Plaintiffs in the recent Alabama Court of Civil Appeals case of State Farm Mutual Automobile Insurance v. Brown were seriously injured in a car accident with an at-fault driver who was underinsured, meaning he lacked enough insurance to cover all of their losses.
Fortunately, plaintiffs had an underinsured motorist (UIM) policy with defendant insurer. Plaintiffs subsequently sued the at-fault driver for negligence, and also named their own insurer as a defendant in order to recover UIM benefits.
The liability insurer of the at-fault driver subsequently offered to settle the case for $200,000, which represented the driver’s policy limits. Plaintiffs informed their own insurer of the claim. The insurer then took action under a precedent set by the Alabama Supreme Court in 1991 with Lambert v. State Farm.