Source: https://ncbarblog.com/token-offers-by-uim-insurer-do-not-constitute-unfair-claims-settlement-practice/
Timestamp: 2019-04-24 02:10:54+00:00

Document:
Elliott was injured in an auto accident on 1/16/2013 with Michael Jones, who had $30,000 of liability coverage with State Farm. Elliott submitted a demand package to State Farm alleging $234,847 in total damages. State Farm paid its $30,000 policy limit. Elliott had $100,000 per person UIM coverage with American States Insurance Co. (ASIC). She submitted the same demand package to ASIC and demanded the full UIM exposure of $70,000. ASIC declined to make any offer. On 10/08/2014 Elliott filed a lawsuit against Jones in Durham County Superior Court. ASIC defended as an unnamed party. Elliott demanded arbitration pursuant to the UIM provisions of her policy. An arbitration hearing was conducted on 2/2/2016. Elliott alleged that ASIC made “token offers” to settle between her filing of the lawsuit and the arbitration hearing, and that these offers were substantially less than the amount of UIM coverage ultimately recovered. The arbitration award was $90,000, plus pre-judgment interest and costs. A judgment was entered based on the arbitration award and ASIC paid the full amount of the judgment, after deducting State Farm’s $30,000.
Elliott then filed a lawsuit against ASIC in Durham County Superior Court, which was removed to federal court, alleging that ASIC’s conduct of forcing her to initiate arbitration to get her claim paid constituted an unfair claims settlement practice in violation of N.C.G.S. § 58-63-15 (11) and thus, as a matter of law, an unfair and deceptive trade practice in violation of N.C.G.S. § 75-1.1. The District Court, Judge N. Carlton Tilley, Jr., granted ASIC’s Rule 12(b)(6) motion to dismiss. The Fourth Circuit affirmed.
The Court began its analysis by observing that, under North Carolina law, even when UIM coverage is triggered by exhaustion of the tortfeasor’s liability coverage, the UIM carrier’s liability is derivative and is conditioned upon the insured being legally entitled to recover damages from the underinsured tortfeasor, and the “legally entitled” requirement means that plaintiff must have a cause of action and “a remedy by which he can reduce his right to damages to judgment.” “ASIC was thus not required to settle Elliott’s UIM claim until after it was determined that Elliott was legally entitled to recover from Jones – i.e., until after judgment was entered in Elliott v. Jones.” The Court then addressed plaintiff’s specific arguments that her complaint sufficiently alleged that ASIC violated three provisions of N.C.G.S. § 58-63-15 (11).
It is important to note that Elliott’s complaint did not allege a violation of N.C.G.S. § 58-63-15 (11)b. (failing to acknowledge and act reasonably promptly upon communications), d. (refusing to pay claims without conducting a reasonable investigation, or n. (failing to promptly provide a reasonable explanation for denial of a claim or for the offer of a compromise settlement). It is also important to recognize the differences between this case and Guessford v. Pa. Nat’l Mut. Cas. Ins. Co., 918 F. Supp. 2d 453 (M.D.N.C. 2013), which was mentioned and distinguished in Judge Tilley’s opinion, but was not mentioned in the Fourth Circuit’s decision. The plaintiff’s complaint in Guessford alleged that the UIM carrier failed to investigate plaintiff’s claim properly and misrepresented pertinent facts or insurance policy provisions. The Court in Guessford found that those allegations of aggravated conduct and bad faith delay stated a plausible claim of unfair or deceptive trade practices.

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