UM Plaintiff’s Burden of Proof
When making a UM claim, the claimant has the initial burden of proof. To satisfy this burden, he must produce “sufficient facts” to the UM insurer that:
- The adverse driver in the accident was uninsured or underinsured;
- The un/underinsured driver was at fault;
- Such fault gave rise to damages; and,
- Extent of damages.
Reed v. State Farm (La. 10/21/03), 857 So.2d 1012, citing McDill v. Utica Mut. Ins. Co., 475 So. 2d 1085, 1088 (La. 1985). Insofar as the first item (adverse driver uninsured or underinsured), such can be done by an affidavit / sworn testimony by the adverse driver, or Department of Public Safety and Corrections. La. R.S. 22:1295(6)(a)-(c). Once the above information is provided to the insurance company, a prima facie case is established, and the burden shifts to the insurer. La. R.S. 22:1295(6)(d).
“Miss and Run” – Burden Increased
In a situation where damages may be suffered by a UM claimant when there was no physical contact (i.e. run off roadway) with a phantom adverse driver (i.e. driver ran off), the above burden is heightened. The UM claimant must now show, by an independent and disinterested witness, that the injury was the result of the actions of the driver of another vehicle whose identity is unknown or who is uninsured or underinsured. La. R.S. 22:1295(f). It is not necessary that the witness actually see the accident. In Wheat v. Wheat, 868 So.2d 83, (La. App. 1 Cir. 11/7/03), a “miss and run” UM claim was established by the testimony of the investigating state trooper who stated that his investigation revealed that a transmission was left in the roadway that caused the subject accident involving insured’s vehicle. The trooper further stated that he did not get this information from insured, that he did not stand to benefit from the statement, and that he viewed scene soon after accident.
Payment of UM Claim – Unconditional Tender
If the insured has carried his burden (elements 1-4 above), and if the UM insurer does not refute any part of the claim, it must pay the claimant in the amount presented.
If, however, the UM claimant is unable to fully prove the last element of the claim (i.e. exact extent of his general damages), or if the UM insurer disagrees with same, the UM insurer simply cannot do nothing. It must tender a reasonable amount as a sign of its good faith to comply with its contractual duties under the insurance policy. McDill v. Utica Mut. Ins. Co., 475 So.2d 1085 (La.1985). The tender amount should “be a figure over which reasonable minds could not differ.” Further, the tender must be unconditional since it is contractually owed. Id. at 1091–92; Guidry v. State Farm Fire & Cas. Co., 74 So. 3d 1276, 1285, (La. App. 3 Cir. 10/5/11), writ denied, 80 So. 3d 472 (La. 2/10/12).
Since it is “unconditional”, an unconditional tender is not recoverable. However, it also is not a waiver of a right to litigate coverage. State Farm Mutual Automobile Insurance Company v. Azhar, 620 So.2d 1158, 1159 (La.1993). The qualitative effect of a UM unconditional tender is that it protects a UM insurer – for the amount tendered – from penalties and attorney’s fees should it be found after trial that some or more UM payment was due. Clark v. State Farm Mutual Automobile Insurance, 785 So.2d 779, 792 (La. 5/15/01), (issue before the court was abandonment, and not specifically the viability of coverage, but the statement speaks to the purpose and operation of the statute).
Payment Made After Suit is Filed – Judicial Interest Included
By operation of La. R.S. 13:4203, once suit on a UM is filed, the claim necessarily increases to take into account accrued interest from the date of judicial demand (date suit is filed). Therefore, if an unconditional tender is made after suit has been filed, it must include both a principal component and an interest component. Ridenour v. Wausau Ins. Co., 627 So. 2d 141, 143 (La. 1993). In other words, when making a post-suit unconditional tender, a UM insurer must include judicial interest if it wishes to absolve itself of obligations under the policy.
