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Commercial Liability
Umbrella |
Subrogation |
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Breach Of Policy |
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Anita Adkins was in an
automobile accident with Emily Strack on November 21, 2006. Adkins had primary
insurance with Safeco Insurance Company (Safeco) and an umbella policy with
Cincinnati Insurance Company (Cincinnati), which provided excess underinsured
motorists protection for a $1,000,000 limit. It had a provision that any rights
an insured has to recover a payment Cincinnati makes under the policy transfer
to Cincinnati and the insured must not do anything after the loss to impair
those rights. Adkins reported the accident to its insurance agent, Consolidated
Union, within a week of the accident.
Strack's liability carrier
offered the $100,000 policy limit to Adkins in April 2007 and Adkins accepted
on May 22, 2007. However, she did not report the settlement to Cincinnati, who
learned of it on June 6, 2007, after Adkins released Strack. Adkins accepted
Safeco's $150,000 policy limit in November 2007 and then sought underinsured
motorists coverage from Cincinnati. Cincinnati asked for a declaratory judgment
that Adkins breached the policy by settling with Strack without informing
Cincinnati or seeking its consent. The parties made cross motions for summary
judgment and the trial court found for Adkins. Cincinnati appealed.
The Court of Appeals of
Indiana determined that the provisions of insurance policy contracts are subject
to the same rules of construction as all other contracts and that Adkins'
release of Strack after their settlement was a breach of her insurance contract
with Cincinnati. It stated that an insured who destroys the insurance company's
contractual rights of subrogation breaches the insurance contract and
extinguishes its right of action on the policy. An insured destroys the
company's contractual right of subrogation by releasing the tortfeasor before
settling with the company because it is that very settlement that enables the
company to protect its subrogation rights by giving notice of it to the
tortfeasor.
Since Adkins' settlement
with Strack after the loss impaired Cincinnati's subrogation rights, Adkins
breached its contract with Cincinnati and discharged it from its obligation to
provide coverage. As a result, Cincinnati's motion for summary judgment should
have been granted. The appellate court reversed the trial court's judgment and
remanded the case back for entry of summary judgment in favor of Cincinnati.
Court of Appeals of Indiana.
Cincinnati Insurance Company, Appellant-Plaintiff, v. Anita G. Adkins and Wayne
Adkins, Appellees-Defendants. No. 29A02-0912-CV-1270. Sept. 30, 2010. 935
N.E.2d 190