Dunlap v. State Farm Fire and Casualty Co., 878 A.2d 434 (Del 2005).
In this case the Plaintiff, a car passenger, was injured during a collision with a bus. Plaintiff brought this action with her parent against their automobile insurer to recover for bad faith by refusing to consent to settlement with the bus owner for less than its liability coverage limits. The Superior Court dismissed the complaint and the Plaintiffs appealed. Plaintiffs argued that the insurer was informed and could easily verify that the passenger was not responsible for the accident and that her severe, permanent injuries would far exceed the total of all available policy limits. The insurer contended that a claimant had to exhaust liability coverage before UIM coverage was available. The Delaware Supreme Court held that the insurer's alleged refusal to cooperate and agree to car passenger's settlement with bus owner for less than its liability coverage limits could be a breach of the implied covenant of good faith and fair dealing. It was noted by the Supreme Court that the implied covenant of good faith and fair dealing does not require an insurer to risk financial exposure in order to assist the insured. However, it does obligate the insurer not to take advantage of the unequal positions in order to become a second source of injury to the insured.