Liability Insurance Settling When You Think They Are Wrong

Insurance lawyers often will hear a story that goes like this.  – I was involved in an accident last year.  The other guy was at fault.  I let my insurance company know about the wreck and then I found out that my insurance company paid the other guy.  Can I sue them for doing that?

This issue is addressed in a 2000, Dallas Court of Appeals opinion styled, Stevens Transport, Inc. v. National Continental Insurance Company, et al.

Here are the facts of the case:  National Continental Insurance Company, Progressive County Mutual Insurance Company, and Progressive Casualty Insurance Company provided a truckers insurance policy to Stevens Transport, Inc.  The policy included a right to defend and settle any suit involving damages resulting from an accident caused by the use of a covered automobile.  The policy had a $250,000 deductible.

In 1992, Tony Randolph sued Stevens Transport for damages after he claimed that he was forced to swerve onto oncoming traffic by a Stevens Transport truck and hit another truck.  National defended Stevens Transport and settled the case for $900,000, invoking the $250,000 deductible.  Stevens Transport disapproved of the settlement.

Stevens Transport sued National for breach of contract, negligence, fraud, and violations of the Texas Deceptive Trade Practices Act, claiming National improperly investigated and settled the suit.  National counterclaimed for a wrongful injunction and sought a declaratory judgment.  The court found for National.  Stevens Transport appealed arguing that, among other things, National negligently settled the case.

The Dallas Court of Appeals affirmed the trial court’s judgment.  The Dallas Court of Appeals found that National’s insurance policy contained a clause which provided National with the right to investigate and settle any claim or suit as National considered appropriate.  The Dallas Court of Appeals refused to rewrite the insurance policy to insert a provision requiring consent to settle when the parties could have included such a provision in the policy and did not.

The bottom line to take from this case is to read the policy and see what it says about the insurance company’s responsibility to investigate and settle claims.  This is especially important when there is a deductible that the insured is responsible for paying.