The ASERMELY V ALLSTATE decision in 1999 was a very bold and important decision by the Rhode Island Supreme Court. In Asermely, The RI Supreme Court essentially said ‘enough is enough’ to big insurance and their divisive, unfair and heavy handed tactics.
In a decision which was essentially dicta, but constitutes the current law in Rhode Island, the Rhode Island Supreme Court acted as a legislative or administrative body. The Court dealt a body blow to big Insurance across the United States when their insured is involved in an accident or claim in Rhode Island.
The decision was a benefit to seriously injured car, truck, motor vehicle, motorcycle and slip and fall victims across the Ocean State. The decision gave Rhode Island personal injury attorneys leverage to force the insurance company to settle car accident and negligence causes of actions fairly and expeditiously. ASERMELY v. ALLSTATE INSURANCE COMPANY 728 A.2d 461 (1999) http://caselaw.findlaw.com/ri-supreme-court/1403678.html
The Rhode Island Supreme Court determined that if an insurance company rejects a written demand, within the policy limits, and the injured victim is awarded a judgment for more than the policy limits, then the insurance company is liable to pay the entire judgment including interest! See also , http://www.ripersonalinjurylaw.com/insurance-company-refuses-settlement-within-policy-limits-pay-full-judgment-plus-interest/
This decision is not legal binding precedent, national, but is certainly should be a model for all state courts across the United States. The insurance companies now have to seriously consider settlement offers within the policy limits or risk damages way above their contractual obligation with their insureds.
Asermely is a particularly useful tool for Rhode Island semi -truck accidents lawyers, bicycle accident attorneys. It is also a strong tool for other negligence lawyers representing clients in motorcycle collisions, wrongful death and negligence claims in which damages are very high but the policy is low or not enough to cover the massive amount of lost wages, medical bills and pain and suffering.
For Example: If someone dies in a fatal truck collision in which liability on behalf of the trucker is clear and there is only a $300,000 policy available, then the Insurance company should quickly pay the 300k or potentially be on the hook for millions in damages! Under that fact pattern the insurance company should pay up and run for the hills!
This decision was groundbreaking and controversial for 4 reasons:
1. Insurance companies are exposed to extra-contractual damages in Rhode Island. In laymen’s terms this means that the insurance company could be responsible to pay damages over the insurance policy limits that they entered into with their insured.
- Bad faith on the part of the indemnity and surety company is not necessary to obtain extra-contractual damages. The issue of whether the insurance company acted in bad faith in denying the policy limits demand is irrelevant.
- An insurance company which acted reasonably did their due diligence and acted in good faith could be liable if a judge or jury disagrees with their assessment of the value of a car, truck, premises liability or motorcycle accident.
- The RI Supreme Court sitting in the Capital City of Providence instituted a “rule” which was essentially statutory law. The Supreme Court acted as a legislative body, bypassing the Rhode Island legislature. This means that Big Insurance was not able to utilize its usual heavy handed tactic by retaining their highly paid lobbyists to kill this law.
Bad faith insurance.org states: “IT’S THE LAW: Insurance companies are required to ‘willingly’ pay claims properly and promptly in “Good Faith”. It is illegal to ‘willingly’ not pay, discount-lowball, delay, deny payment of legitimate claims in “Bad Faith”. When claims go unpaid in bad faith, the associated wealth-assets-loss of jobs-businesses are lost forever” http://www.badfaithinsurance.org/
Co-editor in chief, California Motor vehicle accident attorney, Steven Sweat wrote about California Bad faith litigation law: “CA courts have held that, “In deciding whether or not to settle a claim, the insurer must take into consideration the interests of the insured” and breaching this duty to accept reasonable settlement offers can expose the insurance company to liability for damages caused by the breach, regardless of policy limits. Hamilton v Maryland Casualty Co. (2002) 27 Cal.4th 718, 725. http://insurancelawhelp.com/duty-insurance-companies-settle-legitimate-claims/
The primary difference between Rhode Island law and the Law in California is that in Rhode Island there is no requirement that the demand for policy limits is “reasonable.”
Hypothetically, a Rhode Island resident is injured in a Providence car crash and has pain and suffering, 50k in lost wages and $20,000 of medical bills. The negligent, at fault motorist has a million dollar policy. The RI car accident lawyer makes a demand of 1 million dollars. If the insurance company reasonably denies the 1 million dollar demand for compensation as absurd and a jury later awards 1.3 million plus to the injured victim plus interest of $360,000 then the insurance company must pay the extra 660,000 judgment.
Whether or not the indemnity company acted in BAD FAITH, in Rhode Island, is irrelevant. If the insurance company guesses wrong they are on the hook to pay the entire judgment. Even if the insurance company acts in good faith rejecting the policy limit settlement proposal, they are on the hook for the entire judgment
The decision is groundbreaking because it allows for extra-contractual damages over and above the insurance policy limit, even if the insurance company is acting as good corporate citizen and trying to do the right thing.
The Court in Asermely stated: “It is not sufficient that the insurance company act in good faith. An insurance company’s fiduciary obligations include a duty to consider seriously a plaintiffs reasonable offer to settle within the policy limits. Accordingly, if it has been afforded reasonable notice and if a plaintiff has made a reasonable written offer to a defendant’s insurer to settle within the policy limits, the insurer is obligated to seriously consider such an offer. If the insurer declines to settle the case within the policy limits, it does so at its peril in the event that a trial results in a judgment that exceeds the policy limits, including interest.
The Rhode Island Supreme Court went on to state:
“If such a judgment is sustained on appeal or is unappealed, the insurer is liable for the amount that exceeds the policy limits, unless it can show that the insured was unwilling to accept the offer of settlement. The insurer’s duty is a fiduciary obligation to act in the best interests of the insured. Even if the insurer believes in good faith that it has a legitimate defense against the third party, it must assume the risk of miscalculation if the ultimate judgment should exceed the policy limits.” Id.
Bad Faith Insurance.org gives some basis of bad faith claims:
|“1. An insurer may be acting in bad faith if the insurer delays, discounts or denies payment without a reasonable basis for its delay, discounting or denial.|
|The author of this post, David Slepkow is an East Providence Rhode Island personal injury attorney who can be reached at 401-437-1100.|