Schmidt v. Henke

This case amounts to a logical extension of a legal fiction which results in an absurdity. What was originally intended as a shield for the collision insurer has become a sword.

The settlement between the plaintiffs Schmidt and their insurer, State Farm Mutual Automobile Insurance Company, was obviously a payment of the amount due Schmidts by reason of the terms of the contract of insurance. The parties cast it in the form of a “loan,” but that was merely a fiction which has been indulged in as a means to avoid consequences normally attendant upon payment of a loss. Undoubtedly, it serves a…