was liable for the full amount of the settlement reached between Besel and Ralston as the settlement was reasonable and reached in good faith and Viking Insurance Company had failed to respond to Besel’s attempts to reach a direct settlement. Once the settlement was determined to be reasonable by the trial court, the Court held, the burden of proof shifted to Viking Insurance Company to demonstrate that the settlement was the product of fraud or collusion, a burden that had not been met.

Docket No. 71071-6 (from Court of Appeals Division III Case No. 16669-4)

Petitioner: Robert Besel

(Counsel: Michael J. Riccelli)

Respondent: Viking Insurance Company of Wisconsin

(Counsel: James B. King)

Argument: Tuesday, January 29th, 2002

Decided: Thursday, July 18th, 2002

Prevailing Party: Robert Besel (Petitioner)

Vote: 9-0

Opinion: 146 Wn.2d 730 (2002)

Court: Alexander1 Court (2001-2002)

Alexander

Smith

Johnson

Madsen

Sanders

Ireland

Bridge

Chambers

Owens