|
Handling Uninsured/Underinsured Motorist Insurance Claims in Texas |
 |
 |
 |
|
Written by Administrator
|
|
Saturday, 19 July 2008 12:49 |
| | | | | | | | | | Handling Uninsured/Underinsured Motorist Insurance Claims in Texas | | | | | | | | I. Introduction This article will serve as an overview of UM/UIM coverage and the settlement process under Texas law. UM/UIM coverage is first-party insurance that protects injured persons who are involved in accidents with individuals who are not insured or are underinsured. II. The Uninsured/Underinsured Statute The Texas Uninsured/Underinsured Motorist Statute, under the Texas Insurance Code, governs UM/UIM coverage. The main purpose of the statue is to protect an insured that is injured because of the fault of operators of vehicles that are uninsured or underinsured. Stracener v. United Services Auto Ass 'n, 111 S.W.2d 378, 382 (Tex. 1989). The Texas Insurance Code requires a minimum of $ 25,000 in UM/UIM coverage required to be offered to consumers of insurance services in Texas. This coverage is provided by law unless the insured specifically rejects the coverage in writing. In Old American County Mutual Fine Ins. Co. v. Sanchez, 81 S.W.3d452 (Tex. App.-Austin 2002, no pet.), the court found that the spouse of a named insured under the policy may properly reject UM/UIM coverage. The maximum amount of UM/UIM coverage that can be purchased is an amount equal to the liability limits purchased. In other words, the insured cannot purchase UM/UIM coverage for more than the liability limits purchased in the policy. The UM/UIM policy covers property damage, repairs, replacement and rental car reimbursement. It also covers personal injury and wrongful death claims. An insurance company that pays a UM/UIM claim may offset any payment by the amount of the insured's recovery against the negligent third party. | | | | | | | | | |
| | | | | | | | | | III. When Coverage Occurs The Texas Insurance Code places the burden to prove the uninsured status of the negligent motorist on the insurance company, Tex. Insurance Code 5.06-1(7). If the carrier proves that the negligent party has some insurance, the burden then shifts to the insured to prove that the injuries exceed the insurance of the negligent motorists. In order to invoke coverage under the UM/UIM portion of the policy the claim must fall into a specific category of motorist causing the injury and it must meet the insurance policy requirements. The five categories of motorists covered are as follows: (1) Uninsured motorists; (2) Underinsured motorists with limits less than the insured's damages; (3) Hit and run drivers making actual contact with the person or property of the insured; (4) Negligent motorists who have insurance but whose coverage is denied by the negligent motorists carrier; and (5) Negligent motorists with insolvent insurers. Once the claim is determined to fall under one of the five categories the insured must establish coverage under the policy. Coverage under the policy is provided to the spouse and family members of the named insured who reside in the same household and are related by blood, marriage or adoption. Coverage also extends to anyone occupying the named (covered) vehicle. Occupants of the vehicle who are not the named insured, who also have UM/UIM coverage, are entitled to recover the limits of both policies. Stracener at 378. IV. Proving Entitlement to Recovery The insured must prove that he is legally entitled to recovery from the negligent motorist before he is entitled to recover from his insured under the UM/UIM portion of his policy. Continental Casualty Co. v. Thomas, 463 S.W.2d 501, 504-505 (Tex. Civ. App. Beaumont 1971, no writ). The operative phrase of UM/UEVI coverage which requires payment by the insurance company to the insured is the language "legally entitled to recover." This has | | | | | | | | | |
