Cherylann Victoria Maston
Alternative Dispute Resolution
PLG 111-1602
05-03-2016
Assignment 2

In the case between Donna and Vic, the issue is whether Donna’s insurance company Gekko had a duty to negotiate in good faith with Vic, who was willing to negotiate a settlement for 100,000. Donna claims that the insurance company Gekko had a stubborn refusal to change their view, they would not settle for more than 50,000 and were willing to take their chances in court. Ultimately, Vic wins a verdict of 200,000 however, Gekko will only pay 100,000 and Donna must pay the remaining 100,000 which forces her into bankruptcy. Donna wants Gekko to pay the full amount awarded to Vic since she feels Gekko had a duty to negotiate in good faith and could have settled the case for the amount they are already going to pay to Vic. Under Ohio case law there are two cases that will have a direct impact on how the Ohio civil court will most likely rule on Donna’s suit against Gekko. In the case of Shaeffer, Whiting v. Grange Mutual Casualty Company, 1981 Ohio App. Lexis 14351 (Ohio Ct. App. 1981) the plaintiff filed suit against the Grange insurance company arguing there was willful disregard of their obligation to settle in good faith without litigation. However, Grange denied any negligent or willful failure to negotiate a settlement, nor did they fail to live up to their obligations in the insurance contract. The issue in this case is whether Grange has an enforceable duty to the plaintiff to negotiate in good faith to attempt to settle the matter without litigation. Since the plaintiff is a third party injured by the party insured, the Grange insurance company only had an enforceable contractual duty to the insured party and not the injured third party.
Therefore, Grange only owed a duty to the person they insured to act in good faith in their transactions with a person making a claim against the individual they insured. Moreover, Grange had fulfilled its required contractual duty with the insured by defending the lawsuit and they paid a judgement assessed against its insured party that were covered under the terms of the insurance policy. The trial court sustained the motion and discharged all direct duties to the plaintiff. In applying this case law to Donna’s situation, she will most likely not prevail in her suit against the Gekko insurance company. Given this case law, Gekko was not obligated to negotiate with Vic being that he is a third party and was not contracted with Gekko. Gekko only owed a duty to negotiate with or on Donna’s behave and by offering 50,000 to settle can be seen as an act to negotiate in good faith. The case of Schneider v. Eady, 2008-Ohio-6747 (Ohio Ct. App. 2008) would also impact the outcome of Donna’s case against Gekko. In Schneider v. Eady, the injured claimant appealed her bad faith claim in which the summary judgement was granted to the insurance company. The claimant argued that she is a third party beneficiary of the contract between the insured and the insurer. Furthermore, she argued that the insurance company had a duty to act in good faith and there was a breach of duty in settling her claim. Being that the claimant feels she is a third party beneficiary of the contract, it makes her claim valid against the insurance company. However, the insurance company argued that the claimant is not an intended third party beneficiary of the contract between the insurer and the insured. The contract is to benefit the person insured and not the person injured and/or third party. Since the duty only exist between the insured and the insurer the third party does not have a cause of action for bad faith against the insurance company. The appellate court affirmed the decision of the lower court, finding that the claimant was not an intended third party beneficiary of the contract between the insured and the insurer. In the contract between the insured and the insurer the promisee (insured) must have named the claimant in the contract as an intended third party beneficiary in order for the claimant to have enforceable rights under the contract. Since the insured had no intent to benefit a third party, then the claimant is only an incidental beneficiary that does not have contractual enforceable rights. Given that the claimant does not possess any contractual rights under Ohio law she does not have a cause of action. In applying this case law to Donna’s lawsuit, the court would most likely rule in Gekko’s favor because Donna did not name Vic in the contract as a third party beneficiary. Vic would be considered an incidental beneficiary and therefore Gekko would not be under any obligation to negotiate a settlement with Vic, nor would he be entitled to file a claim with Donna’s insurance company. After reviewing both cases as they would apply to Donna’s situation, she would not be successful in her lawsuit against Gekko.