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Mississippi & North Carolina courts turn down diminished value, subrogation appeals

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Insurance | Legal
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Mississippi and North Carolina courts have sided with two lower courts in separate lawsuits, one over allegedly unpaid diminished value and the other regarding subrogation rights; both of which involved uninsured motorist claims.

In Mississippi, a 2021 crash left the third-party claimant with $13,545 in diminished value on his 2021 Chevrolet Tahoe. Kenan Watkins was paid $24,314.25 by Safeway Insurance Co. for damages then the remaining $685.75 of the at-fault party’s policy limit toward diminished value.

In response, Watkins filed an uninsured motorist claim with his insurer, Allstate. In Mississippi, underinsured motorist claims fall under uninsured. His claim was denied because of a policy provision that excludes “any decrease in the property’s value, however measured, resulting from the loss and/or repair or replacement.”

Watkins filed suit against Allstate in the Southern District of Mississippi District Court. Watkins argued that Allstate’s provision violated Mississippi’s uninsured motorist statute and that its auto policies “impermissibly deny insurance coverage that is required by law.”

Allstate sought dismissal stating that Watkins had not proven the other driver to have been uninsured and that the policy provision was legal. The District Court sided with Allstate, which was upheld on appeal.

A panel of United States Court of Appeals for the Fifth Circuit judges wrote in their Jan. 12 ruling, “Watkins’ claim that the diminished value exclusion violates public policy fails because Watkins has not pointed to a ‘pronouncement, either legislative or judicial, requiring that diminished value be a part of all automobile insurance policies’ …Neither the legislature nor the judiciary have pronounced that insurers must provide for payment of diminished value in all issued automobile policies.”

In a separate Chatham County, North Carolina case, the North Carolina Farm Bureau sought reimbursement of underinsured motorist policy coverage it had paid to its policyholder after learning of a settlement between the two parties involved in the collision.

Farm Bureau had paid $100,000 in UIM coverage to its policyholder who was the passenger in a vehicle involved in a 2016 collision and was severely injured, according to court documents. The injured party filed suit against Nationwide, the driver’s insurer, two years later for negligence in the collision and for having not received payment per the driver’s policy of $300,000 per person and $300,000 per accident.

In October 2022, the case was settled between the driver and passenger with a confidential amount exceeding $300,000.

Farm Bureau sought reimbursement but because it didn’t offer the tentative settlement amount to the plaintiff within 30 days of notice that a settlement had been reached, the court ruled it lost its right to subrogation.

The appeals court agreed with the lower court’s ruling, citing N.C. Gen. Stat. § 20-279.21(b)(4) as “clear and unambiguous.”

The statute states, “No insurer shall exercise any right of subrogation… where the insurer has been provided with written notice before a settlement between its insured and the underinsured motorist and the insurer fails to advance a payment to the insured in an amount equal to the tentative settlement within 30 days following receipt of that notice.”

The appeals judges wrote in their Jan. 16 order that “Farm Bureau’s position is based on the premise that Plaintiff ‘had expressly rejected the tender of policy limits and stated [an] intent to continue to reject settlement offers for the liability insurer’s policy limits.’

“This argument has been repeatedly rejected by this Court: Both the statute and case law require a UIM insurer be notified when a settlement offer is made, and when the primary liability insurance carrier has offered the limits of its policy in settlement, as was done in this case, the insurer must advance that amount to the insured within 30 days to protect its subrogation rights. Neither the statute nor case law require that the settlement be completed or that the UIM carrier must have notice of its insured’s acceptance of the offer.”


Featured image: Stock photo of judge with gavel. (Credit: Liudmila Chernetska/iStock)

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