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Eighth Circuit Upholds Voiding of Insurance Provision Limiting Recovery as Contrary to Public Policy – Schubert v. Auto Owners Ins. Co.

By August 18, 2011March 14th, 2022Auto Accidents, bad faith, Burn Injuries

As a St. Louis personal injury lawyer, I was interested to read a court decision voiding certain limitations in insurance contracts as contrary to Missouri public policy. The Eighth U.S. Circuit Court of Appeals made that decision in Carolyn Schubert v. Auto Owners Insurance Policy, a case about an insurance payout for a home destroyed by fire. Carolyn Schubert and her husband’s stepdaughter, Deborah Lee Weiss, stipulated to each owning half of the home after Schubert’s husband, Thomas Schubert, died. Because of this, and because of a provision in the insurance contract, Auto Owners maintained that it owed Schubert only half of the total value of the policy, or $62,250 instead of $124,500. The U.S. District Court for the Western District of Missouri found that this was voided as against public policy, and the Eighth Circuit agreed.
The Schuberts married in 2005 and Thomas Schubert died in 2006. Because he left no will, Carolyn Schubert and Weiss, who was Thomas’s stepdaughter from his first marriage, agreed in probate proceedings that each owned 50 percent of the home. Weiss was living there at the time. After the death, Carolyn Schubert continued making premium payments regularly and renewed the home’s insurance policy twice, although she had also told Auto Owners that she was not sure whether she legally owned the house. However, three months after the probate agreement, Weiss intentionally set the home on fire, causing it to be completely destroyed. Schubert made an insurance claim after the fire. Auto Owners agreed to pay only half, citing a provision in the policy saying it would pay no more than the “insurable interest” the insured had in the property. Schubert filed a lawsuit seeking the full amount, alleging breach of contract and vexatious refusal to pay. The district court ultimately found for Schubert on breach of contract, finding that the provision was both ambiguous and against Missouri’s valued policy statute. Auto Owners appealed.
On appeal, the Eighth Circuit first decided that it did indeed have jurisdiction, because the entire amount in controversy, $124,500, exceeded the $75,000 legal threshold. It then turned to the question of whether the Auto Owners contract provision did indeed violate Missouri law. The valued contract statute says the value of the property, as listed in the contract, is conclusive unless there was fraud or other wrongdoing. In the case of a total loss, the statute expressly says the settlement should be the amount for which the property was insured. To receive a settlement, the person should have an insurable interest — that is, suffer a financial loss from the property’s destruction or a financial gain from its preservation. This is true regardless of who has title to the property. Furthermore, it noted that Missouri law has generally granted full payments to part owners, absent substantial changes in ownership or strict definitions of interest. The Eighth also agreed that the clause at issue is ambiguous because it failed to define “insurable interest.” Thus, it upheld the district court’s decision and called for Schubert to recover the full policy amount.
This is good news for Missouri plaintiffs and Missouri personal injury attorneys like me, because it allows plaintiffs to recover more money to help them deal with their serious physical and financial injuries. I most often deal with insurance through auto accident cases, where insurance companies can be notoriously unwilling to pay claims, even when the language of their policies makes it clear that they must. Insurance companies routinely offer less than the claim is worth, relying on injured people not to understand their rights. Some insurers deny that the victims are as badly injured as they say, but they may also undervalue the vehicle or the cost of repairs. My job as a southern Illinois car accident lawyer is to fight for a full settlement, through negotiations or, if necessary, in court.

If your family has been affected by a serious auto accident and your insurance company refuses to meet its obligations, call Carey, Danis & Lowe for a free, confidential consultation. You can reach us through our website or call toll-free at 1-877-678-3400 today.
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