What is the test for an insurer to accept an offer to settle a lawsuit by a third party?

California, United States of America

The following excerpt is from Rappaport-Scott v. Interinsurance Exchange, 146 Cal.App.4th 831, 53 Cal.Rptr.3d 245 (Cal. App. 2007):

The covenant of good faith and fair dealing implied in every insurance policy obligates the insurer, among other things, to accept a reasonable offer to settle a lawsuit by a third party against the insured within policy limits whenever there is a substantial likelihood of a recovery in excess of those limits. (Kransco v. American Empire Surplus Lines Ins. Co. (2000) 23 Cal.4th 390, 401, 97 Cal.Rptr.2d 151, 2

[53 Cal.Rptr.3d 249]

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What is the test for an insurer to accept an offer to settle a lawsuit by a third party?

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