Berniece Ratliff and her husband were injured on May 22, 1992, in an accident caused by a negligent driver, Keli Britton. Keli had a policy issued by State Farm with a limit of $25,000, and Berniece had a policy issued by Grange Mutual which provided for higher limits and covered losses caused by underinsured motorists.

State Farm was notified of the accident the following day and, after a thorough investigation, offered the possibility of settlement. The Ratliffs consulted their attorney who wrote Grange on July 27 inquiring about his clients' UIM coverage. In response to that letter, one of Grange's claims adjusters met with the attorney on September 8 and advised the attorney that the policy required the consent of Grange prior to any settlement with State Farm.

On November 11 State Farm advised the attorney that it would settle the claim for the limit of $25,000. The attorney promptly telephoned Grange's adjuster to tell him of the offer. He followed up that conversation with a letter the following day indicating that the Ratliffs were inclined to accept the offer but wanted to preserve the UIM benefits under their own policy. He requested a reply. On November 19 the insureds met with a State Farm representative and signed a release of any claims against Britton. Their attorney did not accompany them. Mrs. Ratliff was paid $25,000 and her husband received $10,000.

On December 7, 1993, a representative for Grange asked State Farm about further medical bills and was told that a settlement had been made. Ratliffs' attorney confirmed this. Grange thereupon denied Ratliffs' UIM claim on December 22, 1993.

The insureds filed for a declaratory judgment on May 13, 1994. Judgment was entered against Grange, and it appealed.

Grange contended that its subrogation rights were destroyed by the insureds' settlement, and it did not have sufficient time to evaluate the claim between the time it was notified of the settlement offer and the signing of the release by the Ratliffs. The lower court found that Grange had not responded within a reasonable time between the time an offer to settle was made and the time the release was signed. While only eight days had elapsed, the company had received notice of a potential settlement offer 108 days before that, as was shown by the letters from the Ratliffs' attorney. Finally, Grange knew that with the $25,000 settlement offer, the Britton policy limit was exhausted. Its lack of action voided its subrogation rights, and the judgment of the trial court finding Grange liable on the UIM coverage was affirmed.

Ratliff v. Grange Mutual Casualty Company, Appellant--No. 6-96-13--Court of Appeals of Ohio, Third District, Hardin County--February 5, 1997--691 North Eastern Reporter 2d 1136.