"In determining whether to accept or reject an offer of compromise, the insurer not only may consider its own interests but also must equally respect the insured's interests," pursuant to the U.S. District Court for the District of Connecticut's 1972 decision in United Servs. Auto. Association v. Glens Falls Insurance Co. On June 17, 2005, Lorraine Rystedt was walking her dog on the sidewalk when Barbara Morris allegedly drove her motor vehicle, which she leased, onto the sidewalk. Morris' insurance policy had a $100,000 limit, and Rystedt's attorney claimed that his client's case was worth $450,000 to $600,000. On July 5, 2005, Rystedt's attorney informed the plaintiff, Windmill Distributing Co., that Rystedt might file a claim against its driver, who allegedly operated a delivery truck in the vicinity of Morris' motor-vehicle accident. Rystedt sued Windmill in New York State Supreme Court. Hartford Fire Insurance Co., which insured Windmill, settled Rystedt's personal-injury claims for $225,000, pursuant to Hartford's power to "investigate and settle any claim or 'suit' as [Hartford] consider[s] appropriate." The Graves Amendment, which barred vicarious liability against lessors of motor vehicles, was signed into law on Aug. 10, 2005. Windmill sued Hartford Fire Insurance, alleging it failed to adequately defend and investigate and settled in bad faith, because Morris' motor-vehicle leasing company could have been found legally responsible. The District Court, Bryant, J., concluded that Hartford Fire Insurance acted in good faith and granted Hartford Fire Insurance Company's motion for summary judgment. Windmill appealed. The 2nd Circuit found that there was no evidence that Hartford Fire Insurance breached its duty to investigate and to defend. "The record is devoid of any evidence," wrote the 2nd Circuit, "that Hartford acted unreasonably, or in bad faith, in considering Rystedt's offer of settlement." The 2nd Circuit affirmed the judgment of the District Court.

VIEW FULL CASE