When Insurer Settles Claim Against Insured for Less Than Policy Limits it Fulfills its Obligations Under the Policy
Post 4916
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Raymond Kvalvog challenged the dismissal of his claims against his insurer, Secura Supreme Insurance Company. Kvalvog argued that his complaint states a claim upon which relief can be granted because it alleges Secura (1) breached its duty of good faith by failing to inform Kvalvog of his right to withdraw from the liability coverage he invoked and take over his defense, (2) breached its duty of good faith by failing to properly evaluate the claims against Kvalvog, and (3) failed to pay Kvalvog $17,500 in uninsured-motorist benefits.
In Raymond Kvalvog v. Secura Supreme Insurance Company, No. A24-0226, Court of Appeals of Minnesota (October 14, 2024) the Court of Appeals resolved the allegations.
FACTS
After a tragic automobile accident where Kvalvog’s son was driving an automobile as part of a high school athletic trip. The passengers in the automobile included Kvalvog’s other son and Mark Schwandt. As a result of the accident, Kvalvog’s sons died and Schwandt was injured. At the time of the accident, Secura provided automobile insurance coverage to Kvalvog that included liability coverage.
Kvalvog brought a wrongful-death action against, among others, the school and a coach who was driving a different vehicle as part of the school trip only to lose.
Schwandt later commenced a separate action against Kvalvog, the school, the coach, and Schwandt’s own insurer (the underlying action), asserting in part that Kvalvog was liable for Schwandt’s substantial injuries. Kvalvog tendered the defense of the underlying action to Secura, which appointed a lawyer to defend Kvalvog. The case settled with Secura paying less than the policy limits in exchange for a release of all claims against Kvalvog.
The district court granted Secura’s motion reasoning that Secura had the right to settle the claims against Kvalvog, did so within his policy limits.
Kvalvog asserts that his complaint supports three theories of liability, the first two of which are premised on Secura’s claimed breach of its duty of good faith.
The district court granted Secura’s motion to dismiss, determining that Secura did not breach their duty of good faith by settling the claims at mediation within policy limits and that the complaint did not state a viable claim for $17,500 in uninsured-motorist benefits.
DECISION
A complaint is subject to dismissal if it fails to state a claim upon which relief can be granted. Kvalvog’s complaint fails to state a legally sufficient claim that Secura breached its duty of good faith.
An insurance policy, like other contracts, is governed by its terms. But Minnesota law imposes an additional duty of good faith on a liability insurer that assumes control of the right of settlement of claims against its insured. This duty arises because an insured and insurer may have conflicting interests, with an insurer being obligated to represent an insured’s best interests and to defend and indemnify while also wanting settlement at the lowest possible figure. An insurer’s right to control the negotiations for settlement must be subordinated to the purpose of the insurance contract-to defend and indemnify the insured within the limits of the insurance contract
Secura Did Not Have A Duty To Inform Kvalvog That He Could Withdraw From The Coverage He Invoked.
A liability insurer’s duty of good faith springs from the purpose of the insurance contract-to defend and indemnify the insured within the limits of the insurance contract. If an insured is clearly liable the insurer must attempt to settle with the injured party. A liability insurer’s obligations are tethered to a purpose: protecting an insured’s financial interests and ensuring that the insured receives the full benefits it is entitled to under the policy.
Creating the duty advanced by Kvalvog would do the opposite. Such a duty would run counter to an insurer’s other rights and obligations.
Secura Is Not Liable For Any Failure To Investigate.
Kvalvog has not stated a claim for a breach of the duty of good faith on which relief can be granted. Kvalvog’s theories of liability, failing to advise him that he could fire the appointed lawyer, are not viable under Minnesota law.
Kvalvog’s Complaint Fails To State A Legally Sufficient Claim For Uninsuredmotorist Benefits.
Without an identified liability theory, the complaint does not provide fair notice of the basis for Kvalvog’s uninsured motorist claim. It was appropriately dismissed.
ZALMA OPINION
Liability insurance provides for a defense of the insured. It does not, nor should it, provide for the insured’s attempt to gain a judgment against a third party or UM coverage when the responsible party is insured. No good deed was punished – Secura settled the claim against Kvalvog only to be sued for doing what the policy required it to do.
(c) 2024 Barry Zalma & ClaimSchool, Inc.
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Concurrent Cause Doctrine Does Not Apply When all Causes are Excluded
Post 5119
Death by Drug Overdose is Excluded
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Southern Insurance Company Of Virginia v. Justin D. Mitchell, et al., No. 3:24-cv-00198, United States District Court, M.D. Tennessee, Nashville Division (October 10, 2024) Southern Insurance Company of Virginia sought a declaratory judgment regarding its duty to defend William Mitchell in a wrongful death case pending in California state court.
