Permission To Settle Claim

People in Grand Prairie, Arlington, Mansfield, Fort Worth, Dallas, or anywhere else in Texas will often times try to settle a claim they have without the assistance of an experienced Insurance Law Attorney. The problem with doing this is that there are multiple ways a person can be making a big mistake. Here is just one of them.
The Dallas Court of Appeals, decided a case in 1992, styled, “Rochelle Traylor v. Cascade Insurance Company, Formerly Known as Bonneville Texas Insurance Company, Successor in Interest to Victoria Lloyds Insurance Company.”
Here is some factual background:
Traylor was riding in a car driven by Glynnis Penny when they were involved in an accident caused by Khoron Page. Traylor was seriously injured in the accident. Page’s liability insurance was limited to $25,000 per person. Traylor settled with Page for the full policy amount of $25,000 and released Page from further liability without the consent of Cascade Insurance Company, Penny’s insurer. Because Traylor’s damages exceeded $25,000, she sued Cascade for its underinsured motorist (UM) protection of $20,000 per person. Cascade denied coverage and moved for summary judgment contending that coverage was excluded under Section A.2 of the policy’s exclusions, which provides:
A. We do not provide Uninsured/Underinsured Motorists Coverage for any person:
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2. If that person or the legal representative settles the claim without our consent.
Traylor argued in response that the exclusion violates Texas Insurance Code, Section 1952.108. The trial court disagreed and granted Cascade’s motion.
Traylor argued that the consent-to-settlement clause in the insurance policy violated the statutory purposes of underinsured motorist coverage expressed in the Texas Insurance Code. Pointed out was that the Texas Supreme Court has stated that the purpose of underinsured motorist coverage is “the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured or underinsured motor vehicles ….” Thus, the purpose of this court is to determine whether the consent-to-settlement clause is inconsistent with and fails to further the purpose of the Texas Insurance Code UM statutes.
This court then discussed the results of other cases dealing with this subject. After that discussion this court said that the consent-to-settlement clauses are a valid way for an insurance company to protect its right to subrogation against the UM motorist or any other person legally responsible for the insured’s injuries. The court said that by permitting the insurance company to recover from the at-fault party some or all of the insurance proceeds paid to the insured, the right of subrogation defrays the cost and expands the availability of underinsured motorist coverage. When the insured settles with the at-fault party and releases that party from all future liability, even when the release is in exchange for the entire sum for which that party is insured, the insured cuts off the insurance company’s right to recover its liability from the at-fault party. The consent-to-settlement clause preserves that right. Because the consent-to-settlement clause furthers the insurance company’s right to subrogation under the Texas Insurance Code, the clause furthers the purpose of the Insurance Code. Accordingly, the exclusion under the policy for failure to obtain the insurer’s consent to settlement is valid.
Traylor further argued that the enforcement of consent-to-settlement clause would encourage insurance companies to deny consent to an injured claimant to settle with a negligent motorist, thereby frustrating the attempts of the claimant to recover any insurance proceeds. In response, this court pointed out that the law provides heavy penalties against insurance companies that delay or refuse settlement of claims in bad faith.
There are exceptions to the law expressed in this opinion.