• Arkansas Appeals Court Finds Insurer Breached Settlement And Violated Statutory Law By Including Plaintiff’s Insurer As Payee On Settlement Check
  • May 28, 2013 | Author: George B. Hall
  • Law Firm: Phelps Dunbar LLP - New Orleans Office
  • An Arkansas appeals court had held that a liability insurer breached a settlement agreement and violated state law by including a potential lien holder as a payee on a settlement check issued to an injured plaintiff.  Lopez v. United Auto. Ins. Co., 2013 WL 1682214 (April 17, 2013).

    Following an auto accident, an injured party received medical pay benefits from her own insurer.  The insurer submitted a letter to the tortfeasor’s liability insurer advising of a subrogation lien.  The injured party and the tortfeasor’s insurer reached a settlement agreement that required the victim to indemnify the insurer against liens.  The agreement did not specify how the payment was to be issued.  A check was issued and made payable to various parties, including the injured party’s own insurer, which previously advised that it had a subrogation lien.  The injured party objected to the inclusion of her insurer as a payee on the settlement check and filed suit against the tortfeasor’s liability insurer for breach of the settlement agreement.  The trial court granted summary judgment in favor of the liability insurer.

    The appeals court reversed, finding that the inclusion of the victim’s own insurer as a payee violated the settlement agreement.  It held that the parties to the agreement contemplated the existence of liens, and that the injured party agreed to indemnify the insurer against lienholder claims.  The agreement contained no other language about the insurer’s right to protect itself against liens.  Thus, the court held that insurer breached the agreement by including the purported lienholder as a payee on the check, and that, pursuant to Arkansas statute, the insurer was not permitted to condition its payment on the issuance of a settlement check which included the injured party’s own insurer as a payee.