Insurer denies claim involving 'temporary substitute' auto

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Verdicts & Settlements

December 27, 2012

Insurer denies claim involving 'temporary substitute' auto 

Theodore Hoffman, 59, was driving his girlfriend’s pickup truck and was stopped at a stop sign when he was rear-ended by a vehicle operated by Desiree Fabello. Hoffman suffered a herniated disk at L4-5. When conservative treatment failed to alleviate his worsening back pain, he underwent a laminectomy and diskectomy at L4-5. Hoffman also suffered aggravation of his restless leg syndrome—which was under control with medication before the collision—and some sexual dysfunction.

After exhausting the limits of Fabello’s $25,000 insurance policy, Hoffman filed a claim with his insurer, Oregon Mutual, for underinsured motorist (UIM) coverage. The policy provided coverage for an insured occupying a “temporary substitute for a covered auto,” provided that the covered auto was out of service because of breakdown, repair, servicing, loss, or destruction.

Oregon Mutual denied the claim on the ground that Hoffman was driving a “non-owned, non-covered” vehicle at the time of the incident.

Hoffman sued Oregon Mutual, alleging bad faith, breach of contract, and breach of the covenant of good faith and fair dealing. The plaintiff asserted that his girlfriend’s car was a temporary substitute under the policy’s terms because he had borrowed it after his own truck developed a flat tire.

The defense argued that the plaintiff’s flat-tire story was an excuse to obtain coverage after his claim was denied. The plaintiff was prepared to show that (1) when he told the claims representative about the flat tire, he had not yet received notice that his claim had been denied and (2) the letter denying the claim did not mention that Hoffman would have been covered if he had been driving a temporary substitute for a covered vehicle. Thus, the plaintiff asserted, there was no reason for him to lie about the flat tire.

The plaintiff was also prepared to rebut defense arguments that he failed to provide prompt notice of the UIM claim.

The parties settled for $80,000.

Citation: Hoffman v. Oregon Mut. Ins. Co., No. 1:11-cv-00120 (D. Idaho Sept. 18, 2012).

Plaintiff counsel: Jake Davis McGrady and Craig L. Meadows, both of Boise, Idaho.

Plaintiff expert: Roy Frizzell, neurosurgery, Boise.

Defense experts: Irving Paul, claims handling procedures, Coeur d’Alene, Idaho; and Rodde D. Cox, physical medicine and rehabilitation, Boise.

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