As we discussed in a recent post, an injured person does not usually have the right to sue the insurance company of the person or business that caused the injury. There is a small exception to this rule, however. In situations when an injured person (or, in the case of death, his or her family) has filed a lawsuit against the negligent person or business and obtained a judgment, but the insurance company refuses to pay the injured person the money to which he or she is entitled under the judgment, the injured person may be able to sue the insurer directly.
In the case of Morales v. Zenith Insurance Company, the family of a man who was killed on the job filed suit against the man’s employer. According to the family’s complaint, the man was killed by a falling palm tree while working for a landscaping firm. The family filed a wrongful death lawsuit in state court in 1999, alleging that the landscaping firm’s negligence had caused the man’s death. A default judgment was entered against the firm. Later, a jury trial was held to assess damages, with the family ultimately being awarded $9.525 million.
The Workers’ Compensation Settlement
Meanwhile, the family accepted workers’ compensation benefits from the landscaping firm’s insurance company, which insured the firm for both workers’ compensation (“Part I”) and employer liability insurance (“Part II”). The employer liability insurance provision contained an exclusion to the effect that there would be no coverage for any obligation under workers’ compensation law. In 2003, the insurance company made a “final lump sum payment” to the family in exchange for a settlement agreement that purported to constitute an election of remedies by the man’s estate with respect to both the employer and the carrier. Including the lump sum, the family received a total of $100,000 in workers’ compensation benefits.