Fourth Circuit Holds Insurers Have No Duty to Act in Good Faith Toward Underinsured Motorist Claimants

In Hoang Do v. Liberty Insurance Corporation, the Fourth Circuit Court of Appeals affirmed the district court’s dismissal of Hoang Do’s complaint for failure to state a claim.  In doing so, the Court of Appeals, in a per curiam opinion, held that Do’s complaint against Liberty Insurance Corporation (“Liberty”) failed to state a plausible claim for a bad faith action because Liberty had no duty to act in good faith toward Do with regard to his uninsured motorist claim.

The case arose following an automobile accident between Do and Gerson Arias, who was allegedly at fault and underinsured.  Do filed an uninsured motorist claim with Liberty, Arias’ automotive insurance provider.  During the months Do waited for Liberty to respond to the claim, Do settled with and signed a release of rights with Arias and his insurer.  It was also during this time that the statute of limitations passed for Do to bring any tort claims arising from the accident.  Liberty ultimately rejected Do’s underinsured motorist claim, prompting Do to file suit against Liberty claiming that its delay and rejection of Do’s claim was done against the interests of its insured and in bad faith.

The United States District Court for the Eastern District of Virginia dismissed the complaint for failure to state a claim for two reasons.  First, because Do had not secured a judgment against Arias, the court held that Do could not then state a claim against Liberty under the uninsured motorist provision.  Second, the court further held that Liberty had no duty to act in good faith toward Do regarding the claim because Liberty was Do’s adversary.  On appeal, Do presented only the second holding for review.

The Fourth Circuit Court of Appeals first recognized that, under Virginia law, an adversarial relationship is assumed between an insurer and an insured when an insured files an uninsured motorist claim with its insurer.  Under these circumstances, the insurer has no duty to furnish its insured with information.  Applied to the instant case, the court concluded that Liberty was not obligated to inform Do that uninsured motorist coverage required the existence of a judgment against its underinsured motorist.  Liberty was also under no obligation to inform Do that his settlement and release of rights with Arias and his Arias’ insurer could serve as the predicate of Liberty’s denial of uninsured motorist coverage.

Having concluded that Liberty had no duty to act in good faith toward Do concerning his underinsured motorist claim, the Court of Appeals affirmed the district court dismissal of Do’s complaint for failure to state a claim.