Much has been written about an insurer’s dilemma on how to divide up policy limits when an accident involves multiple claimants and the policy limits are inadequate to compensate the injured parties. The 8th Circuit’s recent affirmation of the Western District of Missouri’s grant of summary judgment highlights the difficulty in a claimant imposing extra-contractual liability for an injury suffered in a multiple claimant accident despite potentially significant claims handling errors by an insurer.
Purscell v. Tico Insurance Company
The underlying claims arose after Ben Purscell agreed to give his intoxicated co-worker, Amy Priesendorf, a ride home. As the two were driving, Priesendorf began acting erratically by reaching her foot across the vehicle and pressing down on Purscell’s foot on the accelerator. Although unknown to Purscell, Priesendorf had a history of similar erratic behavior while riding in vehicles driven by others. Purscell, unable to stop his car due to Priesendof’s actions, entered an intersection traveling an estimated 75 mph and struck a vehicle driven by Tim and Amy Carr. As a result of the collision Tim Carr suffered serious injuries and was life-flighted from the scene, Amy Carr sustained non-threatening injuries, and Priesendorf was ejected from Purscell’s vehicle and pronounced dead at the scene.
Purscell was insured by Infinity Insurance Company with the minimum limits of 25/50k, clearly inadequate for a death and serious injury accident. Initially, Infinity received a settlement offer from the Carrs for the full limits of the policy. Additionally, this offer put Infinity on notice the Carrs intended to file suit and that Tim Carr’s medical bills alone exceeded $97,000. Infinity informed counsel for the Carrs that it needed time to investigate coverage for Priesendorf’s actions. When no clarification of the coverage issues was forthcoming, counsel for the Carrs withdrew the settlement offer, reiterating that any wrongful death claim asserted by Priesendorf had little chance of being meritorious.
Eventually Infinity learned that Priesendorf’s parents intended to file a wrongful death claim and that the Carrs had filed a suit against Purscell. Additionally, Purscell’s criminal attorney requested that Infinity settle the Carrs’ claims within the limits of Purscell’s policy. Infinity failed to act on Purscell’s request to settle the Carrs’ claims and later received a demand from Priesendorf’s parents for the policy limits of Purscell’s policy.
Following the receipt of the settlement demand made by Priesendorf’s parents, Infinity filed an interpleader action depositing the limited policy funds into the circuit court’s registry. Subsequently, the Carr’s lawsuit proceeded to trial with Priesendorf and Purscell being found equally at fault for the Carr’s injuries. Damages were awarded to Tim Carr in the amount of $830,000 and $75,000 to Amy Carr. A month later the Priesendorf’s wrongful death claim was settled for $7,764.50 and Infinity’s interplead policy limits were apportioned between the Carrs and the Priesendorf families. However, a significant portion of the Carrs’ judgment against Purscell remained unsatisfied.
Bad Faith Litigation
Purscell eventually filed a bad faith claim in state court, which Infinity immediately removed to the Western District and moved for summary judgment. The Western District granted Infinity’s motion and the case was appealed to the 8th Circuit. The 8th Circuit ultimately affirmed, finding that Infinity did not act in bad faith in attempting to reach a global settlement of the Carrs’ claims and Priesendorf’s wrongful death claim. The court brushed aside the fact that Purscell had specifically demanded Infinity settle the Carrs’ claims (clearly the claims with the greatest excess exposure) and instead found Infinity had never attempted to avoid paying its full policy limits and thus had not acted in bad faith. It appeared the withdrawal of the limits demand by the Carrs gave the Court the foothold it needed to release the carrier from the excess liability as a matter of law.
Infinity escaped liability despite acting against Purscell’s express directive to settle the Carrs’ claims within the policy limits. Infinity’s evasion of liability is due in large part to its assertion that it was attempting to reach a global settlement on behalf of Mr. Purscell. The Court contrasted this conduct with the Rinehart decision where there was evidence that the adjuster was using the presence of multiple claimants to leverage a less than limits resolution on the Rinehart claims.
As shown by the Court’s decision, multiple claimants and limited coverage can create problems for everyone involved - the carrier, claimants’ counsel, personal as well as retained counsel for the insured, and ultimately, for excess judgment creditors.
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If you have any questions regarding bad faith insurance claims or litigation, please contact Kirk Presley for more information on how Presley & Presley can help you.