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State Farm On the Hook for Bad Faith and Fraud Perpetrated Against Their Own Insured
After Jerry Earl was injured in a hit-and-run motorcycle accident, State Farm Mutual Automobile Insurance Company offered to settle the claim for $40,000. Earl and his wife, Kimberly, rejected that offer and instead sued State Farm under their uninsured motorist coverage benefits and loss of services, society and companionship.
When the Earls inquired as to the uninsured motorist policy State Farm’s counsel, answered that the couple was covered under an uninsured motorist policy of $250,000. Jerry Earl later died of unrelated causes, and a jury awarded $175,000 to his estate and $75,000 to Kimberly Earl.
After the verdict, State Farm’s counsel let it slip that the Earls had a Personal Liability Umbrella Policy (PLUP), which provided an additional $2 million in uninsured motorist coverage. Upon learning of this, the Earls moved for a modification of the verdict based on the insurer’s failure to produce information about the PLUP policy during the discovery phase of the trial. The Earls thereafter withdrew that motion and filed a fraud, bad faith and breach of contract claim against State Farm and Vinnedge, requesting damages and attorney fees.
State Farm argued that the case was already decided and cannot be litigated again and should be thrown out. The Jackson Superior Court agreed. The case was then appealed to the Indiana Court of Appeals and the decision was overturned and the Earls can continue. The Court of Appeals stated that there was no overlap in the claims or requested damages between the two cases and that the fraud litigation did not ask the trial court to avoid the judgment in the UM litigation.