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An insurer is not obligated to pay a $2.6 million default judgment against a truck driver who has disappeared, says a divided federal appeals court, in affirming a lower court ruling.
Around 2 a.m. in October 2016, Zef Ljajcaj was driving his semitruck across Indiana’s border into Michigan when another truck driver, Nurbek Aiazbekov, suddenly stalled and jackknifed into the middle lane, according to Tuesday’s ruling by the 6th U.S. Circuit Court of Appeals in Cincinnati in National Continental Insurance Co. v. Nurbek Aiazbekov; Road Carriers Inc., Zef Ljajcaj.
Mr. Ljajcaj could not avoid hitting the back of Mr. Aiazbekov’s trailer, and said he suffered head, back and shoulder injuries that required multiple surgeries and caused lasting physical and mental harm.
He filed a negligence suit against Mr. Aiazbekov and his company, Darien, Illinois-based Road Carriers Inc.
The company’s insurer, Progressive Corp. unit National Continental, based in Cleveland, paid for separate counsel to defend both Road Carriers and Mr. Aiazbekov.
Mr. Aiazbekov’s attorney “made many efforts to reach him, including through a private investigator, but learned that Aiazbekov had fled to ‘Asia or Russia,’” said the ruling.
The attorney moved to withdraw from the case, which was permitted. Two weeks later, Mr. Ljajcaj agreed to a $500,000 settlement with Road Carriers, which was half of the $1 million coverage limit under the company’s insurance policy.
That settlement agreement did not release Mr. Ljajcaj’s claims against Mr. Aiazbekov, and Mr. Ljajcaj later obtained a default judgment of about $2.6 million against him, the ruling said.
National Continental then filed suit in U.S. District Court in Grand Rapids, Michigan, seeking a declaratory judgment it had no duty to defend or indemnify Mr. Aiazbekov in the case under its policy, which states it has no duty to provide coverage if the duty to cooperate has been violated.
“National Continental argued that Aiazbekov had violated its ‘cooperation provision’ by fleeing the country,” said the ruling. The district court agreed and ruled the insurer need not indemnify Mr. Ljajcaj for the judgment against Mr. Aiazbekov.
An appeals court panel affirmed the ruling in its 2-1 decision. “National Continental took many steps that Ljajcaj claims it should have, including searching property records and social media,” the ruling said.
“As for other actions (such as contacting employees), Ljajcaj identifies no case law suggesting National Continental needed to do more than it did under the circumstances: repeatedly call, text, and send mail to Aiazbekov, hire a private investigator to conduct online searches of his records, and personally visit his possible residences,” the ruling said.
National Continental “followed the steps required by Illinois law,” the decision said. “Unlike in most cases where the insurer disputes coverage from a case’s outset, National Continental did not disclaim coverage from the start.
“Rather, it disclaimed coverage only after Aiazbekov disappeared and breached the cooperation clause. At that point, it could choose between defending the absent client under a reservation of rights or filing a declaratory-judgment action. It chose the latter course. We think it did so within a reasonable time,” it said, in affirming the lower court decision.
The dissenting opinion states National Continental “ceded its non-cooperation defense by failing to seek a declaration excusing it of its duty to defend its insured prior to withdrawing as counsel.”
Attorneys in the case had no comment or could not be reached.
The Texas Supreme Court ruled last week that the family of an “overworked” truck driver who was killed after his 18-wheeler veered off the road in Texas cannot sue his employer because the family could not prove the company knew the accident could occur.
A federal appeals court has reversed a lower court in a dispute between insurers over coverage for a trucking accident, and held that a motor carrier liability policy must provide coverage.