E-Alert Case Updates

Insurance Company Owes No Duty of Good Faith to Insured Who Files an Uninsured Motorist Claim, Placing Them in an Adversarial Relationship

Hoang Do v. Liberty Insurance Corporation
Case No. 13-1063 (United States Court of Appeals for the Fourth Circuit)
by Joel M. Celso, Summer Associate
Semmes, Bowen & Semmes (www.semmes.com)

In this recently issued opinion, the U.S. Court of Appeals for the Fourth Circuit affirmed the judgment of the U.S. District Court in granting Defendant Liberty Insurance Corporation’s (“Liberty”) motion to dismiss Plaintiff Hoang Do’s (“Mr. Do”) complaint for failure to state a claim.

The suit arose out of an automobile accident between Mr. Do and Gerson Arias (“Mr. Arias”). Because Mr. Arias was simultaneously at fault for the accident and uninsured, Mr. Do submitted an uninsured motorist claim to Liberty, his automobile insurance carrier. Liberty waited months to respond to Mr. Do’s claim, which it ultimately rejected. In the meantime, Mr. Do had settled and signed a release of rights with Mr. Arias and his insurer. Because of Liberty’s delayed response, the statute of limitations lapsed for Mr. Do to bring any tort claims related to the accident.

Mr. Do then filed suit against Liberty claiming that the company acted in bad faith by promoting its own best interests against those of the insured (Mr. Do) when it delayed acting on, and ultimately rejected, Mr. Do’s uninsured motorist claim. The district court dismissed Mr. Do’s complaint for failure to state a claim against Liberty because Mr. Do had not secured a judgment against Mr. Arias. The court further held that Mr. Do failed to state a claim for bad faith against Liberty because Liberty was Mr. Do’s adversary in the uninsured motorist claim and therefore owed Mr. Do no duty to act in good faith. Mr. Do appealed only the second ground.

On appeal the Court stated that as soon as an insured individual files an uninsured motorist claim with its insurer, they assume an adversary relationship. Because they are in an adversarial relationship, the insurer has no obligation to share information with the insured. Therefore, the Court stated that Liberty had no duty to inform Mr. Do that uninsured motorist coverage required a judgment against the uninsured motorist. Similarly, Liberty was not required to let Mr. Do know that if he settled and signed a release of his rights with Mr. Arias and his insurer, that Liberty would rely on that settlement to deny Mr. Do’s uninsured motorist claim.

Because Liberty owed no duty of good faith toward Mr. Do, the U.S. Court of Appeals affirmed the district court’s holding that Mr. Do’s complaint failed to state a plausible claim for bad faith against Liberty.