| | | | | | | | | | been interpreted by the Supreme Court to mean that the insured must prove fault on the part of the negligent motorists and the extent of damages suffered by the insured. Franco v. Allstate, 505 S.W. 2d 789, 792 (Tex. 1974). The Texas Supreme Court in recent years has moved more and more toward a very restrictive reading of the language requiring the insured to obtain a judgment or other agreement establishing the negligent motorists liability before UM/UIM coverage applies. This trend will be discussed below. When settling a 3rd party claim, the plaintiffs attorney should be careful not to provide a blanket release that dismisses the case with prejudice. If that is done, the UM/UIM carrier could take the position that the insurance company is not "legally entitled" to pay the claim. To protect against such occurrences, make sure you have a consent to settle agreement executed by the UM/UIM carrier on file as well as an exclusion in the 3rd party release which allows you to proceed against the UM/UIM carrier. V. Contractual Claims and Damages in UM/UIM Claims There are contractual issues that come into play when handling a UM/UIM claim. The insured has four years to bring a cause of action for recovery of UM/UIM benefits in which to bring these claims. An insured may bring a breach of contract claim if the insurance company refuses to pay the claim. The value of this sort of claim has been severely limited, if not entirely eliminated, by the Texas Supreme Court in Brainard v. Trinity Universal___S.W. 3d___ (Tex. 2006). Brainard limits recovery of attorney's fees in UM/UIM claims to those situations that occur if the company does not timely pay after the insured obtains a judgment against the 3 party. No attorney's fees are collectable simply because the company did not timely pay the claim before the judgment. This same reasoning also applies to pre-judgment interest. Henson v. Southern Farm Bureau, 17 S.W. 3rd 652, 653 (Tex. 2000). Because of Brainard and Henson the law is clear that in order to obtain attorney's fees and pre-judgment interest, the Supreme Court has held that "legally | | | | | | | | | |
| | | | | | | | | | entitled to recover" is a condition precedent which requires the insured to obtain a judicial determination of liability and damages. Extra-contractual claims are theoretically allowed and those claims are outlined under section 541.060 (formally 21.21) of the Texas Insurance Code and provide; in the case of a proved violation, recovery for actual damages, mental anguish, court costs, attorney's fees; and for knowing conduct, three times the actual damages. Individual adjusters can also be liable under the Texas Insurance Code § 541.002(2). The current validity of these claims after Brainard is now debatable. Former Article 21.55 now 542.055 of the Texas Insurance Code provides for certain time deadlines that an insurance company must follow when responding to a claim. The requirements and penalties set forth in the statute apply to UM/UIM policies as well as 3rd party claims, Dunn v. Southern Farm Bureau, 991 S.W. 2d 467, 473 (Tex. App.-Tyler 1999, pet. denied). However, because of the Brainard decision, it appears that the current law in Texas regarding UM/UIM claims is that no extra-contractual damages are applicable until there is a judicial determination of liability and the insurance company fails to pay within 30 days of that determination. VI. Settlement Tips (1) You must obtain the UM/UIM carriers consent before setting with the 3rd party. This is required by the language of the policy and is intended to provide the UM/UIM carrier with an opportunity to investigate the claim to protect its subrogation rights. Send a letter to the UM/UIM adjuster requesting such permission and providing a 30 day deadline for granting or denying permission. Include with your letter a copy of the accident report, medical records, medical bills, lost income and all other information needed for the claim. (2) After settlement with the third party or if there is no insurance, you must make a written demand on the insurance company setting forth your damages. Because you have previously furnished the carrier with your damages model when you requested consent to settle, this letter can simply contain a demand amount and deadline. | | | | | | | | | |
| | | | | | | | | | (3) If suit is necessary, you must sue the third party or otherwise prove your claim that all conditions precedent to recovery have been met. Conclusion Because of the Brainard case, the UM/UIM carrier's duty to pay does not arrive until the at fault motorists liability and the insured's damages are legally determined. The Brainard decision makes setting UM/UIM claims increasingly difficult because the carrier has no incentive to timely pay and investigate the claim. Because no penalties apply to the carrier for not timely settling the UM/UIM claim, the plaintiffs attorney would be wise to file suit against the 3rd party early in the process or risk a long delay in obtaining a recovery for his client. | | | | | | | | | |
 |
About Charles Dunn 
Show/Hide comments