Before You Sue Your Insurance Company: The Claim-First Rule From Kincaid v. Erie

Published December 23, 2010 · Ohio Supreme Court

Suppose you were hit by an uninsured driver on Wilmington Pike, and you are certain your own policy's uninsured-motorist coverage should pay. You have called your agent twice, mentioned it to the adjuster handling your property damage, and gotten nowhere. Can you simply file suit against your insurance company and let the lawyers sort it out?

As of last week, the Ohio Supreme Court's answer is no, not until you have actually made the claim and the insurer has turned it down or ignored it. In Kincaid v. Erie Ins. Co., 128 Ohio St.3d 322, 2010-Ohio-6036, decided December 16, 2010, a divided court held that a policyholder who has not presented a claim to his insurer has no standing to sue for breach of the policy. The decision was aimed at a class action, but its practical lesson lands squarely on every crash victim dealing with their own insurer.

What happened in Kincaid

The facts were unusual. Don Kincaid was involved in a crash in 2001 and was sued. His insurer, Erie, hired a lawyer and defended him under his liability coverage, and the case settled. Seven years later, in 2008, Kincaid filed a class-action lawsuit on behalf of himself and every other Erie policyholder in his situation. His theory was that the Erie policy's "additional payments" provision promised to reimburse insureds for expenses they incurred helping with their defense, such as postage, travel, and lost earnings for attending depositions, and that Erie systematically failed to pay them.

The problem, as Erie pointed out in its answer, was that Kincaid had never asked. He never submitted a receipt, never sent a letter, never told Erie he had incurred any expense at all. The lawsuit was the first Erie heard of it. The trial court dismissed the case on the pleadings. The Eighth District reversed, reasoning that the policy did not spell out any particular notice procedure and that Ohio's liberal pleading rules were satisfied.

What the Supreme Court held

Four justices reversed the court of appeals and reinstated the dismissal. The majority framed the issue as one of standing: a court can only decide an actual controversy between parties with adverse legal interests, and there is no controversy with an insurer that has never been asked to pay and has never refused. A breach-of-contract claim does not accrue until the insured suffers actual damages, and until the insurer refuses a claim, there are none.

The majority was blunt about the common-sense problem with Kincaid's approach. It wrote that "it defies common sense to expect an insurer to pay for incidental expenses that it does not know its insured incurred." The policyholder, the court observed, is the only one who knows whether he spent money on parking or lost a day's pay, and so the policyholder "must make the insurance company aware of the claim and give it the opportunity to pay."

The court also held that Kincaid's bad-faith claim failed for the same reason. Bad faith in Ohio is grounded in an insurer's unreasonable refusal to pay, and Erie had not refused anything.

Three justices dissented. Chief Justice Brown, joined by Justice Cupp, argued that Ohio is a notice-pleading state, that Kincaid's complaint alleged all conditions precedent had been satisfied, and that whether he had actually presented a claim was a factual dispute that should not have been resolved on the pleadings. Justice Pfeifer wrote separately that the policy was silent on how to request reimbursement, and that ambiguous insurance language is supposed to be construed in favor of the insured.

Why a case about postage matters to crash victims

Kincaid is, on its face, a case about small expenses and class-action tactics. But the rule it announces applies to every first-party claim, meaning every claim you make against your own insurer rather than the other driver's. In a crash case, those claims include:

• Medical-payments coverage, which pays your crash-related medical bills regardless of fault.
• Uninsured and underinsured motorist coverage, which steps in when the at-fault driver has no insurance or too little. I explained the basics of this coverage in What Uninsured and Underinsured Motorist Coverage Is earlier this year.
• Collision coverage for the damage to your own car.

After Kincaid, none of these can be the subject of a lawsuit until you have presented the claim and your insurer has either denied it or failed to respond after a reasonable time. A phone call to your agent mentioning that "the other guy didn't have insurance" is probably not a claim. A conversation with the property-damage adjuster is probably not a UM claim. If the insurer later says it was never asked, the court may agree.

The practical rule: make the claim, in writing, with proof

Here is how I would translate Kincaid into instructions for a client:

1. Submit each claim separately and in writing. A UM claim, a med-pay claim, and a collision claim are three claims. Identify the coverage, the date of loss, and what you are asking for.
2. Send it where the policy says. Most policies specify where notice goes. Use that address, send it by a method you can prove, and keep a copy.
3. Include documentation. For med-pay, the bills. For UM or UIM, the police report showing the other driver was uninsured, or the other insurer's letter showing its limits, plus your medical records. The court in Kincaid faulted the policyholder for never giving the insurer anything it could evaluate.
4. Keep a log. Dates of every submission, every call, every response or non-response. If the insurer stalls, that log becomes the proof that you presented the claim and the insurer failed to respond, which is exactly what the Supreme Court said must exist before you can sue.
5. Cooperate, but carefully. Your own policy requires cooperation, which may include a statement. As I wrote in October about recorded statements, that obligation runs to your own insurer, not the other driver's, and it should be handled with a lawyer involved, especially on a UM or UIM claim where your insurer has every incentive to minimize your injury.

Do all of this and the insurer is in a box. Pay the claim, deny it and face a breach-of-contract and possibly a bad-faith suit, or ignore it and face the same thing. Skip the paperwork and the insurer has a defense that costs it nothing.

What this means for you

Kincaid is a decision that favors insurers, and I will not pretend otherwise. It gives a company that has quietly failed to pay a benefit the argument that it was never asked. But the rule is also easy to satisfy once you know it exists. A clear written claim with supporting documents, sent to the right place and logged, removes the defense entirely and starts the clock on the insurer's obligation to respond.

The people most at risk are those who assume their own insurance company will take care of them without being asked. It will not. If you were hit by an uninsured or hit-and-run driver, or by someone whose limits are too low for your injuries, the claim against your own policy has to be made deliberately, and the sooner it is made properly, the sooner it can be enforced.