Zimmer, Duncan & Cole

Court Wields Power for the Powerless

When an insurance company flatly refuses to pay the full amount of your claim, there are only two options:  give up or file suit. A pair of court cases decided last week were the product of two injured drivers who refused to give up.  The opinions are Cindy Tripp v. Western National Mutual Insurance Company and Andrea Bjornestad v. Progressive Northern Insurance Company. In each, the Court of Appeals for the Eighth Circuit examined an insurance company’s duty to deal fairly and honestly with its insureds.

*   *   *

I’m writing this week’s column from the hospital.  Four feet away is my wife’s bed, and just beyond it is a flashing screen that confirms our unborn daughter’s heart is chugging right along at 139 beats per minute. A clear bag of saline solution hangs above Jen’s bed, along with a little bottle that drips some magic elixir into her spine. Our nurse bustles in and out fixing, checking, adjusting, verifying. Earlier, a team of her senior colleagues were called in on special assignment to find somewhere to insert my wife’s IV port.  (She apparently has small veins.) Next came a specialist who carefully threaded the epidural needle into a tiny opening in her spinal column. The obstetrician pokes her head in to explain the big picture (and also to confirm that we’ve picked a good name: “Zoe”.) It’s a team effort of experts, and I’m just a spectator.  I have no medical training beyond a CPR course.  (My heart skips a beat even hearing the announcement that it’s time to break the water.) For the next 48 hours, my faith and trust are in those who know more than me.  Someone else is calling all the shots.  I am absolutely powerless. 
 The analogy isn’t perfect, but this is a lot like the relationship between an insurance company and its insureds. They know more than us, and they call the shots.  We pay the premiums, and they make the decisions.  They write the fine print, and we sign without reading it.  We’re mostly powerless.
Both of the cases this week investigate what happens when insurance companies “go too far” while sitting in the driver’s seat.

*   *   *

Andrea Bjornestad and Cindy Tripp were involved in separate car accidents, over a year apart.  Both were injured, and both were hit by drivers who didn’t have enough insurance to cover the damages.
In situations like this, we rely on something called “Uninsured/Underinsured Motorist Coverage” which we purchase through our own insurance companies. This type of coverage is especially useful in a state like South Dakota, where other drivers are only required to have $25,000 worth of basic coverage. The standard amount of UM/UIM coverage to fill in the gaps is $100,000.  (Here’s a good item for a new year’s resolution: make sure you have at least  $500,000 of this coverage.)
In Cindy’s case, it was estimated that she had $330,000 worth of damages, but the at-fault driver had only $100,000 in primary coverage. 
Andrea’s crash left her with damages estimated as high as $175,000, but the at-fault driver had only $25,000 worth of insurance.
Both drivers then turned to their own insurance companies for help. Almost the exact same thing happened to each:  their insurance companies responded by “low-balling.” Progressive offered only $10,000 in response to Andrea’s request for $75,000.  Likewise, Western National’s final offer was also $10,000 in response to Cindy’s request for $150,000.
Insurance companies hold all the cards in situations like this.  Unless you agree to take their final offer, your only remaining choice is to ask the courts for help.  That’s what Cindy and Andrea did. Their lawsuits slowly worked their way through the court system, but their patience was ultimately rewarded. Two separate juries agreed with them.  In their verdicts, the jurors concluded that the insurance companies had breached their insurance contracts and were therefore required to pay the full amount requested (plus interest). In addition, Cindy and Andrea asked for their attorney’s fees.  A jury doesn’t make this decision, however.  It’s left up to the judge. The trial judges both awarded attorney’s fees:  $45,718 in Andrea’s case, and $65,000 in Cindy’s case.
Progressive and Western National appealed, and both appeals affirmed the trial judge’s decisions for similar reasons. Internally, both insurance companies had valued the claims much higher than their ultimate, final offers of $10,000.  As a matter of principal, then, the Court said they should have offered their own customers at least as much as their adjusters said the claims were worth. They didn’t, and as a result, they’ll be paying a hefty legal bill on top of the amount they probably should have paid in the first place. 

*   *   *

Daniel K. Brendtro is a trial attorney and a partner in the Zimmer, Duncan & Cole law firm of Sioux Falls and Parker.  He is also Zoe’s dad.  She arrived home happy, healthy, and cute.