EQUALCONSIDERATIONARTICLE 008 EQUAL CONSIDERATION DOES NOT REQUIRE OVERPAYMENT AUTHOR: Jeff Collins EMAIL: firstname.lastname@example.org BIO: jshfirm.com/jeffersontcollins In Arizona, options are available to insureds when an insurer does not unconditionally agree to defend without issuing a reservation of rights letter, or denies coverage altogether. These circumstances give rise to Morris and Damron Agreements, in which an insured usually stipulates to a judgment in exchange for a covenant not to execute. The plaintiff then sues the insurer to recover that judgment, which typically exceeds the policy limits. Such agreements can also result, however, when the insurer fails to settle within the limits of the insurance policy, so it behooves all parties – the insurer, the insured and the plaintiff – to understand the potential consequences of such agreements. One of the duties an insurance carrier owes to the insured is to give “equal consideration” to third-party demands within the limits of the insurance policy, irrespective of whether the insurer has unconditionally provided coverage or has reserved rights. The standard requires an insurer to examine “whether [the insurer] without policy limits would have accepted the [demand].” It must do so “objectively” and as if “[the insurer] alone would be responsible for the payment of any judgment rendered.” If the insurance carrier breaches that duty, the insured is not bound by the “cooperation clause” in the policy and is free to negotiate a Morris Agreement with the plaintiff. In examining whether an insurer has given “equal consideration” to a demand, Arizona courts consider the following factors: • strength of plaintiff’s case on issues of liability and damages; • attempts by the insurer to induce the insured to contribute to a settlement; • failure of the insurer to properly investigate the circumstances to ascertain the evidence against the insured; • the insurer’s rejection of advice of its own attorney or agent; • failure of the insurer to inform the insured of a compromise offer; • amount of financial risk to which each party is exposed in the event of a refusal to settle; • fault of the insured in inducing the insurer’s rejection of the compromise offer by misleading it as to the facts; and • any other factors tending to establish or negate bad faith on insurer’s part Pruett v. Farmers Ins. Co. of Arizona, 175 Ariz. 447, 857 P.2d 1301 (App. 1993).