In Nationwide
Mutual Ins. Co. v. Wood, No. 1111486 (Ala. Feb. 22, 2013), the Alabama
Supreme Court ruled on an interesting fact scenario and I believe ruled
correctly.
On March 16, 2011, D.V.G., a minor, was
injured while a passenger in a vehicle being driven by K.C.T. Apparently,
the accident was due to K.C.T.’s negligence. K.C.T.’s liability carrier
was Nationwide and D.V.G. was entitled to UM/UIM benefits under a policy issued
by State Farm. As D.V.G’s attorney, Stan Brobston contacted both
insurers. Nationwide agreed to pay policy limits ($50,000), as did State
Farm ($50,000). While no lawsuit was filed, everyone agreed that, through
a pro ami hearing, a court would have to approve the settlement since D.V.G.
was minor.
On September 15, 2011, before any pro
ami hearing, D.V.G. died as a result of injuries sustained in an unrelated
motor vehicle accident.
Nationwide and State Farm instituted a
dec action in federal court asking the federal court to determine the status of
the settlement agreement.
The Alabama Supreme Court answered the following
certified question in the affirmative: “Under Alabama law, is an
insurance company bound to a settlement agreement negotiated on behalf of an
injured minor, if that minor dies before the scheduling of a pro ami hearing
which was intended by both sides to obtain approval of the settlement?”
The Alabama Supreme Court held that the
settlement created a contract and any contract claim survived D.V.G.’s death. They reasoned that as
long as D.V.G or her representative did not disavow the settlement, the
settlement was enforceable against the two insurers.
D.V.G.’s death did not make it
impossible to conduct the pro ami hearing. The opinion noted that, while
D.V.G’s mother wanted to have a pro ami hearing, the two insurers refused to
cooperate. The Alabama Supreme Court was not going to allow the insurers
to prevent the conducting of a pro ami hearing and, then, argue that the
settlement could not be enforced until a pro ami hearing was held.
The Alabama Supreme Court declared that the
two insurers could not avoid the settlement simply because D.V.G. died before
the pro ami hearing was held.
