Wednesday, September 2, 2009

Not Enough Money


One of the issues bad faith attorneys have encountered over the years is a particular problem in Florida, the multiple claimant/short limit, ("MC/SL"), dillema. MC/SL issues arise whenever there are insufficient proceeds to resolve all of the claims arising from an incident and the number claimants exceeds the the number which results from the division of the aggregate limit of insurance by the per person limit of insurance. It sounds more complex than it is. If you have an insurance policy with per person limits of 100 and an aggregate limit of 300, you would need to have more than 3 claims to have an MC/SL situation (the total value of all the claims would also need to exceed 300).


Some jurisdictions have adopted a first come, first serve rule which protects carriers from bad faith allegations. This allows an insurer to settle a third party claim against its insured without regard for other potential claims arising from the same loss. In those states (Texas is one), the insurer has no duty to try and resolve as many claims as possible against the insured thereby preserving the maximum available coverage for the insured. Rather, third party insurers in First Come/First Serve states are free to resolve claims as they are presented without regard to protecting the insured's assets or obtaining the greatest value for the contracted liability limits. The insured is left to deal with any judgment in excess of their contracted limit because the insurer can pay claims as they arrive without concern for limiting the overall value of claims against their insured.

Why should it be that someone purchasing insurance in Texas should get less benefit from the same policy as a purchaser in identical circumstances in Florida. In what other industry does state regulation substantially diminish a product being purchased, let alone a product so necessary and regulated.

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