As a Missouri car accident attorney, I was interested to see a Minnesota Supreme Court ruling barring injured drivers from accepting an uninsured/underinsured motorist insurance settlement and also pursuing a specific kind of lawsuit. In Isaac v. Ho, Batika Isaac was injured by underinsured driver Vy Thanh Ho. Isaac gave her UIM insurance carrier notice of intent to settle a negligence claim for a particular amount, then accepted a check from that carrier. The Minnesota Supreme Court ruled that the check she received from the insurer was a substitute for a check from Ho, the driver she sued. Thus, the court said, Isaac should not have been permitted to continue pursuing her claim; Ho’s liability was limited to any subrogation claim the insurer might make.
The underlying accident was not described, but Isaac sued Vy Thanh Ho and Lien Ho for negligence that led to a car accident with injuries. Isaac made a settlement offer contingent on her giving her insurance company, the AAA, a chance to stop the settlement by substituting a check of its own, which is the insurer’s right pursuant to a 1983 Minnesota Supreme Court decision, Schmidt v. Clothier. The Hos’ counteroffer did not include this language. Isaac took it once a bit more money was added. Pursuant to Schmidt-Clothier, her attorney notified the AAA that it had 30 days to either substitute a check or lose its right to subrogation. The AAA substituted a check and intervened in the litigation. The Hos then moved for dismissal, but the trial court declined, saying the language of the settlement granted AAA the power to end the settlement, then concluded that the AAA’s substitution did terminate it.
The case went to trial, and Isaac and AAA won a judgment totaling considerably more. The Court of Appeals reversed the judgment in favor of AAA but affirmed in favor of Isaac. It found that the AAA’s payment to Isaac was voluntary and thus carried to right of subrogation, but that Isaac did not need to dismiss her claim against the Hos because it was not a full and final settlement agreement.
On appeal to the Minnesota Supreme Court, the Hos argued that the case should have been dismissed because when the AAA substituted its check, it settled the case against the Hos. The high court ultimately agreed. In Schmidt-Clothier, the court found that a settlement with the tortfeasor doesn’t prevent the injured driver from pursuing UIM benefits, as long as the UIM carrier gets notice and an opportunity to protect its subrogation rights by substituting its check. Such a settlement is “tentative,” the high court said, only insofar as the UIM carrier may substitute its check. The substitution acts as a settlement and releases the tortfeasor from liability. Allowing Isaac to settle and then continue a lawsuit would discourage settlement, the court observed. It went on to disagree with the district court that Isaac’s letter to the AAA notified it of an intent to settle outside Schmidt-Clothier, saying the letter expressly referenced that case. Thus, it reversed the trial court’s judgment against the Hos and upheld the appeals court’s judgment against the AAA.
As a southern Illinois car crash lawyer, I’m not surprised to see this decision. Parties to car accident lawsuits frequently settle in order to avoid litigation. To permit a settlement and also let the lawsuit go forward gives the defendant no incentive whatsoever to settle. Here in Missouri, and next door in Illinois, we don’t have the Schmidt-Clothier procedure, which may simplify the issue of settling directly with the tortfeasor. However, the underlying issue of the right to pursue uninsured motorist benefits remains alive and well in our two jurisdictions, because insurance companies often find spurious reasons to fight these claims. That’s why our St. Louis motor vehicle accident attorneys like to be involved in the case as early as possible, to lay the groundwork for a successful UIM claim or, if necessary, a lawsuit against the insurer.
Carey, Danis & Lowe represents people across Missouri and southern Illinois from offices in St. Louis and Belleville. If you were seriously injured or lost a loved one in a car crash caused by someone else’s bad decisions, call us today at 1-877-678-3400 for a free consultation or send us an email.
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