Auto insurance carriers are some of the most notoriously difficult to negotiate with following a crash resulting in injury. Often, they will extend low-ball settlement offers in lieu of policy limits, even when it seems clear full coverage is warranted.That’s if the carrier doesn’t deny the claim outright.
Policies are often drafted with many contingencies and exemptions, and the language can be extremely confusing to someone unfamiliar with contract and insurance law. Insurers bank on your lack of knowledge, which is why it’s so important to have an experienced lawyer advocating for you at the start.
In the recent case of Smith v. Maryland Casualty Co., before an appellate court in Missouri, an insurer dug in their heels to deny coverage to a crash victim under a commercial liability policy.
According to court records, plaintiff was a passenger in a commercial vehicle driven by an employee of a door-to-door sales company, insured by defendant carrier, when that vehicle was involved in an accident. Plaintiff alleged employee was acting as the sales company’s agent at the time of the crash.
The sales company had two auto insurance policies with defendant at the time of the crash: A commercial auto insurance policy worth $1 million and another commercial umbrella policy also with a limit of $1 million.
After plaintiff filed his lawsuit, a representative for the insurer sent employee driver a letter offering to defend him in the litigation (in which he was a named defendant). The company indicated it was not foregoing its right to later deny payment for any judgment against him. The insurer retained an attorney to represent employee defendant in that case.
That first lawsuit was later dismissed for failure to prosecute, but plaintiff soon filed a second lawsuit, this time naming employee as sole defendant. The attorney representing employee in the first case sent a letter to insurer indicating employee had authorized him to accept service of the case on his behalf, and seeking the insurer’s permission to accept. However, employee later indicated he believed the lawsuit was one continuous action, rather than a second separate lawsuit. While insurer told the attorney the defense would be provided in the second case under the same terms as the first, the insurer did not send a second reservation of rights letter directly to employee defendant.
Insurer then filed a petition for declaratory judgment in federal court, seeking a judgment regarding whether there was coverage for defendant employee under the policy issued to the sales company.
While that decision was pending, plaintiff and defendant employee reached a settlement agreement, which included a demand from defendant for insurer to indemnify him for defense and damages. Insurer refused, and defendant proceeded with a new lawyer. Trial court entered a judgment against defendant employee for $1.8 million in damages.
Plaintiff then filed a petition seeking to collect that money from the insurer. However, insurer countered defendant employee was not an insured under its policy exclusions and therefore refused to pay. Defendant employee then filed a cross-motion for bad faith refusal to settle within policy limits. Both plaintiff and defendant filed a motion for summary judgment against the insurer in which they noted the defense provided in the second case was done so without a formal reservation of rights. Further, they argued the vehicle driven by defendant employee was owned by the sales company and thus insured by the carrier.
Insurer denied these statements, but trial court granted summary judgment against the insurer, ordering it to pay the $1.8 million in compensation. No ruling was made on the bad faith claim.
However, the Missouri Court of Appeals later reversed the summary judgment order, reasoning that coverage is not created with the absence of a waiver (in this case, the reservation of rights letter).
This does not mean the insurer won’t have to pay. However, summary judgment as a matter of law was not deemed appropriate. Instead, plaintiff and defendant employee will have to seek a decision through a finding of fact at trial.
Our West Palm Beach accident attorneys recognize this kind of back-and-forth with an insurer is not uncommon, particularly when compensation is likely to reach in excess of six figures. In these situations, experienced legal counsel for victims is paramount.
Call Freeman Injury Law — 1-800-561-7777 for a free appointment to discuss your rights.
Smith v. Maryland Casualty Co., Jan. 23, 2015, Missouri Court of appeals, Southern District Division Two
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Gonsalves v. Li – Test Drive Crash Injury, Jan. 25, 2015, West Palm Beach Car Accident Lawyer Blog