• Bob Siems

S.H. v. Hudson Insurance Company, MIA No. 27-1001-08-00025 (August 25, 2008).

Insurer acted in bad faith by refusing to pay a UM claim after declining to intervene in the litigation about the claim.

The MIA found that Hudson Insurance Company acted without good faith when it refused to pay a UM claim after declining to intervene in the litigation about the claim despite being on notice. Maryland law clearly requires an insurer with notice of a tort action against an uninsured motorist and ample opportunity to intervene to either intervene or be bound by the result of that judgment. Hudson chose not to intervene and then tried to avoid paying the judgment.

Plaintiff suffered injuries on April 21, 2004 when another driver ran a stop sign and stuck her vehicle. Although the other driver had insurance with MAIF, MAIF denied the claim for failure to cooperate. At the time, Plaintiff had insurance with Hudson that provided $20,000 in uninsured motorist coverage.

Plaintiff sued the other driver in Baltimore City and told Hudson about it. Hudson declined to intervene. Two years later, on January 17, 2008, Plaintiff secured a default judgment against the other driver. Plaintiff promptly sent Hudson a demand for policy limits to satisfy the judgment. Hudson denied the claim.

Hudson asserted three defenses. First, it argued that the Statute of Limitations (and a time-clause in the contract) barred the claim. Second, it argued that Plaintiff had failed to properly notify it of the law suit. Third, it argued that Plaintiff had failed to cooperate with it.

The MIA rejected all three defenses. The MIA rejected the Statute of Limitation defense because the statute tolls for UM claims against the Insurer tolls not at the time of event, but at the time of the denial. The MIA rejected Hudson’s lack of notice defense because Hudson knew enough information to use Maryland Judiciary Case Search to keep track of the litigation. The MIA rejected the lack of cooperation claim on the merits because Plaintiff had answered every question Hudson had asked.

After rejected Hudson’s defenses, the MIA found that Hudson had failed to act in good faith. The MIA concluded that Hudson’s defense had been motivated not by honesty and diligence, but by an attempt to avoid paying the claim. The MIA focused on notes in the claims file that showed “after the fact justifications for shirking its legal responsibility.” (Op. 13).

After finding Hudson acted without good faith, the Court turned to attorney’s fees. They held that under the law, plaintiffs could recover attorneys fees only for the 27-1001 action, and not for the underlying insurance action. (Op. 13-14.)

Hudson appealed to the Circuit Court, but settled a week later.

You can find the decision here.

#MarylandInsuranceAdministration #InsuranceBadFaith #BadFaithBadLawyering #CivilProcedure #AutoInsurance #FailuretoCooperateDenial

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