No Bad Faith in Uninsured Motorist Claim Where Damages in Dispute

This Tuesday, the 11th Circuit affirmed a summary judgment granted in favor of State Farm, holding that State Farm was not legally obligated to pay the claim since the amount of damages was in dispute.

Alabama law states that there can be no breach of an uninsured motorist contract, and therefore no claim for bad faith, unless and until the insured proves that he is “legally entitled” to recover. In this case, the record established that the other driver was at-fault. However, the analysis did not stop there.

The Court provided that, to establish that a plaintiff is “legally entitled” to recover, both liability and damages must be proved. Here, the record was clear that State Farm disputed the amount of damages claimed by plaintiff. As such, his claims for breach of contract and bad faith were properly dismissed as premature.

The case is Broadway v. State Farm Mut. Ins. Co., 2017 U.S. App. LEXIS 5350 (March 28, 2017).

Allocation of Underlying Settlement and UM Coverage Set-Off

Long standing Georgia law requires a claimant to exhaust the tortfeasor’s underlying liability insurance limits before looking to uninsured motorist insurance for coverage.  Daniels v. Johnson, 270 Ga. 289, 290 (1998). Additionally, Georgia public policy prohibits the recovery of punitive damages from an uninsured motorist insurer. State Farm Ins. Co. v. Weathers, 260 Ga. 123, 392 S.E.2d 1 (1990); Bonamico v. Kisella, 290 Ga.App. 211, 213, 659 S.E.2d 666 (2008); Roman v. Terrell, 195 Ga.App. 219, 219–222(2), (3), 393 S.E.2d 83 (1990).

So what is the effect on UM coverage when a claimant allocates the liability settlement payment between punitive damages and compensatory damages? According to the Georgia Supreme Court, in Carter v. Progressive Mountain Insurance Company, 2014 WL 3396496 (Ga., July 14, 2014), while allocation is not prohibited, any allocation will not increase the UM carrier’s coverages.

In Carter, the plaintiff was injured in an automobile collision with a driver allegedly driving under the influence of alcohol. Carter settled her claim with the liability carrier, pursuant to a limited liability release; but, within the terms and conditions of the release specifically allocated $29,000.00 of the $30,000.00 policy limits as payment of punitive damages and only $1,000.00 toward compensatory damages. Carter then pursued recovery of compensatory damages from her UM carrier, Progressive.

Arguing that the inclusion of such an allocation within the terms and conditions of the limited liability release effectively shifted payment of punitive damages to the UM carrier, Progressive moved for summary judgment. The trial court granted the motion, and the Court of Appeals affirmed. But, the Georgia Supreme Court reversed. The Supreme Court held that although Carter had exhausted the underlying liability limits, any additional recovery from her UM carrier remained subject to the statutory limitations of O.C.G.A. §§33–24–41.1(d)(2) and 33-7-11.

Writing for the Court, Justice Hines explained

Under OCGA § 33–24–41.1(d)(2), “the amount paid under a limited release shall be admissible as provided by law as evidence of the offset against the liability of an uninsured motorist carrier and as evidence of the offset against any verdict of the trier of fact.”  And, by the plain language of the statute, it is “the amount paid” that is admissible, not merely the amount attributed to compensatory damages. Further, … [u]nder O.C.G.A. § 33-7-11(b)(1)(D)(ii)(I), recovery under the UM policy will be limited to “the insured’s losses in addition to the amounts payable under any available [liability] coverages” and, “the insured’s combined recovery from the insured’s uninsured motorist coverages and the available [liability] coverages … shall not exceed the sum of all economic and noneconomic losses sustained by the insured.” (Emphasis in original.)

Id. at *3.

Finally, the Supreme Court noted that “punitive damages do not represent ‘losses’ by the insured, and regardless of any designation of such payments in the release, when the UM policy is brought into play, the combined recovery will not exceed the insured’s economic and noneconomic losses.” Id. Unfortunately, however, resolution of Carter type cases requires a jury trial to determine the amount of recoverable compensatory damages, and thus determine the amount of UM coverage available to the plaintiff.  But the message to claimants is clear: allocate the liability settlement any way you choose; the UM carrier still gets credit for every penny.

