When a speeding drunk driver causes a head-on collision that leaves other motorists severely injured, we would expect the victims to be entitled to a large payout. However, a case from three decades ago makes it clear the insurance company has no obligation to pay all of the claimants if the policy has been exhausted.
The 1994 case of Texas Farmers Ins. v. Soriano protects insurance companies in cases with many claimants and acts as an incentive for accident victims and their families to settle cases as soon as possible. The Supreme Court of Texas case illustrates the importance of being the first claimant to have a case settled with an insurance company when numerous claims are pending.
The Facts of the Soriano Case
Richard Soriano was involved in a head-on collision with another car in 1978, over 15 years before his case reached the Supreme Court of Texas. Carlos Medina, the other driver, suffered severe injuries and his wife died. Their two children aged 12 and 11 also suffered serious injuries. Adolfo Lopez, a teen passenger in Soriano’s car also died in the wreck. Police charged Soriano with involuntary manslaughter, driving under the influence of alcohol, unsafe passing, and speeding. Multiple parties filed claims against Soriano’s insurance policy with Texas Farmers Insurance.
Given the nature of the injuries, the survivors anticipated high payouts. Unfortunately, Soriano had taken out a minimum-limits insurance policy with Texas Farmers through his parents’ policy. The policy offered $10,000 per person or $20,000 per accident. The insurance company offered the full policy limits of $20,000 to the Medinas who initially rejected this offer. They wanted to further investigate the defendant’s personal assets. The Medinas, along with Alonzo and Rafaela Lopez, the parents of Adolfo Lopez, the deceased passenger, both sued Richard Soriano. The cases were consolidated for trial. Before the trial, the insurance company settled Adolfo Lopez’s wrongful death claim for $5,000 and offered the remaining $15,000 on the policy to the Medinas. They rejected the offer and asked for $20,000 – the original sum they were offered up to the insurance policy limits.
Soriano later assigned his rights against Farmers to the Medinas in exchange for a covenant not to execute the judgment and to drop the criminal charges against him. The Medinas sued the insurance company in Soriano’s name for negligence, gross negligence, breach of duty of good faith and fair hearing. A jury found Texas Farmers Insurance was negligent and grossly negligent in its handling of the Medinas’ claims. The jury held the insurance company breached a duty of good faith and fair dealing to Soriano by failing to settle the claims brought by the Medinas.
The trial court awarded the Medinas (via Soriano’s assignment) $520,577.24 in damages and prejudgment interest and another $5 million in exemplary damages.
Texas Farmers Ins. v. Soriano in the Supreme Court
The San Antonio Court of Appeals affirmed much of the trial court’s judgment but offered a $4 million remittor on the punitive damages intended to punish the insurance company. The trial court could correct an inequitable award without a new trial. Farmers appealed the case to the Texas Supreme Court.
The state’s highest court reversed the earlier decisions. The justices said they found no evidence of negligence or breach of the duty of good faith and fair dealing on behalf of the insurance company. The court held that when an insurer is faced with multiple insurance claims on an inadequate policy, it may enter into a reasonable settlement with one of a number of claimants even if the settlement exhausts all of the available money, leaving nothing for the other claims.
The justices in Texas Farmers Ins. v. Soriano held that “unreasonableness” is not determined by comparing rival claims. Instead, the courts must consider what a reasonable, prudent insurance company would do under identical or similar circumstances as well as what a sensible business person would do in the management of their own company. Cases since Soriano suggest the “reasonableness” standard is a tough one for claimants to overcome in cases involving multiple claims.
The Soriano ruling has created a pro-insurance climate in Texas injury cases for decades when defendants hold minimal policies and multiple claims are made against them.
Court cases post-Soriano demonstrate how the 1994 case continues to set an important precedent. In Lane v. State Farm Mutual in 1999 the Court of Appeals held that the threshold for the Soriano case is low. Michael Fuhrman was killed as a passenger in a car crash. State Farm gave his grandparents, Donald and Beatrice Merritt and Patricia Lane, the grandparent’s daughter, $10,000 each, to settle an Uninsured Motorist (UIM) policy worth $20,000.
The same court found in favor of an insurance company in Mid-Century Ins. Co. vs Childs a year later in 2000. Alton Childs was involved in a three-car accident that caused several deaths. Mid-Century concluded Childs was responsible for multiple serious injuries. The insurance company settled some of the claims against Childs and exhausted the limits of the policy without settling with Nicole Dodson. She later sued Childs and his insurer refused to provide a defense. Mid-Century asked a court to declare it had no duty to defend Childs further. The court ruled against the insurer finding it was obliged to defend Childs because it had not settled all potential claims from the accident, failed to act reasonably, and failed to prove its coverage limits for property damage had been exhausted.
The Court of Appeals overturned the trial court ruling, citing the Soriano case. The justices said Soriano “held that insurers may not be held liable for settling reasonable claims with one of several claimants under a liability policy, thereby reducing or exhausting the proceeds available to the remaining claimants.”
“When faced with a settlement demand arising out of multiple claims and inadequate proceeds, an insurer may enter into a reasonable settlement with one of the several claimants even though such settlement exhausts or diminishes the proceeds available to satisfy other claims,” the court stated. The justices said Mid-Century acted reasonably because it acted promptly in settling claims and exhausted the policy limits.
The Implications of the Soriano Ruling in Texas
The Soriano ruling continues to hold sway in Texas. It can be dismaying for accident victims and their families to realize that insurers cannot be held liable for using up the limits of an insurance policy on another claimant. Soriano makes it crystal clear that an insurance carrier cannot be held in bad faith if it enters a reasonable settlement with the initial claimant, even if others are left with nothing. A raft of court cases shows reasonableness is not a high bar for insurance companies to reach. Soriano highlights the importance of hiring an experienced Texas car accident lawyer, like the attorneys in Ramji Law Group, who will work out a settlement with the insurance company as soon as possible in cases with low insurance limits and many claimants. If you are in an accident with multiple claimants, callRamji Law Group at 713-888-8888 as soon as possible.
