Tennessee Court of Appeals Addresses the Duty of Insurer to Obtain Sufficient Auto Liability Insurance Coverage

A case recently before the Tennessee Court of Appeals addresses the the duty of an insurance company to provide appropriate automobile accident liability insurance coverage. In Barrick v. State Farm Mutual Automobile Insurance Company, just issued on December 21, 2012, the plaintiffs had sued State Farm alleging that they had been clients of State Farm for more than twenty-five years, that they insured four vehicles with State Farm, and that State Farm had held themselves out as professionals and experts with respect to selecting, issuing and servicing personal lines of insurance. Despite these facts, the plaintiffs were issued a policy of insurance by State Farm that only provided for liability coverage in the amount of $100,000 per person and $300,000 per accident. When the plaintiffs’ son, driving one of their insured vehicles, caused an auto accident in which the other driver was killed, the plaintiffs were left without sufficient insurance coverage. As a result, the plaintiffs had to spend $100,000 of their own funds above the insurance policy limits to settle the claims brought by the widow of the deceased driver.

In the Barrick case, the trial court had granted summary judgment to State Farm, finding that because State Farm had sent the plaintiffs copies of their insurance policies, declaration pages, and renewal notices, they had satisfied any obligation they had to their insured. In essence, the trial court held that the insurance company had no duty to select the appropriate coverage limits.

While the Tennessee Court of Appeals was poised to decide this interesting issue, it ultimately determined that the trial court’s judgment was not an appealable final judgment because it did not address other claims in the lawsuit, such as the plaintiffs’ claim under Tennessee’s Consumer Protection Act. The Court of Appeals, as a result, did not issue an opinion on the issue but sent the matter back to the trial court for further proceedings. it will be interesting to see how this case proceeds.

Regardless of the eventual outcome, the case illustrates the absolute necessity of Tennessee drivers and vehicle owners obtaining sufficient insurance coverage. One aspect of that coverage is to ensure that there is sufficient liability coverage to pay any claims that might arise because of your actions (or those of someone in your family or driving your car). The other question is how much Uninsured Motorist (UM) coverage to obtain — coverage that protects you or others in your vehicle or family — when an auto accident is caused by someone either without insurance or with insufficient insurance. UM coverage will be the subject of a future post.

In the Barrick case, the liability insurance policy only provided coverage of $100,000 per person in any auto accident. Although that is well in excess of the required minimum liability insurance coverage in Tennessee, it is insufficient to pay a serious injury or wrongful death claim. If the insured has any substantial assets (bank accounts, home, vehicles, etc.) or even a modest income, the lack of sufficient insurance liability coverage may pose a financially devastating risk in the event of a serious auto accident.