A person injured in a crash with a drunk driver who was undeniably at-fault might reasonably expect the insurance company covering that individual to offer a fair settlement to avoid litigation.
That person would probably be wrong.
Most insurance companies are interested in limiting liability wherever possible, and they bank on injured victims, desperate for money for medical bills, signing off on low-ball settlement offers to end the case. These companies know victims often don’t want the hassle and the headaches that can accompany litigation.
But what many accident victims don’t realize is the amount to which they are in fact entitled. In many cases, it’s far in excess of that initial offer by the insurer.
The recent case of Wolfe v. Allstate Cas. Ins. Co. is one recent example. U.S. Court of Appeals for the Third Circuit presided.
According to court records, the underlying crash happened around 4 a.m. in suburban Pennsylvania.
Defendant driver rear-ended plaintiff’s vehicle after consuming his 15th or 16th beer that night. It was later revealed defendant’s blood-alcohol level was around 0.25 percent – more than three times the legal limit to operate a vehicle.
Plaintiff was injured in the accident and received treatment at the local hospital emergency room.
Defendant was insured by Allstate, and the policy provided for up to $50,000 in coverage. The policy also required the insurance company to defend its insured for lawsuits from third parties arising out of automobile accidents.
Policy stated insurer would not defend against damages which aren’t covered in the policy, and the policy did expressly bar payment for punitive damages. What that means is if plaintiff sought and received punitive damages, defendant would be personally liable to pay that amount.
Plaintiff made a settlement demand for $25,000, based on initial medical records provided to the insurer. Allstate, however valued the claim at between $1,200 and $1,400, and extended a total settlement offer of just $1,200.
Plaintiff rightfully rejected this offer, and then filed a lawsuit.
Allstate told its insured (the drunk driver) that because the claim didn’t indicate total damages, he might be personally responsible to pay anything in excess of $50,000. He was advised to hire his own lawyer at his own expense to cooperate with counsel from Allstate. Insured did this, but his attorney wasn’t actively involved in the case.
During the discovery phase, plaintiff learned just how drunk defendant had been, and at that point, amended the complaint to assert punitive damages. These are damages intended to punish rather than compensate.
Allstate again informed defendant his policy didn’t cover punitive damages and he would be responsible to pay for it.
Case went to trial and jurors awarded plaintiff $15,000 in compensatory damages and $50,000 in punitive damages. Allstate paid the $15,000, but refused to cover the $50,000.
After trial, defendant assigned his rights to pursue his insurer for bad faith to the plaintiff in exchange for not enforcing the punitive judgment against him.
Plaintiff, standing in the shoes of the drunk driver, then sued the insurer for breach of conduct and bad faith, seeking to recover the $50,000 in damages plus attorney’s fees.
Trial court denied insurer’s motion for summary judgment and found it had acted in bad faith, awarding no compensatory damages but $50,000 in punitive damages.
Third Circuit vacated and remanded. Appeals court justices found trial court was right to deny summary judgment to defense, but could not in the next trial consider evidence of the punitive damages awarded in the initial trial.
If you have been a victim of a traffic accident, call Chalik & Chalik at (954) 476-1000 or 1 (800) 873-9040.
Wolfe v. Allstate Cas. Ins. Co. , June 12, 2015, U.S. Court of Appeals for the Third Circuit
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