Nellie Kabatoff v. Safeco Insurance Company of America, a Corporation

This diversity case involves a claim under Oregon law against an insurer for bad faith failure to settle a claim asserted against its insured. The insurer, Safeco Insurance Co., appeals from the district court’s judgment awarding the insured, appellee Nellie Kabatoff, $20,000 in damages for Safeco’s failure to settle a personal injury claim asserted against her. Safeco also appeals from the district court’s award to Kabatoff of $25,-000 as reasonable attorney’s fees. Finding no error, we affirm.

Appellee Nellie Kabatoff was involved in an automobile accident with Jack McElwain in Marion County, Oregon on February 28, 1974. McElwain sued Kabatoff in Oregon state court for $57,000 in damages for personal injuries sustained in the accident. Appellant Safeco was Kabatoff’s insurer, and by the terms of the insurance contract, Safeco exercised total control over the defense and settlement of the McElwain action. During pretrial settlement negotiations, McElwain offered to settle the litigation for $10,000. Safeco’s highest settlement offer was $6,500, even though Safeco had established a cash reserve of $22,500. The case was ultimately tried to an Oregon jury which returned a verdict…