Insurance coverage lawyers, when defending carriers in first-party claims, regularly deal with the real party in interest issue.  The insured’s lawyer, in filing the lawsuit, sometimes names the wrong issuing company, the parent company, or even names a fictitious company.  Most practitioners resolve this by filing a motion to dismiss if consultation with opposing counsel does not result in a consent Order of substitution. 

However, a recent United States district court decision suggests that insured counsel’s naming of the wrong entity may not be caused by mistake or laziness, and may not result in the dismissal of the allegedly incorrect entity. 

In Hart v. Safeco Insurance Co., 2:16-2777-RMG, the district court considered Safeco’s motion to dismiss the complaint on the grounds that Safeco was not the issuing company.  Safeco argued that its wholly owned subsidiary, which clearly issued the policy, was the real party in interest.  The district court cited the following facts, which were incorporated into the complaint: (1) the declarations page prominently featured Safeco’s name/logo, (2) the policy referred to “Safeco Policy Holders”, (3) the policy defined Safeco as “Safeco Insurance Co. and [the issuing company]”, (4) the claims adjuster used a @safeco.com domain name in his email address.

While most, if not all, of these facts are consistent with Safeco’s logo and branding, the district court, employing Rule 12(b)(6)’s standard, found that it could not determine, “solely from the documents referenced in or integral to the … complaint, that Plaintiffs have not stated a claim against Safeco.”   Therefore, the court denied the motion to dismiss, but also ordered that Plaintiffs add the issuing company as an additional defendant.

This case and its holding demonstrate the necessity of clear communication in insurance claims handling.  Claims adjusters must communicate with the insured solely in the name of the issuing company, and clearly identify that company.  Letters and emails should be tagged with the issuing company’s legal name, and the brand or logo should be minimized as much as possible.  While those changes may not avoid a lawsuit against the parent company, it would help the carrier’s counsel successfully argue a dispositive motion to dismiss the parent company.  Because every mistake and every conflation of the parent company’s name will be used against the carrier in the litigation to complicate the case.