State Farm Loses Big in Bama

Recently the Alabama Court of Civil Appeals issued an interesting decision on medical payments subrogation. The case is Mitchell v. State Farm. The facts are that the Plaintiff hired an attorney who ultimately secured a settlement for the Plaintiff. State Farm contributed nothing towards effectuating the settlement. It was solely the work of the Plaintiff’s attorney negotiating with the defendant’s insurance company, Cotton States. State Farm paid out $5,000.00 in medical payments coverage to Plaintiff under their contract of insurance with the Plaintiff (for which Plaintiff paid good money in the form of premiums).

Like a good neighbor, State Farm sought full repayment of $5,000.00 from the Plaintiff’s settlement. Never mind that the insured paid premiums for the medical payments coverage to be there when the Plaintiff needed it; never mind that State Farm did absolutely nothing in generating the settlement funds from which they sought full repayment; never mind that this was their own insured from whom they sought to take money meant to compensate the insured for their injuries.

Unfortunately for State Farm, an attorney stood up against this unfairness and won. The Court held that State Farm had to reduce its medical payments claim for reimbursement by the amount of the Plaintiff’s attorney fee. This is a textbook application of what is called the “common-fund doctrine.” The doctrine says that if an attorney creates a pool of money—like in a personal injury settlement—then someone who seeks reimbursement from that fund must share in paying the attorney’s fee. The principle is quite simple, really. If someone’s work benefits you, you have to pay them. It’s just not fair otherwise.

The opinion, however, is not without its flaws. The court seems to suggest that State Farm could simply modify its policy language to disavow the common-fund doctrine. That would mean that an insured would have to pay back what State Farm paid out for medpay benefits that the insured already pays a premium for. However, there is also language in the opinion that the common-fund doctrine might still apply under equitable (“fairness”) principles. We will have to wait and see what the Court does in the future. For now, insurance companies must SHARE in the cost when a Plaintiff’s attorney works and settles a case.

Of course the attorneys at Gary Bruce, P.C. are always happy to discuss your case with you if you have been hurt in a wreck. It is often difficult to determine who has a valid claim for reimbursement on a given settlement. The attorneys at Gary O. Bruce, P.C. know many techniques used to defeat or substantially reduce claims for reimbursement on your settlement. Call us for a free consultation.

“Like a Bad Neighbor, that You should Beware”: Despite receiving premiums, State Farm avoids covering its insured’s injury based on policy technicality.

            Never underestimate the importance of time in your personal injury claim.  We are reminded of this daily in our practice by observing the behaviors of insurance companies who never stop fighting to avoid paying legitimate claims for injured people.  In the latest instance, State Farm was able to prevent itself from being responsible to its own insured for injuries sustained in a wreck on September 15, 2006.  Throughout this article bear in mind: State Farm fought for a only nine days short of five years and spent thousands of dollars until a final decision on September 6, 2011, when it was ultimately determined that the company could avoid covering its own insured’s injury.  The clear reason is that by securing a denial of coverage in this case, the company will likely earn its executives profits for years to come.

            The recent case is Lankford v. State Farm Mut. Auto. Ins. Co.  The general facts are that Mr. Lankford was injured in a wreck while in his employer’s truck.  The other driver possessed liability insurance coverage with State Farm, the same company as Mr. Lankford’s underinsured motorist coverage.  Only three days after the wreck, Mr. Lankford received a letter from State Farm seeking information on his “recent wreck” referencing the other driver’s policy.  Third parties also contacted State Farm via letter expressing subrogation interests.  In February, State Farm issued payment for property damage to Mr. Lankford’s employer.  Meanwhile, Mr. Lankford saw doctors, treated for his injuries, and in July 2007, Mr. Langford underwent a lumbar fusion surgery.  As a result, his attorney requested the policy limits information on the defendant’s State Farm coverage.  That September, Mr. Langford discussed his injuries and claims with his own State Farm agent.  On September 5, 2008, a lawsuit was properly filed on Mr. Lankford’s behalf, of which State Farm received a copy via letter mentioning the UM policies and was timely served on September 8. 

            Just to be clear, the simple facts are that 1) a man was injured in a wreck, 2) his insurance company sent him a letter three days later, 3) others wrote his insurance company about the wreck, 4) he had back surgery, 5) he wrote his insurance company about his wreck, 6) he spoke with his own insurance agent about his wreck/injury/claim, and 7) his insurance company was served with a lawsuit arising out of that wreck and injury.  All of this occurred within the statute of limitations which Georgia law provides for filing a lawsuit.  Now wrap your head around the fact that the injured man’s insurance company asserted a defense that it “wasn’t notified of the wreck/injury” and won that argument.  Still believe that big business isn’t ruling our courts?

Ultimately, the Georgia Court of Appeals determined that an insured is required to provide its insurer with timely notice of an accident under the insured’s policy, even if the insurer receives prior notice from an unrelated third party.  In other words, YOU or YOUR ATTORNEYS must set up your uninsured or underinsured motorist claim with your insurance company personally and in writing.  Just because they have heard from someone else that you were in a wreck does not mean your claim has been properly reported.  Even worse in that ruling were statements about timely notice to your insurance company.  The Court found that an unreasonable delay could mean that you have no coverage because your insurance company will no longer have to uphold its end of the policy contract covering your injury.  The Court reasoned that your insurance policy is your contract with the company and if you don’t follow its requirements, you lose your claim.

            What does this mean for you???  TIME IS OF THE ESSENCE.  Do not wait to speak to an attorney after your injury happens.  After you are involved in a car wreck, make sure that your attorney knows about all insurance policies on both the car you were riding in and in your household.  It is critical for your attorney to have that information in order to get your claim set up properly and protect you, even from your own insurance company, by preventing them from wiggling out of the policy which you have been paying premiums on every month, sometimes for years.  By knowing your company and policy information, your attorney can make sure that technicalities and policy requirements don’t prevent you from recovering from your loss.  Also, always remember to tell your attorney about any family members, other vehicles, or households which may be connected to you, as additional coverage can often be found there under Georgia law.  Knowing about these policies can make all the difference between either you or a hospital collecting the bulk your settlement proceeds for your injury.