Consumer Alert: Recent Rhode Island Bad Faith Case

Experienced Attorneys Taking on Big Insurance for Victims in Rhode Island and Massachusetts

In a recent Rhode Island Supreme Court decision, Rhode Island car accident victims and insureds suffered a setback to consumer rights. In DeMarco v. Travelers Ins. Co., WL 2697038 (R.I. July 12, 2011), the Rhode Island Supreme Court vacated judgment against an insurance company that had failed to protect its insured from an excess judgment.

DeMarco involved a multi-party car accident resulting in serious personal injury to two people. Each injured party brought an injury claim against the at-fault driver who had a one million dollar bodily injury policy per occurrence with Travelers Insurance Company. Under existing Rhode Island law (Asermely v. Allstate Insurance Co., 728 A.2d 461 (R.I. 1999)), one injury victim who suffered catastrophic injuries demanded the entire one million dollar policy from the insurer. Travelers refused to pay, even though it was likely that the victim’s damages greatly exceeded one million dollars. Instead, Travelers chose to settle with the other victim within the policy limits for $450,000 and offer the remaining $550,000 to the other victim. But the remaining injured party rejected such an inadequate offer and proceeded to trial where he was awarded damages in excess of $2 million.

The Superior Court then entered judgment for the entire amount against Travelers, reasoning that, under the Asermely case, the insurer’s failure to settle within the policy limits needlessly exposed its insured to an excess judgment. More than a decade ago, the Rhode Island Supreme Court had held in Asermely that an insurer that rejected a settlement demand within the policy limit became responsible for any later judgment in excess of the limits (unless its insured objected to such settlement). However, on appeal, the Rhode Island Supreme Court vacated the Superior Court’s summary judgment, thereby backtracking from its bright line rule in Asermely. Although the Court did reaffirm Asermely’s holding and its application to multiple claimant cases, the Court held that an insurer in such a situation that fails to settle does not face strict liability. Instead, the insurer’s actions would be analyzed in a factual context.

After DeMarco, it is now more important than ever before for car accident victims and any consumer involved in an insurance dispute to consult a Rhode Island lawyer experienced in representing injured victims.

If you or your loved one was injured and the insurance company denied compensation you were due, contact our offices to speak with an experienced attorney. We are here to help you.