Insurance Companies Battle Over Who Picks Up the Tab After a Car Wreck in Monroe

Amber Bridges was driving her parents’ 2002 Hyundai Sonata without their permission when she was involved in an accident with a 1992 GMC pickup truck owned by Tommy McClain at the intersection of Millhaven Road and Highway 594. She was attempting to turn left onto Millhaven road and was issued a citation and later found by the trial court to be solely responsible for the accident. Amber had received her official driver’s license just two weeks before. The car she was driving was owned by her father, Terry, and insured by American through Advanced Planning Insurance Company.

Although both cars were insured, American denied coverage for the liability of Amber.

When Terry obtained the automobile insurance in 2006, Amber was 16 years old and had a driver’s permit. However, Terry failed to disclose that Amber was a resident of the household over the age of 14. State Farm, the insurer of McClain’s car, paid the fair market value of the totaled pickup truck. State Farm and McClain then brought a civil suit for damages against Terry, Amber, and American.

La. R.S. 22:860 states that any statement or promise discussed when negotiating an insurance contract may not be material to the contract unless misrepresentation occurs or there is an intent to deceive a party. The statute clarifies that in an application for insurance, all statements made by an insured are considered to be representations instead of warranties. If an applicant made a false statement, recovery is still possible so long as the statement was not made with the intention to deceive and that the statement did not materially affect the insurer’s decision to assume the risk.

When seeking insurance, the purchaser has a duty to inform the insurer of all the facts relevant to a decision about writing a policy. An insurance policy may be voided if (1) the insured made a false statement in the insurance application, (2) the false statement was material, and (3) it was made with the intent to deceive. The insurer carries the burden of proving that the insured misrepresented a material fact with the intent to deceive.

Despite the omission, the trial court found and the appellate court affirmed that the policy could not be voided. Bernice, the representative of Advanced who completed the application for insurance, knew Terry, his background, his children and their ages, and was informed by Terry that the vehicle in question would eventually be driven by Amber when she was a senior in high school. Terry mistakenly believed that Amber would not have to be on the policy until she was allowed to drive the vehicle. Bernice had Terry sign the insurance application using an electronic signature pad without presenting the application to Terry for review. If an agent by mistake, fraud or negligence inserts erroneous or untrue answers to the questions contained in the application, those representations are not binding on the insured. The courts determined that Terry could not have intentionally withheld the information with the intent to deceive because he trusted the representative to prepare the application, had no intention of hiding the fact that Amber would eventually drive the car, and was not shown the application to review its accuracy.

Disputes like this arise quite often with insurance companies. By carefully analyzing the situation and consulting with a legal expert, you can make sure a company looking out for their bottom line doesn’t violate your rights