The Insurer Has A Duty to Settle Where There Could Be Liability In Excess of The Policy Limits
The insured purchased a policy from Founders Insurance, listing his current address on the application. Insured collided with the claimant, resulting in property damage to the claimant’s vehicle and bodily injury to the claimant. The insurer settled the claims for the property damage but not the claims for bodily injury and lost wages. A few years later, the insured notified the insurer that he had been served with a summons and complaint regarding the bodily injuries resulting from the collision. However, after several attempts by the insurer, it could not locate or contract the insured regarding information for the case.
The claimant argues that the insurer’s search for the insured was inadequate. The claimant alleges the insurer did not ask every possible question regarding the insured’s whereabouts when it contacted a family member of the insured.
Because the insured did not show up at the arbitration hearing, an award was entered against him. Further, the court held that the insurer did not have a duty to compromise with the other party because the amount sought in the complaint was less than the policy limit.
Further, because the insured was unresponsive to the insurer’s attempts to contact him, the insured breached the cooperation clause. In order to breach the cooperation clause, it must be established that the insurer exercised reasonable diligence in seeking the insured’s participation and that the insured’s absence was due to a refusal to cooperate. The court held that through the insurer’s efforts to locate the insured, the insurer demonstrated diligence. The court further stated that in a situation such as this, where the recovery sought is actually less than the policy limit, the insurer is not required to consider the interest of the insured in conducting the defense.
Founders Ins. Co. v. Shaikh. 405 Ill.App.3d 367, 937 N.E.2d 1186 Ill.App. 1 Dist.,2010. October 22, 2010
