In most if not all states, the settlement of a minor’s personal injury claim must be approved by the Court. This is certainly true in Tennessee – the applicable statute is T.C.A. Section 29-34-105.
The Alabama Supreme Court recently decided a case in which the minor died after a settlement was reached with the defendant’s insurer and the plaintiff’s uninsured motorist carrier but before state court approval could be obtained. The death occurred as a result of a subsequent unrelated automobile accident . The insurance company then attempted to have the settlement declared void in a declaratory judgment action filed in federal court.
The federal court certified this question to the Alabama Supreme Court: "Under Alabama law, is an insurance company bound to a settlement agreement negotiated on behalf of an injured minor, if that minor dies before the scheduling of a pro ami hearing which was intended by both sides to obtain approval of the settlement?"
Relevant to the consideration of the issue is that under Alabama law an unfiled tort claim does not survive the death of the plaintiff. Malcolm v. King, 686 So.2d 231 (Ala. 1996). Suit had not been filed on the minor’s claim, and therefore if the insurers won this declaratory judgment action, they would have have faced no financial responsibility for the minor’s personal injury claim.
Nationwide (the liability carrier) and State Farm (the UM carrier) argued that a contract to settle a case with a minor was an executory contract that had no force or effect until a settlement was approved by the court. Alternatively, Nationwide argued that even if the contract was binding a hearing was a condition precedent to the performance of the contract, that the hearing was now impossible given the death of the minor, and therefore the duty of Nationwide to perform under the contract was discharged.
The Alabama Supreme Court had that a valid contract existed (although it was voidable at the election of the minor). The Court also rejected the second argument advanced by the insurance companies, saying that it was not impossible for the state court to hold a hearing to determine whether it or not the settlement should be approved. The Court also held, in footnote 3, that the insurers had a duty to participate in the hearing.
Thus, the Court answered the certified question as follows:
an insurance company is bound to a settlement agreement negotiated on behalf of an injured minor, even if that minor dies before the scheduling of the court hearing that all parties agreed was necessary to obtain approval of the settlement agreement. In accordance with the parties’ understanding, such a hearing is still required, and the minor’s death does not render that hearing impossible.
The case is Nationwide Mutual Insurance Company v. Wood, No. 1111486 (Ala. Feb. 22, 2013).