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Auto Insurance Claims: Too Important to Fail

The sage old backcountry philosopher, Harry Truman once said that if you want a friend in life, don’t ask a bank: get a dog. There’s a real good chance that insurance companies, not banks, would be the object of Harry Truman’s attention these days. Besides, insurance is just filled with contradictions. It’s one of the most expensive things that people pay for, and hope never to use. So what happens when after a horrific accident, and an insurance company just does what it can to avoid paying a claim?  Or if the company delays responding to reasonable requests for answers by the insured?

This is not meant to be an attack on insurance companies. It is that people can be perfectly honest, and still face unfair hurdles, or even attack, from a powerful and large corporation that has enormous assets at hand.

Most states, North Carolina included, try to deal with uninsured motorist coverage. One in eight drivers across the US are likely uninsured. Some individual states are much worse, and 1 in 4 are uninsured. North Carolina is a bit better than average, but still risky: about 10% of all drivers here are uninsured. Only 22 states (North Carolina being one of them), and the District of Columbia, require drivers to purchase uninsured motorist coverage; although many states require insurance companies to offer it. In the case we will talk about here, Nationwide was fighting to get off the hook for uninsured motors coverage in a two-fatality crash. It required an experienced auto insurance attorney to fight to keep that coverage intact.

Robert McPhaul was driving the car owned by his wife, Arnetta, who was also the policy holder with Nationwide. Robert was not listed on the policy. Robert cross the centerline and crashed into the car being driven by Cliff Oxendine. Arnetta and cliff both died as a result. Nationwide asked to be released from the terms of the policy by saying Robert’s use of his wife’s car and policy amounted to fraud.  Instead, Nationwide offered to pay $939 under the collision coverage, and that was all.

II.  Facts Aren’t False: When Facts Change

There are many reasons that an originally true statement on insurance may not match with later facts. In this case, there was evidence that the marital lives of the couple had changed over the years. Is this “fraud”? More importantly, does it automatically release an insurer such as Nationwide from the coverage it had been providing for years? As the estate of the policy holder’s auto insurance attorney pointed out, the policy was in effect. This meant, then, that the insurance company had to argue the policy had been void ab initio… from the very beginning.

If courts can’t always rule only based on what’s fair, that doesn’t mean fairness isn’t relevant. But in that sense, what may matter is the state’s insurance regulations and law, and if the legislature has specifically adopted protections for insured drivers.

Ever better technology has helped make sure that insurance coverage is proven very quickly. For example, the state department of motor vehicles, or law-enforcement, use an online portal to check in sure data which gives them real time data about coverage. The point is that there’s a cost associated with keeping facts up to date. An experienced auto insurance attorney can help keep an unfair amount of that cost, or risk, from being shifted onto injured parties. Besides, DMV and police officers aren’t the only ones who count on thinking that they have insurance. Motorists also have a sense of safety to go out on what seem to be ever more hazardous roads. People may never want to have to use their insurance in this kind of horrible accident, but they have reasonable expectations about what they’ve paid for, and that they are protected from “the other guy.” That’s one reason that Nationwide’s claim of “fraud” by the policyholder in this case can be so devastating. This case was complicated by real life. The McPhauls had apparently had serious issues with their marriage, and had sometimes lived together, and at other significant periods of time, been separated. At the time of their accident, apparently reconciled and together.

Mrs. McPhaul’s husband also had a dwi on his record within five years of her insurance application. True, that if she had listed her husband, Robert, on the policy, Nationwide would never have issued her a policy to begin with. The issue in this case, however, went beyond Nationwide’s claim of fraud based on this fact not being on Mrs. McPhaul’s application for coverage. In passing uninsured motorist protections, the North Carolina state legislature determined that it is important to have the coverage available once there is an accident. In other words, this immediate problem takes priority over the ‘claimed’ fraud (possibly years) before an accident. The legislature wrote a specific statute emphasizing this point. General Statute section 20-279.21 (f). For example, in North Carolina every single vehicle liability policy has this protection: “the liability of the insurance carrier… Shall become absolute [emphasis added] whenever injury or damage covered by… policy occurs; set policy may not be canceled

[emphasis added]

or annulled.”

Regardless of the frequent power exercised by insurance companies, there are still protections for injured parties against many unfair practices. These protections, such as the law used in this case, usually begin by talking with a qualified auto insurance attorney.

III. Insurance Policy: For The People

The fact is that insurance, as a recent economic meltdown showed, is “too big to fail.” What this means for people who are injured is that there are market conditions that may make an insurance company regard an individual case as fairly minor. Of course, the case we’ve been talking about—with its two deaths--was anything but minor to so many people. For these injured policyholders and their families or survivors, their case makes these failures and insurance coverage too important to ignore. Private litigation by expert auto insurance attorneys will help even the playing field, and automobile/insurance trial attorneys have been described as the cutting edge in insurance reform[1].To a great extent, these problems could be fixed by state insurance regulation. If and until those fixes are made, it is up to an expert attorney in auto insurance and trial practices to step in and make the difference for an injured driver fighting an obstreperous insurance company.

 IV. Conclusions:

The injured party’s auto insurance attorney won the argument based on public policy, as written in state law. Simply alleging fraud in an original application for insurance was no defense under the facts of this case. The key was how important the North Carolina state legislature thinks uninsured coverage is. It is a matter of public policy; it doesn’t encourage people to necessarily buy insurance coverage. What it does do is protect all the drivers who need to count on a safety net on the road.

If the state legislature had intended a different result, it could have written that language into the law. Instead, the trial attorney again points out General Statute 20-279.21F. This law included a subsection [ (h)], which allows insurers to have a process to recoup any losses based on the application of that law. Interestingly, in this particular case, Nationwide chose not to file a counterclaim to recoup those costs. That choice did not necessarily strengthen Nationwide’s argument. The bottom line was that arguing fraud was no defense once the injury had happened. So if you, a family member or a loved one have been hurt in a vehicle accident—or have questions about insurance claims or need help related to a motor vehicle insurance policy, or involving related claims or your legal rights or hearings, please contact us.  You will speak with an auto accident attorney who can best answer your questions.  There is never a fee for this initial consultation.

[1] The Regulation of Insurance Claim Practices. Feinman, Jay M. UC IRVINE LAW REVIEW Vol. 5:1319

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