Federal Court in Texas Says Insurance Company Had No Obligation to Pay Judgment in Auto Accident Case

commuter trainA successful personal injury lawsuit requires many components. First, the plaintiff must “prove his case” against the defendant by establishing that the defendant owed the plaintiff a duty, that the duty was breached, that the plaintiff suffered damages, and that there was proximate cause between the breach of duty and the damages claimed by the plaintiff.

Once these elements are proven, the jury decides the amount of money due the plaintiff, and the trial court enters a judgment in the plaintiff’s favor. At that point, the defendant has the option of paying the judgment or appealing the case to a higher court. In most cases, it is the defendant’s insurance company that makes this decision (and many others). This is because a policy of insurance is a contract under which both the insured driver and the company have certain rights and responsibilities.

A recent case dealt with the consequences of a driver’s apparent failure to formally demand that an insurance company defend him in a state court lawsuit brought by a passenger who alleged that she was hurt due to the driver’s negligence.

Facts of the Case

In a recent federal case, the plaintiff was a passenger of a vehicle that was struck by a transit authority train after the driver drove into the train’s path. The vehicle involved in the accident was a company vehicle provided to the driver’s mother by her employer; the mother had lent the vehicle to the driver for his personal use.

The passenger filed suit against the driver and the defendant insurance company in a Louisiana state court  (The plaintiff’s husband also joined in the action, presumably to assert a loss of consortium claim.) After the insurance company was dismissed from the Louisiana lawsuit, the plaintiffs obtained a default judgment against the allegedly negligent driver. The driver thereafter assigned his rights against the insurance company to the plaintiffs.

The plaintiffs filed a second lawsuit in a Texas state court, seeking to assert the driver’s rights against the insurance company. Specifically, they averred that the insurance company had failed to defend the driver against the Louisiana lawsuit and had failed to pay the judgment against him in the plaintiffs’ favor. The insurance company removed the action to federal court and filed a motion for summary judgment.

Decision of the Federal District Court

The court granted summary judgment to the insurance company.  Although the insurance company had actual notice of the Louisiana action, the driver never tendered the lawsuit to the insurance company, nor did he demand a defense prior to the entry of judgment against him.

According to the court, the issue of whether the insurance company owed a duty to the driver under similar circumstances had been decided previously by the Texas Supreme Court in another case. In that action, the court stated, “[i]nsurers owe no duty to provide an unsought, uninvited, unrequested, unsolicited defense.” Since the driver did not notify the insurance company that he expected, and believed he was entitled to, a defense in the Louisiana lawsuit, the court found that the insurance company was prejudiced as a matter of law. Thus, the driver – and the passenger and her husband who sought to stand in his shoes as successors in interest – were not entitled to recover anything against the insurance company.

This decision yielded a harsh result for the injured passenger and her husband. While they do have a judgment against the driver, the collection of the money due them will be difficult. It all begs the question, “Why did the driver not demand that he be defended in the Louisiana case?” Perhaps he assumed that, since the insurance company was also sued, he was not required to do anything further. Maybe he didn’t realize he was a covered driver under the policy because the vehicle did not belong to him. Either way, both he and the injured passenger now face an uncertain financial future – and the insurance company didn’t have to pay a dime on the claim.

Talk to an East Texas Car Accident Attorney

East Texas car accident attorney Earl Drott will be glad to schedule a free consultation if you or a loved one has been hurt in a car wreck or truck crash in Tyler or Smith County. Just call us at 903-531-9300, and we will schedule a time for you to come in and discuss your legal options, as well as any rights or responsibilities you may have regarding insurance coverage in a motor vehicle accident.

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