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Liberty Mutual unit entitled to recoup $1M deductible


A federal appeals court Wednesday reversed a lower court ruling and held a Liberty Mutual Insurance Group unit is entitled to recoup the $1 million deductible it paid in a motor vehicle accident settlement, despite the blank space under “applicable policies” left in its policy’s deductible endorsement.

In May 2018, Raymond Goodlin, an employee of trucking company Big Binder Express LLC, based in Union City, Tennessee, was involved in an accident with another vehicle while driving a tractor with an attached trailer, according to the ruling by the 5th U.S. Circuit Court of Appeals in New Orleans in Big Binder Express, LLC; Raymond Goodlin v. Liberty Mutual Fire Insurance Co. v. Darling Ingredients, Inc. The trailer was owned by Darling and leased to Big Binder.

Later that year, two personal injury lawsuits were filed alleging that Mr. Goodlin, Big Binder and Darling had been negligent, according to the ruling. Liberty Mutual Fire Insurance Co. had provided coverage to Darling as well as to Big Binder and Goodlin as additional insureds under its policy.

In settling the litigation, Liberty Mutual contended it had $2 million in limited liability coverage under its policy, and that Big Binder and Mr. Goodlin were responsible for a $1 million deductible under the policy’s deductible endorsement.

In February 2019, Big Binder and Mr. Goodlin filed suit against Liberty Mutual in U.S. District Court in Oxford, Mississippi, seeking a declaratory judgment the insurer’s deductible endorsement was unenforceable because it left the “applicable policies” section of the endorsement blank.

Darling intervened in the case, agreeing with Big Binder that the deductible endorsement did not provide for an applicable deductible.

Liberty Mutual agreed to front the $1 million deductible in the settlement.  The district court then ruled the deducible endorsement was not enforceable as written, and therefore Liberty Mutual could not recoup the $1 million it had advanced.

A three-judge appeals board panel reversed that decision on appeal.

Even though the applicable policies section of the endorsement was blank, the deductible endorsement “unambiguously applies” to the policy, based on other parts of the policy, the panel said.

“More significantly,” it added, the “insureds’ interpretation would render the entire Deductible Endorsement meaningless … because the only thing that the Deductible Endorsement does is add a deductible.  It is thus unreasonable for an insured that agreed to an endorsement to think that the endorsement has no effect; it begs the question of why an insurer would include an endorsement in the first place.”

The panel held that because Big Binder and Goodlin were additional insureds under the Liberty Mutual policy, Darling was obligated to pay the insurer the $1 million deductible Liberty Mutual had fronted in the settlement agreement.

A Liberty Mutual attorney had no comment, while Darling’s attorneys did not respond to a request for comment.





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