The incredible beauty of a blue sky insurance letter

The first time I experienced a “blue sky” letter was in 2003.  My friend Bill Bailey, a PI lawyer who I taught law school with, needed a miracle.  His client, a young girl, had been the back seat passenger in a car that was speared by another.  The girl sustained massive head and facial injuries from the direct hit.  The driver had low policy limits. 

Bill sent me the case because he was at his wits end and wanted me to “think outside of the box.”  I decided to sue the school for allowing the girl to be driven by a friend’s mother without written permission.  It was a slim case.  But sometimes cases get better. 

The defendant driver’s insurance company made a big mistake.  It disposed of the vehicle despite Defendant’s claim that mechanical failure was the reason she lost control.  By destroying the car, the insurer destroyed their insured’s defense. She was now exposed to an excess judgment.  The insurer lifted policy limits.  I dismissed the lawsuit. And we obtained enough funds to take care of the girl for the rest of her life.

In B.S. v. Holguin, Allstate made another big boo boo.  A 26 year old critically injured motorcyclist called me asking for help. He had been in Harborview for a month, and his medical bills were starting to stream in.  He had been hit by a stay at home mom who was driving the family van. 

I did not sign B.S. up as a client at that time.  And instead gave him instructions.  There would be two outcomes.  If Allstate did the right thing and paid the claim, he would have no case.  But if Allstate did the wrong thing and refused to pay, then we would be able to help him.

B.S. sent a letter to Allstate asking it to pay the policy limits and advising them that he was injured and his bills were going to be much more than that.  Allstate refused.

We (Andrew Ackley was working on the case with me at the time) promptly signed B.S. up as a client,  notified Allstate that he was now represented and withdrew the prior settlement offer. 

After that, we repeatedly asked to be put in touch with the defendant’s personal counsel – since she was now exposed to an excess judgment.  Our efforts were declined.  We requested the insurance coverage letter and that was also refused. 

We filed a motion to compel production of that letter with mixed results. The judge decided to read the letter “in camera” and would not let us see it.  However, she told us that indeed it was a blue sky letter.

The case proceeded to jury verdict.  In the back of my mind, because I hadn’t seen the letter, there was still a little bit of doubt.  A few weeks later Allstate appealed and posted bond on the full verdict amount plus its prediction of interest totaling $47M. 

The moral to this story – is to not automatically assume that an inadequate insurance policy will always be a barrier to full recovery on behalf of an injured person.  Sometimes the best plan is to take a breath, set the case free to float in the universe, and wait for an insurance company to horribly mess up.

Photo: a blue sky day