## Facts

- Raymond M. Bleday, D.P.M., and related practice entities held professional liability insurance for February 1988 to February 1989.
- The policy provided that the insurer had the right and duty to defend and “may make such investigation and settlement of any claim or suit as it deems expedient,” even if allegations were “groundless, false or fraudulent.”
- A patient sued Dr. Bleday alleging injury from a February 2, 1988 surgery and the need for corrective surgery.
- The insurers retained Riley & Fleming Adjusters, Ltd. to investigate and handle the claim.
- On December 7, 1990, the insurers settled the malpractice claim for $10,000 over the insureds’ objection, stating the decision was to avoid litigation costs and trial uncertainty.
- The insureds alleged the settlement caused increased premiums, loss of earnings, and reputational harm, including reporting to the National Practitioner Data Bank.
- The insureds sued the insurers for breach of contract and negligence (asserting a lack of good faith in settling without consent) and sued the adjuster for negligence in failing to handle the claim in the insureds’ best interests.
- The trial court sustained preliminary objections in the nature of a demurrer and dismissed the complaint.

## Issues

1. Whether an insurer breaches contract or the duty of good faith by settling a malpractice claim within policy limits over the insured’s objection when the policy authorizes settlement as the insurer “deems expedient.”
2. Whether an adjuster retained by the insurer owes a legally actionable duty to the insured to adjust the claim in the insured’s “best interests,” supporting a negligence claim.

## Decision

- The Superior Court affirmed the dismissal on demurrer.
- The complaint failed to state a claim against the insurers because the policy unambiguously granted the insurer settlement authority “as it deems expedient,” including for claims alleged to be groundless.
- Alleged collateral harms from settlement (e.g., reputational injury, premium increases, reporting consequences) did not convert a contractually authorized settlement decision into actionable bad faith or breach.
- The complaint failed to state a claim against the adjuster because the adjuster’s obligations ran to the insurers, and no independent duty to the insured was pleaded or recognized on these facts.

## Legal Principles

- Clear policy language granting an insurer unilateral authority to settle claims “as it deems expedient” permits settlement over an insured’s objection, including when the insured asserts the claim is frivolous.
- The insurer’s duty of good faith does not negate an unambiguous contractual allocation of settlement control to the insurer absent allegations of improper purpose, dishonesty, or comparable misconduct beyond the insured’s disagreement with the settlement.
- Alleged reputational and economic consequences flowing from a settlement authorized by the policy are generally treated as collateral effects insufficient, standing alone, to establish breach of contract or bad faith.
- A claims adjuster retained by an insurer generally owes duties to the insurer; a negligence claim by the insured requires a recognized, independent duty running directly from the adjuster to the insured.

## Conclusion

The court held that, where a malpractice policy expressly allows the insurer to settle claims as it deems expedient, the insured cannot state a claim for breach of contract or bad faith based solely on an unwanted settlement and its collateral consequences, and a retained adjuster is not liable in negligence absent an independent duty owed to the insured.


Bleday v. OUM Grp., 645 A.2d 1358 (Pa. Super. Ct. 1994)