Georgia Court Of Appeals Says “Applicable” Is Ambiguous

The availability of UM coverage in varying circumstances is keeping Georgia’s appellate courts busy.  As claimants look for all available means of recovery, their insurers and the courts are struggling to keep up with a landscape that changes on a near-weekly basis.  Although it has long been the law in Georgia that courts will not strain to find ambiguities where none exist, a recent ruling by the Court of Appeals suggests that it may be willing to at least stretch.

Typically, before an insured can recover UM benefits, he or she must first exhaust the applicable underlying liability limits. However, in Wade v. Allstate Fire & Cas. Co., 751 S.E.2d 153 (Ga. Ct. App. 2013), an insured reached a partial settlement to receive the full limit of one allegedly negligent motorist’s liability insurance limits in connection with a multi-vehicle accident and then sought to recover benefits under his UM policy, though he had not exhausted the liability limits of the two other allegedly negligent motorists.

Bernard Wade, who was insured under an Allstate liability policy with added-on UM coverage in the amount of $25,000.00 per person, was injured in a multi-vehicle accident and filed suit against the other drivers involved in the accident—Fred Bergh, Dale Froman, and James Bruce—alleging that their negligence caused his injuries. Wade also served his insurer, Allstate, with a copy of his suit.

pie chart with money

Wade subsequently settled with Bruce (and his mother who had also been named as a defendant under the family purpose doctrine), through the payment of the full limits of their liability insurance policy in exchange for a limited liability release. Wade then settled his claims against Bergh and Froman, as well as Froman’s employer, for a total sum of $30,000, which was an amount less than the full amount of their respective liability policy coverages. Wade executed a general release with respect to Bergh, Froman, and Froman’s employer and dismissed these defendants with prejudice.

Allstate consented to the dismissal of Bergh, Froman, and Froman’s employer, but it expressly noted that it did not waive any defenses regarding Wade’s claim for UM benefits. Allstate moved for summary judgment, contending that under the UM provision in Wade’s policy, it was not obligated to pay on Wade’s claim for UM benefits since he had not exhausted the limits of the insurance liability protection available to all named-defendants. The trial court granted Allstate’s motion, finding that the UM provision clearly and unambiguouslyOn appeal, however, Wade argued that summary judgment was improper because there had not been a determination as to the extent of his damages and there had been no apportionment of fault as required by law.  Wade contended that he had exhausted the policy limits with respect to one of the defendants but that Allstate’s UM coverage obligation could not be determined until liability of all defendants had been apportioned.  The Court of Appeals agreed. provided that Allstate was not obligated to pay benefits because Wade did not exhaust the limits of insurance for all defendants.

The Court held that the term “applicable” in the exhaustion provision was ambiguous.[1]  The Court explained the because there were multiple tortfeasors, who could not be held jointly and severally liable, then their respective liability carriers were only responsible for the amount of the damages apportioned to each tortfeasor.  “[I]t stands to reason that an individual tortfeasor’s liability insurance is not ‘applicable’ to pay for any other tortfeasor’s damages.”  Although Wade settled with the Bruces pursuant to a limited liability release and the remaining defendants pursuant to a full release, there had been no determination as to the percentage of fault attributable to each.  The Court of Appeals ruled that Wade would be entitled to UM benefits “if there is an uninsured or underinsured motorist who is legally responsible for his damages.”  More precisely, if there were any losses attributable to the Bruces in excess of their policy limits, then Wade would be entitled to UM coverage. Accordingly, the court ruled that Allstate was not entitled to judgment as a matter of law and remanded the case for a factual determination of Wade’s damages and for an apportionment of fault among the defendants.

