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Auto Owners loses fight to force Lloyds of London to underwrite payment of bad-faith settlement against AutoOwners.

Kelly Matthews and her parents were sued after AutoOwners, their insurer, allegedly mis-managed an auto negligence claim against Kelly, rejecting an offer to settle within the policy limits.  Ultimately, a jury verdict against the Matthews resulted in a judgment well in excess of the Matthews' AutoOwners policy limits, and the Matthews sued AutoOwners for the difference, alleging "bad faith" by the company and numerous individuals.  AutoOwners settled the bad faith claim with the Matthews and then attempted to recoup its losses by suing its own insurer, Lloyds of London.

Lloyds claimed that it had not received proper written notice of the Matthews' claim on a timely basis, but AutoOwners argued that by aggregating the correspondence involving the underlying claim, it could fulfill the "notice of claim" provision in its policy with Lloyds during the operative time period.  The Court rejected AutoOwners' theory, holding that the plain language in its policy with Lloyds required AutoOwners to file documents within the policy period, containing a demand for relief and an allegation of wrongful act, in order to meet the policy terms.  Since AutoOwners relied upon aggregated documents filed before the policy period, its aggregation claim must fail.  The Court did not resolve the issue of whether documents filed within the proper time period could be aggregated to constitute a proper claim.

It is ironic that an insurer so practiced in the policy of denying claims based on technical arguments from the fine print of its policies should be "hoisted by its own petard." 

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