Insurance Company Fights UIM Claim on Grounds of Mutual Mistake

In any car accident case, the contents of all insurance policies held by involved parties become of critical importance, read line-by-line very carefully by our Rock Hill car accident lawyers. trucks.jpg

Minor clauses contained in the small print could impact the outcome of an entire case. Still, we’ve known auto insurance companies to vigorously battle claims no matter what the policy indicated.

In the recent case of Nichols v. Zurich Am. Ins. Co., reviewed by the Kentucky Supreme Court, an insurance company attempted to argue that it shouldn’t have to pay underinsured motorist benefits because, while it was in the policy, it wasn’t supposed to have been!

The legal doctrine the firm applied is called “mutual mistake,” which is that both the company and the consumer had agreed to different terms than what was in the contract, and it was not intended for those underinsured motorist benefits to be included. It was an interesting approach – and it almost worked.

This case was somewhat more complex for the fact that the insurance company the plaintiff was battling was that of his employer, as the accident that had caused his injuries had occurred while he was on-the-job.

According to court documents, the plaintiff was a truck driver who was severely injured in an automobile accident in 2002. Through the company insurance policy, the worker was paid workers’ compensation benefits. The auto insurance policy was held by the same insurer, which included an underinsured motorist coverage endorsement of $1 million. The policy had been procured through the employer’s independent broker.

In addition to his workers’ compensation benefits, the injured worker sought compensation from the driver whose negligence had caused the crash and resulted in his injuries. As it turned out, he was underinsured, and his policy held a liability limit of $25,000. The insurance company that held that policy agreed to pay the policy limit if the injured worker would release their driver from further liability.

The driver knew he had an underinsured motorist policy through his employer’s auto insurer, and he notified his employer’s insurer of the proposed settlement. The insurer did not respond. The worker accepted the settlement, and soon thereafter applied to collect the rest of his estimated damages by filing an underinsured motorist claim.

The insurer responded by claiming there was no underinsured motorist coverage because the employer had rejected the coverage in both Indiana (where it is based) and Kentucky (where much of its work is conducted). The plaintiff sued the insurer.

In its response, the insurer stated, “(The employer) had no UIM coverage for (the worker), and therefore there is no claim. It’s that simple.”

It was not that simple.

The injured trucker pointed out the documents that indicated underinsured motorist coverage was included. The insurance company countered that the inclusion of the UIM policy was a “mutual mistake” by the employer and the insurer that required reformation of the policy to reflect the employer’s intention to reject UIM coverage.

The trial court granted the insurance company’s motion for a summary judgment, and that finding was upheld upon appeal. However, the Kentucky Supreme Court reversed, finding that the equitable doctrine of mutual mistake was misapplied in this case.

The court noted that in order to reform a written contract on equitable grounds of mutual mistake, the party proposing reform has to meet these requirements:

  • Show that the mistake was mutual, and not one-sided.
  • Prove that the mistake was mutual by producing clear and convincing evidence of this.
  • Show that the parties agreed upon terms that were different than what was expressed in the written contract.

The state supreme court indicated that even when viewing the case in the light most favorable to the insurer, the facts don’t indicate the insurer met this burden. There was no evidence presented that at the time the contract was executed that the employer had intended to pay for a policy that excluded UIM coverage, but was accidentally granted a policy that contained UIM coverage anyway.

The employer did not express a desire to reject UIM coverage until after the accident occurred.

As such, the worker was entitled to collect UIM benefits from the insurer.

Contact the South Carolina injury lawyers at the Lee Law Offices by calling 800-887-1965.

Additional Resources:
Nichols v. Zurich Am. Ins. Co., March 13, 2014, Kentucky Supreme Court

More Blog Entries:
Collision Prevention Should be Focus of Carolina Law Enforcement, March 5, 2014, Rock Hill Car Accident Lawyer Blog

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