This holding suggests that UM carriers may face protracted litigation in cases involving multiple tortfeasors, especially if the plaintiff settles with one or more of the defendants before trial for less than the liability limits.  If that happens, then the UM carrier may be forced to try the case in order to determine whether the degree of fault attributable to the settling party (or parties) exceeded their respective policy limits, thus triggering UM coverage.

[1] The exhaustion provision stated, in pertinent part:

[Allstate is] not obligated to make any payment for bodily injury or property damage under this coverage which arises out of an accident involving the use of an underinsured motor vehicle until after the limits of liability for all liability protection in effect and applicable at the time of the accident have been exhausted by payment of judgments or settlement.

South Carolina Supreme Court invalidates “owned vehicle” UIM exclusion for Class I insured to permit stacking, distinguishes Burgess

In Carter v. Standard Fire Insurance, Op. No. 27340 (December 11, 2013), the Supreme Court held that South Carolina’s UIM statute prohibits an insurer from excluding UIM coverage for a Class I insured when he is occupying a vehicle he owns but does not insure under the subject policy. In Carter, Michael Carter was seriously injured while riding as a passenger in a vehicle he and his mother owned. The involved vehicle was insured under an Allstate policy that provided liability and UIM limits of $250,000. Allstate tendered $750,000, representing the liability limits plus the UIM limits on the involved vehicle and a second vehicle insured under the same policy. Carter then sought UIM coverage from Standard Fire under a policy issued to his parents, which provided UIM limits of $250,000 for three vehicles insured under the policy, for a total of $750,000.

In Carter, the Court clarified that the rationale of Burgess is only applicable when the insured has the ability to purchase UIM coverage on the involved vehicle, but declines to do so.

Standard Fire asserted that an “owned vehicle” exclusion in the policy barred Carter from stacking the additional UIM coverage. The provision excluded UIM coverage for any person “while ‘occupying’ . . . any motor vehicle owned by you or any ‘family member’ which is not insured for this coverage under this policy.” It was undisputed that Carter and his mother owned the involved vehicle, and the involved vehicle was not insured under Standard Fire’s policy. However, Carter resided with his parents and therefore qualified as a resident relative Class I insured.

Standard Fire relied on language in Burgess v. Nationwide Mutual Insurance Company, 373 S.C. 37, 644 S.E.2d 40 (2007), that “public policy is not offended by an automobile insurance policy provision which limits the portability of basic ‘at home’ UIM coverage when the insured has a vehicle involved in the accident.” The Supreme Court found that the rationale of Burgess was not applicable.

Burgess involved a situation where the insured was injured while riding a motorcycle he owned that did not carry UIM coverage. Burgess sought to “port” UIM coverage from an at-home policy issued by a different insurer. The Burgess court found that under the circumstances, public policy was not offended by precluding UIM coverage where the insured was injured in a vehicle he owned but did not purchase UIM coverage for (to hold otherwise would permit an individual who owns multiple vehicles to purchase UIM for only one, yet have basic UIM coverage on all).

In contrast, Carter involved a situation where the insured did purchase UIM coverage on the involved vehicle and sought to stack the coverage available under his parents’ policy as a resident relative. TheCarter court held that the “owned vehicle” exclusion contravened the language of the UIM statute and was therefore invalid.

Standard Fire is not the first insurer to read more into Burgess than the Court intended. In Carter, the Court clarified that the rationale of Burgess is only applicable when the insured has the ability to purchase UIM coverage on the involved vehicle, but declines to do so. Here, Carter purchased UIM on the involved vehicle, and as a Class I insured, he was entitled to stack all available UIM coverage on each vehicle in an amount equal to the coverage on the involved vehicle.

Handling Complex Auto Insurance Coverage Disputes: Maximize Recovery Through Stacking Automobile Insurance Policies and Utilizing Uninsured Motorist Offsets

Too often there is an absence of adequate insurance coverage to compensate an injured party involved in a motor vehicle collision.  This proposition holds true even though Georgia law mandates availability of uninsured motorist coverage; thus, the ability for an injured party to secure adequate compensation in the event of a catastrophic automobile collision, frequently turns on insurance coverage litigation.

