Tort "Deform" and the BP Oil Spill

My mind is being boggled daily by the ramifications of the BP Oil Spill.  Men lost their lives on the rig, our environment is being devastated and every day folk have lost their livelihood in the Gulf.  Worst of all, this is nowhere close to ending.

Anger is at an all time high.  Tony Hayward foolishly commented that he wanted his life back.  Yeah, well so do the families of the men that perished.  So do the people that depend upon the Gulf and its abundance to earn a living and support their children.  Rep. Joe Barton of Texas had the audacity to apologize to BP because of the pressure the White House was putting on BP to set up an escrow fund of $20 billion dollars to help compensate the victims. I read today that some experts are estimating the total cost could exceed $100 billion.

All of this has generated new buzz on the issue of Tort Reform.  Tort Reform refers to proposed changes in our civil justice system that would limit the ability of victims to get compensation.  Proponents of tort reform would argue that this will reduce skyrocketing insurance costs and limit frivilous lawsuits.  This is despite the fact that there have been no unbiased studies (meaning studies other than those purchased by the insurance or healthcare industry) that prove or even support the proposition that insurance costs are related to tort compensation.  Tort reform only helps big business.  It completely obliterates justice for the comman man. Capping or limiting potential damages under Tort Reform also removes a company's determination to make safety a primary issue.  Take the BP Oil Spill as an example.  Currently, oil companies are limited to a $75 million dollar cap on damages.  Compare that to the estimated $100 billion in damages that BP has caused.  That is $.0007 on the dollar.  How does that affect, say the shrimper in Louisiana that makes $50,000 a year to support his family?  Joe Shrimper makes a claim to BP for his lost income for just one year of $50,000 and BP says, "Yes, we were wrong, but we only owe you $35.00.  Here's a check and best of luck to you".  That, my friends, is Tort Deform.

There is an attempt to push a bill through now that will remove the $75 million dollar cap on damages by oil companies.  By allowing unlimited liability, perhaps that will make companies like BP take safety a little more seriously if the shareholders know their dividend checks are going to be a little lighter in the years to come.

The argument on Tort Reform is contentious and bitter.  I am the first to agree that there are frivilous lawsuits out there but the answer is not in passing measures that will hurt those decent people who are not making frivilous claims but only trying to survive and be treated fairly.  Our civil justice system has plenty of measures in place to take care of frivilous lawsuits (ie, Motions for Summary Judgment, Rule 11 Sanctions, Trial by Jury, etc).  Let those procedures work their magic and take care of booting out the ridiculous lawsuits and leave the law alone to take care of those people that justly deserve it.

Insurance Bad Faith

As Beth discussed in her prior Blog post, if you are sued and the verdict is in excess of your available insurance limits, you may have a claim for Bad Faith against your insurance company. We are required to purchase liability insurance and assume if we are at-fault our insurance carrier will truly be our “Good Neighbor” and take care of us. However, the insurance company makes the decision about what to do for you. So if you are sued, the insurance company decides what offer to make and whether it will entertain fruitful settlement discussions with the Plaintiff. In essence, your insurance company decides whether you will be sued or not based on how they deal with the plaintiff in settling his or her case.


Bad Faith claims usually arise when the insurance company failed to settle a case with a plaintiff within the available insurance coverage and then later a verdict is rendered against the at-fault party for an amount in excess of the insurance limits. In North Carolina, you are required to carry at least $30,000.00 per person/ $60,000 per accident. The majority of time, in my practice, the plaintiff would like to resolve the claim within the limits of the at-fault party’s insurance coverage. Most plaintiffs are not seeking to displace someone from his or her home or someone's retirement. However, when the insurance company refuses to attempt to settle in good faith, my clients sometimes have no choice and at that point are a little irritated they are not being treated fairly.