Duties of Adjusting UM Claim
UM claims are considered “1st party” claims because they are based on insurance contracts to which the claimant is a party. Thus, obligations owed are contractual (versus 3rd party claims that are based on delictual obligations of reasonableness). Since a UM claim is a 1st party claim, the duties of a UM insurer in adjusting claims can be found in pertinent parts of La. R.S. 22:1892, and R.S. 22:1973 that relate to 1st party claims.
22:1892 – Duties / Penalties – UM Claim
Under La. R.S. 22:1892(A) the UM insurer shall pay, or tender, the amount due to the insured within 30 days after receipt of satisfactory proof of loss.
If the UM insurer fails to pay or tender a UM claim after 30 days of proof of loss, it shall be penalized only if such failure is arbitrary, capricious, or without probable cause. If so, the penalty will be – in addition to the underlying UM claim – the greater of: (a) 50% damages on the amount found to be due, or (b) $1000. If partial payment or tender was made, then the penalty is 50% of the difference between the amount paid / tendered and the amount found to be due. Finally, the insurer will also have to pay reasonable attorney fees and costs. La. R.S. 22:1892(B).
22:1793 – Duties / Penalties – UM Claim
In addition, under La. R.S. 22:1973(A), the UM insurer also owes the insured the duty of good faith / fair dealing. Thus it must adjust claims fairly / promptly, and make a reasonable effort to settle claims with the insured. Per La. R.S. 22:1973(B), this means that an insurer cannot knowingly:
- Misrepresent pertinent facts or insurance policy provisions.
- Fail to pay a written settlement agreement within 30 days.
- Deny coverage or attempt to settle a claim pursuant to an application which the insurer knows was altered without notice or consent of the insured.
- Mislead a claimant as to the applicable prescriptive period.
- Fail to pay the amount of any claim to an insured within 60 days after receipt of satisfactory proof of loss when such failure is arbitrary, capricious, or without probable cause.
If a UM insurer knowingly breaches 22:1973 duties, it shall be liable for any new damages (general or special) sustained as a result of the breach. The payment of these new damages is mandatory. La. R.S. 22:1973(A). In addition, the claimant may be awarded penalties (on top of new damages sustained), the amount of which will be the greater of: (a) up to 2 x new damages sustained, (b) or $5000. These penalties are optional. La. R.S. 22:1973(C)
Penalties – Defenses
Although penalties greatly help a UM insurer consider its contractual and good faith duties when adjusting claims, penalties should not scare the insurer from reasonably evaluating each UM claim, and disputing anything that is not sufficiently proven. If the denial is justifiable, penalties should not be owed.
Recall that statutes 22:1892 and 22:1793 both require “clear” proof that the insurer was “arbitrary, capricious, or without probable cause,” a phrase that courts have found is synonymous with “vexatious refusal to pay”, or unjustified action without reasonable or probable cause or excuse. Reed, 857 So.2d at 1020-21; Sher v. Lafayette Ins. Co. 988 So.2d 186, 206-207, (La. 4/8/08). If, however, “there are substantial, reasonable and legitimate questions as to the extent of an insurer’s liability or an insured’s loss, failure to pay within the statutory time period is not arbitrary, capricious or without probable cause.” Louisiana Bag v. Audubon Indem. Co., 999 So.2d at 1110 (La. 12/2/08). Yount v. Lafayette Ins. Co., 4 So.3d 162, 172, (La. App. 4 Cir. 1/28/09). Such depends on the facts known to the insurer at the time of its action … Reed, 857 So.2d at 1020-21; Sher v. Lafayette Ins. Co. 988 So.2d 186, 206-207, (La. 4/8/08). For instance, if a plaintiff possessing information that would suffice as satisfactory proof of a loss, but does not relay that information to the insurer, penalties are not owed (not arbitrary or capricious). Reed, 857 So.2d at 1020-21; Sher v. Lafayette Ins. Co. 988 So.2d 186, 206-207, (La. 4/8/08).
Allen & Gooch is providing this legal update for informational purposes only. This article should not be construed as legal advice or a legal opinion as to any specific facts or circumstances. You should consult your own attorney concerning your particular situation and any specific legal questions you may have.