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Supreme Court Says Pretrial Agreed Judgment May Bind Driver's Insurance Company in Later Bad Faith Litigation (Part I)

The Colorado Supreme Court decided November 22, 2010, that the Colorado Court of Appeals committed error when it upheld the trial court’s grant of summary judgment (a decision on the law without a trial) in favor of an insurance company in a bad faith case brought by a severely injured vehicle passenger.
The vehicle’s driver lost control, seriously injuring five passengers, including one passenger who was rendered paraplegic (complete paralysis form the waist down) in the accident. The driver’s insurance provided coverage of $100,000 per person and $300,000 per accident. The company deposited the full $300,000 with the court and filed what is known as an interpleader case, naming all of the injured passengers as defendants and asking the court to decide how the insurance proceeds should be apportioned.
The insurance company settled with four of the injured passengers for a total of $200,000. Because the insurance company could not serve the remaining passenger, who resided in Florida, with legal process, the court had no jurisdiction to litigate the nonresident’s claim.
The nonresident passenger, claiming that the insurance company refused in bad faith to settle with her for the $100,000 in remaining insurance coverage, then sued the driver. The insurance company undertook defense of the case, as it was legally obligated to do.
In a later post (Part 2 – 12/02/2010), I will elaborate on the outcome of this case.

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