Background
Randall Heimler was injured in a motor-vehicle accident involving Leon Kingston, whose insurer tendered its $10,000 liability limit. Before suing his UM/UIM carrier, Progressive American Insurance Company, Heimler signed a bodily-injury release in exchange for that payment without obtaining Progressive’s consent or a waiver of its subrogation rights.
After retaining new counsel, Heimler tried to undo the settlement and sought Progressive’s waiver. Progressive asserted that the unauthorized settlement barred UM/UIM coverage. The circuit court held a bifurcated bench trial on rescission and prejudice, and found that the settlement had not been rescinded but that Progressive was not prejudiced because Kingston was apparently and probably insolvent.
The Court’s Holding
The Fourth District affirmed the partial final judgment. An insured’s unauthorized settlement with a tortfeasor presumptively prejudices the UM/UIM insurer, but the insured may rebut that presumption by showing a lack of prejudice.
The pertinent question is counterfactual: had the insured complied with the policy and statute, would a reasonably prudent insurer have rejected the settlement and pursued a damages claim against the tortfeasor expecting to come out financially ahead? The trial court could consider collectability, exemptions, likely collection costs, and the value of the proposed settlement. Given Kingston’s financial circumstances, the appellate court held that the trial court did not abuse its discretion in finding no prejudice.
Key Takeaways
- An unauthorized settlement does not automatically forfeit UM/UIM coverage; it creates a rebuttable presumption of insurer prejudice.
- The insured bears the burden to establish that the insurer was not prejudiced by the noncompliant settlement.
- Prejudice turns on the practical value of lost subrogation rights, including whether pursuing the tortfeasor would likely yield a net financial recovery.
Why It Matters
The decision rejects rigid formulations requiring proof that a tortfeasor is permanently judgment-proof. Instead, courts must make a fact-based, commercially realistic assessment of whether the insurer would rationally have preserved and pursued subrogation rights.
For UM/UIM practitioners, the case underscores the importance of seeking statutory authorization before settling while preserving an avenue to rebut prejudice when that requirement was not met.