This article, Handling Complex Auto Insurance Coverage Disputes: Maximize Recovery Through Stacking Automobile Insurance Policies and Utilizing Uninsured Motorist Offsets, addresses complex automobile insurance coverage litigation, including:

  1. Stacking of commercial and personal liability policies;
  2. Recovery against an uninsured motorist; and
  3. Uninsured motorist offsets.

To read the full article, click here

This article also serves as a guide for the practitioner in ascertaining the availability of insurance coverage to compensate the injured party.  This guide is founded upon three fundamental principles critical for resolving automobile insurance coverage disputes – read and understand the terms and conditions of the applicable policies; know the applicable statutory scheme, and learn the facts.  While these principles sound fundamental, and appear self-evident, it is amazing how often they are forgotten, or overlooked.

Georgia Uninsured Motorist Law Governs UM Claim And UM Benefits Awarded Under Umbrella Policy Issued in Indiana

The Georgia Court of Appeals recently held that the Georgia Uninsured Motorist Statute applied to an insurance policy that was issued and delivered in Indiana.  In St. Paul Fire & Marine Ins. Co. v. Hughes, 2013 WL 1924393 (Ga. App.), Appellant St. Paul Fire & Marine Ins. Co. (“St. Paul”) issued a commercial umbrella policy to Townsend Tree Service Co., Inc. (“Townsend”).  One of Townsend’s employees, Appellee Wallace Hughes (“Hughes”), was injured in a motor vehicle accident in August 2005; he sought uninsured/underinsured (“UM”) benefits under the St. Paul umbrella policy.

The trial court granted partial summary judgment to Hughes on his claim that the policy provided UM coverage.  St. Paul appealed, arguing Indiana law applied, and since Indiana law did not require UM coverage at the time the policy was issued, summary judgment in its favor was required.

In its analysis, the Georgia Court of Appeals noted that Georgia’s UM statute in effect at the time of the collision, O.C.G.A. § 33-7-11(a)(a) (2005), applied to policies

“issued or delivered by any insurer licensed in this state upon any motor vehicle then principally garaged or principally used in this state . . . .”

In addition, the statute applied to umbrella policies unless the insured rejected UM coverage in writing.  The court reasoned that because the truck Hughes was driving at the time of the collision was principally used and garaged in Georgia, it was reasonable for the parties to assume that Georgia law applied.

The appellate court thus upheld summary judgment granted in favor of Hughes because St. Paul was licensed in Georgia, the truck was principally used and garaged in Georgia, and there was no written rejection of UM benefits.

Litigating the Uninsured & Underinsured Motorist Claim Seminar

Charlie McDaniel, Erica Parsons and Jason Hammer are scheduled to present at the NBI seminar “Litigating the Uninsured & Underinsured Motorist Claim,” on Friday December 7, 2012. To register online or to download a brochure to register, visit the NBI website.

Whether Motor Vehicle in “Use” at Time of Accident Generally Question of Fact

The Georgia Court of Appeals recently issued two opinions addressing the question of when an incident arises out of the “use” of a motor vehicle for purposes of UM coverage.

In Mough v. Progressive Max Ins. Co., a man was shot and killed while riding his motorcycle.  The motorcyclist was involved in a road-rage incident and was clipped by the driver of another vehicle. Id. at *1.  After following the driver of the vehicle to her house, the motorcyclist was shot and killed by the driver’s father. Id.

The motorcyclist’s policy provided uninsured motorist coverage for injury arising out of the “use” of an uninsured motor vehicle. Id. at *1.  The motorcyclist’s parents argued that his death arose out of the “use” of the driver’s vehicle because “without [the vehicle] leading [the motorcyclist] to the barrel of [the shooter’s gun], the occasion for [the motorcyclist] to be shot and killed would not have occurred.” Id.

The Georgia Court of Appeals noted that “‘arising out of’ does not equal proximate cause or require that the injury be directly caused by the use of a vehicle; only a ‘slight causal connection’ between the damages and the use of the vehicle is required.” Id.

