Indiana court backs Standard Fire in policy clash

The Indiana Supreme Court established a standard for insurers facing claims that exceed policy coverage in a ruling issued on Oct. 21. The case involved Standard Fire Insurance Company and stemmed from a 2018 car crash where Tommi Hummel’s policy had $50,000 per person and $100,000 per accident limits. Three people sought compensation, but the insurer rejected one settlement offer and instead filed an interpleader action, depositing the full policy amount with the court while continuing to defend Hummel. The court determined this approach satisfied the insurer’s obligations.

Baldwin, one claimant, initially demanded $50,000 but later increased his demand to $700,000 after Standard Fire declined his first offer. The Hummels settled with Baldwin for that higher amount without insurer approval, and Baldwin then sued Standard Fire for bad faith. Lower courts disagreed on whether the insurer acted properly. The state’s highest court sided with Standard Fire.

The justices adopted guidelines from the Second Restatement of Liability Insurance, creating a safe harbor for insurers who interplead policy limits, name all claimants, and defend the insured. This framework protects companies from bad-faith allegations when multiple claims surpass available coverage. The decision gives Indiana insurers a clear path forward in similar situations.