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What Happens When an Insurance Company Refuses to Defend a Negligent Driver from a Personal Injury Lawsuit?


If you are injured in a car accident, you have the right to seek damages against the negligent driver. In most cases, the other driver’s insurance company is actually responsible for defending against the personal injury claim, and paying out any damage award within the policy limits. Of course, insurance companies often try to shirk their obligations by claiming the insured driver somehow did not comply with the policy requirements, thereby absolving the insurer of its duty to defend.

Appeals Court Holds Accident Victim “Necessary Party” to Insurance Company Action

Such non-coverage decisions obviously affect not just the insured driver, but also the accident victim, especially when the negligent party has no other financial resources at their disposal. For this reason, Tennessee courts must follow certain rules before issuing declaratory judgments in favor of insurance companies looking to avoid liability for an accident claim.

Here is a recent case on point from the Tennessee Court of Appeals. In December 2012, two drivers were in a car accident. The first driver, whom we’ll identify here as “the defendant,” notified his insurance company via his spouse. The insurer subsequently paid claims to both drivers for property damage to their respective vehicles.

The other driver–the plaintiff–subsequently filed a personal injury lawsuit against the defendant, seeking $500,000 in damages. The defendant’s insurance company then filed its own lawsuit, seeking a declaratory judgment that it was not responsible for defending against the plaintiff’s personal injury claim. The insurer alleged its position was justified due to the defendant’s failure to notify it of the lawsuit or cooperate with its investigation of the accident, both of which constituted breaches of the underlying insurance policy.

The defendant never responded to the insurance company’s lawsuit. The insurer therefore moved for default judgment, which the trial court granted. Nearly two years later, the plaintiff in the personal injury case filed a motion to set aside the default judgment on the grounds she was never served as a party to the case, despite the fact she had an “indispensable interest” in the outcome.

The trial court denied the plaintiff’s petition. But in an opinion issued on August 9, 2018, the Court of Appeals reversed. It held that the plaintiff “as a person allegedly injured due to the actions of the insured [] was a necessary party to the declaratory judgment action brought to resolve [the insurance company’s] obligation of defense and indemnification of” the defendant. Since the plaintiff was never “joined” as a party, the trial court effectively lacked jurisdiction over the insurer’s declaratory judgment action.

Get Help from a Tennessee Car Accident Lawyer Today

Perhaps the most important reason to work with a Knoxville car accident lawyer is to ensure there is someone representing your interests when dealing with insurance companies. As the case above illustrates, you can never expect an insurer to cover your accident without jumping through hoops. So if you need help following an accident, contact the offices of Fox, Farley, Willis & Burnette, Attorneys at Law, to speak with a member of our legal team today.



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