In cases involving shootings, the “general rule is that where a connection appears between the ‘use’ of the vehicle and the discharge of the firearm and resulting injury, such as to render it more likely that the one grew out of the other, it comes within the coverage defined.” Id.

Extending UM Coverage for Accidents Involving Golf Carts

golfcartinmotionMany personal policies of insurance define the term “auto” as a private passenger vehicle designed for operation principally on public roads.  While no Georgia courts have decided the issue, courts in other jurisdictions have determined that a golf cart is not an “auto” under private auto policies of insurance. See Bailey v. Netherlands Ins. Co., 615 F.Supp.2d 1332 (M.D. Fla. 2009); Progressive Casualty Insurance Co. v. Dunn, 665 A.2d 322 (Md. 1995); Herr v. Grier, 671 A.2d 224, 226 (Pa. Super. Ct. 1996); Progressive Cas. Ins. Co. v. McCrea, 2010 WL 2108965 (Conn. Super. Ct. 2010); Jennings v. Midville Gold Club, Inc., 636 A.2d 707, 708 (R.I. 1994); Seaboard Fire & Marine Ins. Co. v. Gibbs, 392 F.2d 793, 794 (4th Cir. 1968).

The reasoning of these cases is strong.  An unmodified, run-of-the-mill golf cart, is not made for use “principally” upon public roadways, particularly in light of the fact that its maximum speed is about 25 miles per hour and it lacks the safety features necessary for travel on public roadways, including a full windshield, doors, a solid roof, turn signals, and a gear-shifting mechanism.  Even though such a case has yet to be decided by a Georgia court, it is likely that a Georgia court would determine that a golf cart is not an “auto” under the standard definition set forth in many policies.  As such, it is likely that most automobile liability insurance policies do not provide any coverage for accidents involving golf carts.

Clarity and Precision And Avoidance of Bad Faith

Whether by design or by accident, bad faith causes of action are occurring in cases where the damages far exceed the policy limits, and the liability insurer clearly intended to pay its policy limits to resolve the case and terminate its exposure.  While the Georgia appellate courts afford insurers certain safe harbors for protection against bad faith, plaintiffs’ counsel have become very adept at exploiting any deviation from the protocol and the appellate courts are not forgiving when the insurer fails to follow, with precision, the requirements for the safe harbors.

In Fortner v. Grange Mutual Ins. Co., Grange placed additional conditions on the requirement for settlement, and the Supreme Court held it was for the jury to determine whether Grange’s additional conditions in response to Fortner’s policy limits settlement demand met the standard of care for the prudent insurer.  This decision followed Jones v. Frickey, where the Court of Appeals found no meeting of the minds regarding a settlement.  The Court stated,

“[a]n answer to an offer will not amount to an acceptance, so as to result in a contract, unless it is unconditional and identical with the terms of the offer. To constitute a contract, the offer must be accepted unequivocally and without variance of any sort.”  Jones, at 401.

Most recently, in Penn v. Muktar, Judge Andrews, in which Judge Phipps and Doyle concurred, held that the parties failed to reach a meeting of the minds regarding a settlement.  The Penns offered to settle their bodily injury claims for the bodily injury policy limits, but when State Farm tendered its policy limits, the proposed release, in effect, asserted a counteroffer in that it contained language that not only released the bodily injury claims, but the property damage claims and any other claims resulting from the collision.

The Penns refused to sign the release and returned the $50,000 settlement check.  The Penns had an uninsured motorist claim which they clearly intended to pursue, but would have been eliminated with the execution of the proposed release forwarded by State Farm.

These cases highlight the importance of clarity and precision in resolving liability claims, so as ensure a meeting of the minds, and not inadvertently create a potential bad faith cause of action.  In each case, bad faith, if pursued may ultimately be avoided, but it is much simpler to avoid a potential bad faith claim altogether by meeting plaintiff’s demand with clarity and precision.