The insurance company has a duty to make good faith efforts to negotiate towards a reasonable settlement. Shade Foods, supra, at 906-907. An insurance company is required to attempt to settle a claim against the insured when there is a reasonable likelihood of a judgment in excess of the insured’s policy limits. Garner v. American Mutual Liability Co., 31 Cal. App. 3d 843, 848 (1973); Communale v. Traders General Ins. Co., 50 Cal. 2d 654, 659-660 (1958); Crisci v. Security Ins. Co., 66 Cal. 2d 425, 429 (1967); Murphy v. Allstate Ins. Co., 17 Cal. 3d 937, 941 (1976).

A written, formal offer to settle is not necessary to trigger the insurance company’s obligation to settle. Gibbs v. State Farm Mut. Ins. Co., 544 F.2d 423, 427 (9th Cir. 1976); Du v. Allstate Ins. Co., 697 F.3d 753, 757 (9th Cir. 2012).

However, the duty may also be breached when there is an unreasonable denial of a settlement offer below the limits of the policy. Shade Foods, supra, at 905-907.

The duty to settle is implied at law, even if the policy does not contain such a provision. Murphy, supra.

When the insurer’s own counsel advises the insurer to seek settlement rather than gamble on a verdict, the insurer acts in bad faith when it heedlessly gambles on a verdict and loses. Kinder v. Western Pioneer Ins. Co., 231 Cal. App. 2d 894, 901 (1965).

Conditioning settlement upon demand that insured give up other coverage constitutes bad faith. Shade Foods, Inc. Innovative Product Sales & Marketing, Inc., 78 Cal. App. 4th 847 (2000).

Walker v. Farmers Insurance Exchange, 153 Cal. App. 4th 965 (2007).

Metropolitan Prop. & Cas. Ins. Co. v. Hedlund, 2016 U.S. Dist. LEXIS 152878 (N.D. Cal.) (insurance company liable for stipulated judgment of $5 million where it breached duty to settle).