For the family of someone killed in a tragic car accident faced with mounting medical bills there is nothing worse than learning that the driver at fault for the accident did not have insurance. Luckily, when that happens, you should be protected by the uninsured or underinsured motorist (UM) coverage on your vehicle. For the Jones Family, however, their UM provider refused to tender the policy limits even after undisputed evidence was provided that damages exceeded that amount. This nightmare happens to far too many families and is a sad reality during a time in which insurance companies try to limit payouts in any way possible.
Thomas Jones was severely injured when his motorcycle was hit by a vehicle driven by Bertha Johnson, and his wife Mary was killed. Johnson was entirely at fault for the accident but neither she, nor the owner of the car she was driving, had insurance coverage at the time. The Jones’ sought their policy limits of $100,000 per person/$300,000 per accident from their UM insurance and at one point the parties agreed that $200,000 would be paid. However the amount was not tendered due to disputes regarding liens from the Jones’ healthcare providers and the company’s concern regarding future claims.
Luckily the Jones had redress when their UM provider refused to pay. The Jones’ brought an additional claim against their insurer, the Markel American Insurance Company, and were awarded $100,000 in (additional) penalties as well as $10,000 in attorneys’ fees. In a recent decision (available here: 45,847-CA) the Louisiana Court of Appeals upheld that ruling.
Under La. R.S. 22:1892, insurance providers can be forced to pay penalties and attorneys’ fees if there is proof that their action in refusing to tender policy limits was arbitrary and capricious and without probable cause. This statute derives from another Louisiana Law, La.R.S. 22:1973(A) that states that insurance companies own a duty of good faith and fair dealing to their policyholders; an affirmative duty to adjust claims fairly and promptly and make reasonable efforts to settle. Before a policy holder can collect on a bad-faith action, however, they must first prove that the insurer received satisfactory proof of loss and then show that the failure to pay was arbitrary and capricious.
Courts have interpreted proof of loss in an UM claim to require review by the insured of four elements:
1. The uninsured or underinsured status of the the owner or operator of the other vehicle in the accident.
2. The fault of that other owner or operator.
3. That damages resulted from that fault.
4. The extent of the damages.
Here, Markel argued that the extent of the damages was not proven due to liens asserted against whatever the Jones’ were entitled to under the policy, also arguing that the amount of liens kept changing.
The Trial Court and Court of Appeals rejected this argument. Even though the amount asserted by lienholders was not exact, it was undisputed that the Jones’ had incurred substantial medical expenses in excess of their policy limits. In addition, Markel could have protected themselves from future claims from lienholders by tendering $200,000 into the Registry of the Court and then holding a concursus proceeding to determine who was entitled to what, and they chose not to do so.
Beyond proving that Markel had proof of loss, the Jones’ also had to prove Markel’s actions were arbitrary and capricious. “Arbitrary” and “capricious” are legal terms of art that mean vexatious–that the refusal to pay is unjustified and without excuse; not based on any good faith defense. Here, because Markel was clearly required by law to tender the policy limits, had no good faith defense, and did not dispute the amount they were obligated to pay, the court found that criteria satisfied.
If you are seriously injured or lose a loved one in a car accident that was not your fault and later learn that the driver to blame did not have insurance, you should be able to collect from your UM carrier to cover the costs of damages arising from the accident. However, if your provider argues they do not have to pay for some reason, it is paramount you have a good attorney on your side to make sure the requirements of your policy are followed and will not hesitate to use laws like the one utilized here to not only collect damages but also penalties and attorneys’ fees to which you are entitled.