§ 3.4 Time Demands
As discussed previously, a component of a third-party bad-faith claim is that the insurer had an opportunity to settle with the third-party plaintiff for an amount within policy limits. After all, if the plaintiff never indicates that he or she would settle within coverage limits, then the insurer has no ability to protect the insured from an excess judgment. The most common way that plaintiff's lawyers give the insurer the opportunity to settle within coverage is to send a time-sensitive demand that expires on a certain date. This type of demand is often called a Tyger River demand or simply a time demand.
§ 3.4.1 Appropriate Deadline in Time Demand
Giving a deadline to the insurer helps move the case toward resolution in an efficient manner. An open-ended demand with no deadline would obviously be less likely to accomplish that.
The question becomes how much time the plaintiff's lawyer should give the insurer to accept the demand. As discussed above, the insurer has a duty to reasonably investigate each claim, and it will need some amount of time to do that. Not giving the insurer enough information or enough time to gather the necessary information to meaningfully evaluate the claim will serve only to defeat any later claim of bad faith for non-acceptance by the deadline. There is no standard amount of time to give the insurer, and before coming up with a deadline, plaintiff's counsel should carefully evaluate the facts of the particular case and what the insurer reasonably needs to know in order to decide whether to accept the demand.
In Columbia Insurance Company v. Reynolds,32 the District Court held as a matter of law that the insurer had not committed bad faith in not accepting a demand for $1 million in policy limits within ten days. More important than the number of days before the deadline was the fact that the insurer had not yet received any meaningful...
