Connelly v. State Farm Mutual Automobile Insurance Co.Annotate this Case
Christina Connelly appealed the dismissal of her claim against State Farm Mutual Automobile Insurance Company. She contended that a claim accrued only when the insured suffers a judgment in excess of policy limits, and that judgment becomes final and non-appealable. Connelly's appeal raised this question as it pertained to the applicable statute of limitations on Connelly's insurance claim. State Farm contended that the claim accrued when the insurer allegedly acts in bad faith and breaches its duty to the insured. Although the Delaware Supreme Court had never addressed that precise issue, courts in other states that have considered it, and the weight of expert authority on insurance law, were in accord that a bad-faith failure-to-settle claim accrued when an excess judgment became final and non-appealable. "That approach conserves litigant and judicial resources. It also properly aligns the incentives of the insurer and its insured by allowing them to join efforts in defending the underlying third-party insurance claim without a stayed breach-of-contract claim causing a conflict of interest between them. Further, to state a claim that the insurer breached its implied duty to act in good faith, the insured must plead damages, which she cannot do before there is a final excess judgment against her." In view of these considerations, the Delaware Court found that a claim against an insurer for acting in bad faith by failing to settle a third-party insurance claim accrued when an excess judgment against an insured becomes final and non-appealable. Accordingly, it reversed the Superior Court's decision.