Conflicting interests must be served whenever insurance settlements are negotiated. A direct conflict arises when an insurance company has an opportunity to settle a claim against the insured within the policy limits, the company declines the offer, and subsequently a judgment is rendered in excess of the policy coverage. The insured seeks redress against the company for that portion of the judgment exceeding the actual coverage on the theory that his liability would have been totally extinguished had the insurance company accepted the offer to settle. On the other hand, the insurer will argue that by litigating, the company seeks to lessen its own liability within the policy limits. The courts have resolved who must pay the excess judgment by determining whether the insurer breached its "duty" to the insured by refusing to accept the settlement offer.

I. The Dilemma

II. Present Standards of Liability and Damages … A. Liability … B. Damages

III. Criticism of Present Liability Standards

IV. Reflections on an Absolute Liability Standard