Nationwide Mutual Insurance Co, Case Study Example

Case Problem

D.V.G. (a minor) was injured in a one-car auto accident in Hoover, Alabama. The vehicle was covered by an insurance policy issued by Nationwide Mutual Insurance Co. Stan Brobston, D.V.G.’s attorney, accepted Nationwide’s offer of $50,000 on D.V.G.’s behalf. Before the settlement could be submitted to an Alabama state court for approval, D.V.G. died from injuries received in a second, unrelated auto accident. Nationwide argued that it was not bound to the settlement because a minor lacks the capacity to contract and so cannot enter into a binding settlement without court approval. Should Nationwide be bound to the settlement? Why or why not?

Issue

Is Nationwide Mutual Insurance Co. excused from paying the $50,000 settlement because there was not a proper hearing to validate the minor’s settlement before their death?

Rule of Law

In Large v. Hayes by and through Nesbitt it was established that case settlements involving minors require a trial before the settlement is legally binding to assure that the agreement is in the best interest of the minor. Burke v. Smith defined this law saying, “[u]nder Alabama law, a hearing to determine the fairness of a settlement must be held in order for that settlement to be binding on a minor party, even where the minor is represented by a next friend or other guardian.”

Application

In cases such as Nationwide Mutual Insurance Co. v. Wood involving minors, a settlement is not legally binding until a hearing can be conducted to rule that the settlement is in the best interest in of the minor. As a hearing was not conducted in the Nationwide case before D.V.G.’s death, Nationwide Mutual Insurance Co. was not bound to pay the settlement until after a legal hearing. Although D.V.G. could not physically appear in court, they could be represented in court by a relative or other representative as outlined in the Burke v. Smith case.

Conclusion

As long as a hearing was conducted to represent D.V.G.’s interests, including a representative for D.V.G., Nationwide Mutual Insurance Co. should be bound to respect the settlement and pay the $50,000 on D.V.G.’s behalf.