Uninsured and Underinsured Motorist Claims

After being involved in a motor vehicle accident, having to handle insurance claims can be very draining. With the intricacies of insurance policies, the various statutes, and ever-changing legal decisions, it is recommended that you seek legal representation when you are involved in a motor vehicle accident. Seeking an attorney who knows how to handle the issues associated with uninsured or underinsured motorist claims can make a vast difference. People who decide to handle these types of claims on their own often miss their right to bring a claim because they are unaware of the policies, and, therefore, unable to comply.

For instance, most insurance companies have a “consent to settle clause” that applies to underinsured motorist claims. It may be one of your insurance’s policies, and you may not be aware of it. So, what does a consent to settle clause mean? Consent to Settle is a form signed by your insurance that allows you to settle a case with the at-fault driver. Most insurances have a clause stating that they do not provide UM or UIM (uninsured motorist or underinsured motorist) coverage for any person if the claimant or his legal representative settle a claim without written consent. You may not hear about this clause until you file a claim with your insurance to cover the expenses that were not covered by the at-fault driver, and your insurance may even have the claim denied because you did not have written consent to settle the liability claim. It can be devastating if the at-fault driver’s insurance is not able to pay due to the damages being over the policy’s limits.

Even though the consent to settle clause has been a settled area of law since the early 1900’s, it has been challenged many times in court. For example, in an unpublished opinion in Gonzalez v. Philadelphia Indem. Ins. Co., F. App.’s 302, 305-306 (5th Cir. 2016) (applying Texas law), the Fifth Circuit Court held that an insurance company was entitled to summary judgment to have the case dismissed based on nothing more than the insured’s failure to obtain consent to settle.

Another example is the case Davis v. State Farm Lloyds, Inc. (Tex.App.—Dallas 2019). The insured, Mr. Davis, was injured in a motor vehicle accident and the at-fault driver was underinsured. The case was settled with the at-fault driver’s insurance company for policy limits, and Mr. Davis filed an underinsured motorist claim with State Farm to cover the expenses that were not covered. His claim was denied by State Farm, who stated that Mr. Davis failed to obtain a consent to settle from State Farm, and therefore, they were not obligated to pay his claim. When Mr. Davis filed a lawsuit against State Farm, the insurance company filed a Motion for Summary Judgment to get the lawsuit dismissed. The trial court agreed with State Farm and dismissed the case.

Mr. Davis appealed the dismissal of his lawsuit, and the Dallas Court of Appeals reversed the summary judgment and sent the case back to the trial court to determine his rights to recover underinsured motorist benefits. Mr. Davis did not argue that he failed to provide the consent to settle; he stated that the consent to settle was unenforceable due to the fact that State Farm failed to show it was prejudiced by his failure to obtain State Farm’s consent.

The Court, agreeing with Mr. Davis, stated that State Farm failed to provide any evidence that it had been prejudiced by the insured’s failure to obtain consent to settle. Furthermore, the Court recognized and followed the Texas Supreme Court’s precedent in Hernandez v. Gulf Group Lloyds, 875 S.W.2d 691 (Tex. 1994), which is directly on point and has not been withdrawn or revised. State Farm argued:

  1. In Guaranty County Mutual Ins. Co. v. Kline, 845 S.W.2d 810, 811 (Tex. 1992) (per curiam), the consent to settle clause was enforced.
  1. Cases that involve the insured giving notice to the insurer of a liability claim prejudices the insurer’s rights as a matter of law.

The Court of Appeals, although initially agreeing with State Farm’s assertion of the enforcement of the consent to settle regarding Guaranty County Mutual Ins. Co. v. Kline, stated that the clause to settle is unenforceable if the insurance company is not able to show prejudice and disagreed that giving notice to the insurer of a liability claim prejudices the insurer’s rights.

State Farm went on to admit that they had no evidence to show prejudice, but argued that:

  1. The insured did not obtain the consent to settle. As a result, they were not able to conduct any investigation to protect their interest under the consent to settle provision.
  1. Because so much time had passed, they would not be able to locate the at-fault driver and see what assets he/she had without civil process.
  1. The Court’s assertion that the only prejudice that matters is the loss of a valuable subrogation right is false. If the at-fault driver did not have enough assets to cover the expenses, then the subrogation right has no value.
  1. The Court declining the motion to add a new rule that would address whether it would be difficult for the insurer to prove that the at-fault driver is not judgment proof.
  1. The Court’s statement that State Farm had no proof that the at-fault driver had any assets and that there was no evidence that they conducted an investigation to verify whether he did. State Farm failed to prove that the settlement interfered with investigation of assets.

In conclusion, the case Davis v. State Farm Lloyds, Inc. confirmed that the consent to settle clause is valid, but it cannot be enforced if the insurance company cannot show that it was prejudiced by the failure to obtain consent. While the Davis v. State Farm Lloyds, Inc. and the Texas Supreme Court’s opinion in Hernandez v. Gulf Group Lloyds, 875 S.W.2d 691 (Tex. 1994) may save some insureds from having their claims dismissed or denied because of the failure to obtain the consent to settle, it is always best to request it before signing the settlement. The best way to avoid being in a situation like this is to seek legal representation and let an attorney handle the settlement with your insurance and the at-fault driver, as it will save you time and money. Being represented by an attorney who knows all the policies that are required when you are involved in a motor vehicle accident will allow you to claim what is owed to you.