An example of bad faith practices by an insurance company is when a plaintiff is seeking to settle his or her claim for let’s say the $30,000.00 worth of available coverage. The insurance company offers $25,000.00 and no more. The insurance company is basically telling the plaintiff, “I won’t pay you more so go file suit (against my insured) and try to get more”.   Filing a lawsuit is, of course, a long, expensive and risky process.  But the plaintiff has no choice but to file suit and let's say gets a verdict of $50,000.00. The insurance company then pays the $30,000.00 according the contractual language of its insured’s policy but leaving its insured to pay the plaintiff the other $20,000.00 from his/her own pocket. Now, if you are like me, I’d be a little ticked if my insurance company could have settled this claim for $30,000.00 and protected my home, car and retirement. Now you owe another $20,000.00 to someone you accidentally hurt. Once you discover the insurance company has not acted in your best interest, you now have a claim for potential bad faith. Some insureds will tell their company, "It’s not my fault", or "How can they be hurt that bad", or "I don’t want them paid". If you tell your company this and then have the above verdict against you, there is no bad faith. In other words, the insurance company acted in the manner you wanted them to and thus they are protected from bad faith. However, if you tell the insurance company to pay the claim to protect your assets like your home, retirement, etc., then you have a better shot at a bad faith claim. I would also recommend if you want the insurance company to resolve the claim to keep your assets protected that you send this in writing via certified mail to document the insurance file.

If you succeed in a bad faith claim against your insurance company, the insurance company could potentially owe you the excess amount. In the example above, it could be enough to cover the excess amount you owed the injured party. Depending on how bad the insurance company acted and what the documentation and claim files show, you could potentially recover more than the excess verdict under various statutes.

I look at bad faith as accepting responsibility. If it’s your fault, accept it and have it handled properly; it could keep you from losing your home or a retirement you have worked hard to obtain. I also recommend you review your insurance coverages. I firmly believe $30,000.00 worth of coverage is not enough to protect you when you are responsible for an accident. Our firm will review your insurance coverage for free and provide you advice on how to best implement an insurance policy that will adequately protect you.  Click here to visit our Online Legal Forms and Advice Store and you can upload your insurance declaration page for a free review by one of our attorneys. 
Posted by:  Jennifer Seate, Partner, Leone Noble & Seate

What Happens If You Are Sued?

So May was not a very good month for my blog.  It suffered because I was so darned busy that I forgot to write!  I also took the liberty of taking a bit of a vacation as well so there you have it. 

But now that I am back and ready to rock and roll (and type), I wanted to try to focus on a topic that doesn't often come up for our own clients, but it does happen to those folks who have hit our clients and maybe to someone you know.  What happens if you get sued by someone that you hit in a car accident?  While our firm does the opposite side of this issue (we represent the person who is filing the lawsuit against the at fault driver), we have had many people call us wanting to know what to do when they get sued.

The simple answer is that your own liability insurance company has a duty to defend you in the lawsuit. If you are ever served with legal papers (called a Complaint and Summons), you should immediately call your insurance carrier and report the lawsuit.  They will, in turn, hire a lawyer to represent you in the lawsuit.  But the real question... why are YOU getting sued instead of your insurance company?  That's the way the law rolls in North Carolina.  We (Plaintiff's lawyers) are forced to sue the individual responsible for the accident, not the insurance company.  While the insurance company has the duty to defend their insured, they are not named in the lawsuit, nor is a jury allowed to even know there is insurance available.

Even if your insurance company provides you with a lawyer at its expense, you are still entitled to your own legal counsel.  It is highly recommended that you hire your own attorney to advise you if there is a chance that you could get hit with a verdict in excess of your insurance limits.  If that is the case, your assets will be in jeopardy of being collected against.  You will, before you get to that point, want your own attorney to independently advise you of the risks outside of the lawyer hired by the insurance company to defend you.

I am going to ask my partner, Jennifer Seate, to write a follow up blog on this issue regarding issues of Bad Faith against your own insurance company.  Keep your eyes open.  It won't be another month before we write again.