State Farm Mutual Automobile Insurance Co. v. Green, 2003 UT 48

Summary

The Utah Supreme Court considered whether an insured who settled with an allegedly liable tortfeasor without the insurer's written consent could recover underinsured motorist benefits. The court held that the consent-to-settle exclusion was enforceable and that the insured breached it, but recovery could be denied only if the insurer suffered actual prejudice to its subrogation rights. The court remanded for a determination of actual prejudice and addressed the insured's potential entitlement to stack coverage under two policies.

Holdings

1. Consent-to-settle exclusions in UIM policies are generally enforceable under Utah law and do not violate public policy merely because they condition UIM coverage on the insurer's consent to a settlement.
2. Green breached the exclusion by settling with Murray without State Farm's written consent after her attorney failed to provide the written verification and settlement information State Farm reasonably requested.
3. A breach of a consent-to-settle exclusion permits denial of UIM coverage only if the settlement caused actual, rather than theoretical, prejudice to the insurer's ability to recover through subrogation.
4. State Farm's policies did not clearly and unambiguously alter the general rule that the insured must be made whole before the insurer may recover from a tortfeasor through subrogation.
5. Under the version of Utah Code section 31A-22-305 applicable to Green's 1995 accident, Green could stack UIM coverage under both State Farm policies, subject to recovering no more than the highest limit afforded for any one vehicle under each policy.

Questions Presented

1. Whether the consent-to-settle exclusion in Green's UIM policies was enforceable under Utah law and public policy.
2. Whether Green breached the consent-to-settle exclusion by settling with Murray without State Farm's written consent.
3. Whether the breach relieved State Farm of its obligation to pay UIM benefits without proof that the settlement actually prejudiced State Farm's subrogation rights.
4. Whether Green could stack the UIM coverage limits under both State Farm policies under the 1995 Utah UIM statute.

Disposition

reversed_and_remanded