Most insureds in Grand Prairie, Fort Worth, Dallas, Mansfield, Arlington, and other areas in the Dallas – Fort Worth metroplex have no idea how the uninsured motorist protection coverage on their automobile policies works. All they know is that their insurance agent told them that they should have it in case they have a wreck with someone who does not have insurance.
The Texas Insurance Code, Section 1952.101 requires that all automobile policies issued in the State of Texas contain uninsured motorist UM protection unless the UM protection is rejected in writing. Section 1952.108, allows for the insurance carrier to pursue the uninsured driver for any amounts paid out by the insurance company. As a result of Section 1952.108, allowing the insurance company to pursue the uninsured driver, almost all insurance policies require that their insured obtain written permission from their insurance company before reaching a settlement with the uninsured driver. Most people do not realize this. As a result, what happens if permission to settle is not obtained before settlement with the uninsured driver?
The answer to the above question is partially answered in the 1977, Texas Supreme Court case, Robert William Ford, Jr., et al. v State Farm Mutual Automobile Insurance Company. The principle question in this case was whether State Farm’s unconditional denial of liability constituted a waiver of its right to consent before its insured subsequently settled with another insurance carrier.
Here are some of the facts.
On October 18, 1969, Mrs. Ford was a passenger in an automobile driven by Mrs. Harvey when the Harvey auto was in a collision with a vehicle driven by Jeffrey Whittten. The collision resulted in Ford’s death and damages in excess of $20,000. Ford was survived by her husband and children. Whitten, whose negligence caused the collision, was an uninsured motorist.
On July 21, 1970, suit was filed by Mr. Ford, for recovery under the UM of a State Farm policy and a Gulf Insurance Company policy. On October 23, 1970, State Farm filed an answer denying any liability. On April 20, 1971, State Farm filed its first amended answer with pleas in bar “to Plaintiff’s action in its entirety.” Later, Ford settled with Gulf. One of these pleas by State Farm, alleged that plaintiff’s action was barred and that State Farm was in no event liable to pay anything under its policy.
State Farm later filed a second amended answer in which it set up the defense that plaintiff’s claim was barred because a settlement reached with another insurance carrier had not received the written consent of State Farm. This written consent was a requirement of the policy Ford had with State Farm.
In discussing this case, the court pointed out that this was a case of first impression for Texas courts.
In deciding for plaintiffs the court stated, “State Farm neither paid not pursued any of its affirmative steps for determination of what, if anything, it was due to pay plaintiff. Instead, it unconditionally denied all liability under the policy. This intentional conduct was inconsistent with claiming the right under the policy to consent before its insured settled with a third party. Such conduct constituted a waiver of that right. Waiver has been frequently defined as an intentional relinquishment of a known right or intentional conduct inconsistent with claiming it.”
The court further said, “If State Farm had been correct in unconditionally denying coverage and liability, it would have lost nothing by plaintiff’s settlement with Gulf. Since State Farm was incorrect it its denial, it has lost only the inconsistent right to assert the exclusionary clause as a grounds for forfeiture of plaintiff’s entire coverage. It has not lost its right of subrogation. When it pays the amount adjudged to plaintiff by the trial court, State Farm will still have its right to institute proceedings in the name of plaintiff against the uninsured motorist or any other person responsible for the accident. It is true that State Farm will have to share subrogation rights with Gulf Insurance which may, by reason of earlier settlement, have a call on the first $10,000 recovered by plaintiff from any person responsible for the accident. The relative status of the subrogation rights of the two companies, as between themselves, is a question which is not before us, and we express no opinion thereon.”
If you are not confused by the above, then you must be pretty experienced with these types of situations. But, it is still confusing and serves as an example why an experienced Insurance Law Attorney needs to be involved.
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