KEY POINTS
1. Motion for Judgment on the Pleadings: The Plaintiff moved for judgment on the pleadings, which was granted in part and denied in part.
2. Duty to Defend: The court found that the Plaintiff has no duty to defend William Mitchell in the California case due to a specific exclusion in the insurance policy.
3. Duty to Indemnify: The court could not determine at this stage whether the Plaintiff had a duty to ...
GEICO Sued Fraudulent Health Care Providers Under RICO and Settled with the Defendants Who Failed to Pay Settlement
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Post 5119
Default of Settlement Agreement Reduced to Judgment
In Government Employees Insurance Company, Geico Indemnity Company, Geico General Insurance Company, and Geico Casualty Company v. Dominic Emeka Onyema, M.D., DEO Medical Services, P.C., and Healthwise Medical Associates, P.C., No. 24-CV-5287 (PKC) (JAM), United States District Court, E.D. New York (July 9, 2025)
Plaintiffs Government Employees Insurance Company and other GEICO companies (“GEICO”) sued Defendants Dominic Emeka Onyema, M.D. (“Onyema”), et al (collectively, “Defendants”) alleging breach of a settlement agreement entered into by the parties to resolve a previous, fraud-related lawsuit (the “Settlement Agreement”). GEICO moved the court for default judgment against ...
ZIFL – Volume 29, Issue 14
Post 5118
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You can read the full 20 page issue of the July 15, 2025 issue at https://lnkd.in/giaSdH29
THE SOURCE FOR THE INSURANCE FRAUD PROFESSIONAL
This issue contains the following articles about insurance fraud:
The Historical Basis of Punitive Damages
It is axiomatic that when a claim is denied for fraud that the fraudster will sue for breach of contract and the tort of bad faith and seek punitive damages.
The award of punitive-type damages was common in early legal systems and was mentioned in religious law as early as the Book of Exodus. Punitive-type damages were provided for in Babylonian law nearly 4000 years ago in the Code of Hammurabi.
You can read this article and the full 20 page issue of the July 15, 2025 issue at https://zalma.com/blog/wp-content/uploads/2025/07/ZIFL-07-15-2025.pdf
Insurer Refuses to Submit to No Fault Insurance Fraud
...
Rulings on Motions Reduced the Issues to be Presented at Trial
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CASE OVERVIEW
In Richard Bernier v. State Farm Mutual Automobile Insurance Company, No. 4:24-cv-00002-GMS, USDC, D. Alaska (May 28, 2025) Richard Bernier made claim under the underinsured motorist (UIM) coverage provided in his State Farm policy, was not satisfied with State Farm's offer and sued. Both parties tried to win by filing motions for summary judgment.
FACTS
Bernier was involved in an auto accident on November 18, 2020, and sought the maximum available UIM coverage under his policy, which was $50,000. State Farm initially offered him $31,342.36, which did not include prejudgment interest or attorney fees.
Prior to trial Bernier had three remaining claims against State Farm:
1. negligent and reckless claims handling;
2. violation of covenant of good faith and fair dealing; and
3. award of punitive damages.
Both Bernier and State Farm dispositive motions before ...
ZIFL Volume 29, Issue 10
The Source for the Insurance Fraud Professional
See the full video at https://lnkd.in/gK_P4-BK and at https://lnkd.in/g2Q7BHBu, and at https://zalma.com/blog and at https://lnkd.in/gjyMWHff.
Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/ You can read the full issue of the May 15, 2025 issue at http://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-05-15-2025.pdf
This issue contains the following articles about insurance fraud:
Health Care Fraud Trial Results in Murder for Hire of Witness
To Avoid Conviction for Insurance Fraud Defendants Murder Witness
In United States of America v. Louis Age, Jr.; Stanton Guillory; Louis Age, III; Ronald Wilson, Jr., No. 22-30656, United States Court of Appeals, Fifth Circuit (April 25, 2025) the Fifth Circuit dealt with the ...
Professional Health Care Services Exclusion Effective
Post 5073
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This opinion is the recommendation of a Magistrate Judge to the District Court Judge and involves Travelers Casualty Insurance Company and its duty to defend the New Mexico Bone and Joint Institute (NMBJI) and its physicians in a medical negligence lawsuit brought by Tervon Dorsey.
In Travelers Casualty Insurance Company Of America v. New Mexico Bone And Joint Institute, P.C.; American Foundation Of Lower Extremity Surgery And Research, Inc., a New Mexico Corporation; Riley Rampton, DPM; Loren K. Spencer, DPM; Tervon Dorsey, individually; Kimberly Dorsey, individually; and Kate Ferlic as Guardian Ad Litem for K.D. and J.D., minors, No. 2:24-cv-0027 MV/DLM, United States District Court, D. New Mexico (May 8, 2025) the Magistrate Judge Recommended:
Insurance Coverage Dispute:
Travelers issued a Commercial General Liability ...
