Court Opinion

ID: 9644586
Source: CourtListenerOpinion
Date Created: 2023-08-22 21:00:07.514522+00
Date Added: 2024-06-11T12:53:42.216445
License: Public Domain

David Newbern, Justice, dissenting. State Farm Mutual Insurance Company, (State Farm), appeals from a judgment which awarded Lindsay Thomas, the insured, attorneys’ fees and a 12% penalty pursuant to Ark. Code Ann. § 23-79-208(a)(Repl. 1992) for failure to pay Ms. Thomas’s claim under a provision for under-insured motorist coverage within a reasonable time. State Farm argues the penalty and fees should not have been awarded as State Farm paid on the underinsured motorist policy immediately after a primary liability insurer tendered its limit to Ms. Thomas in settlement of her claim against one of two motorists allegedly responsible for her injuries. I would affirm the Trial Court’s decision. Ms. Thomas was injured in an automobile accident on March 29, 1991. In effect at the time of the accident was an underinsured motor vehicle policy issued by State Farm. Ms. Thomas made demand for payment of the benefits due under the policy on November 1, 1991, having determined that her medical expenses would exceed primary liability coverage of the persons she alleged to be at fault. State Farm did not pay, and suit was filed against State Farm on February 3, 1992. State Farm participated in the discovery process, apparently contesting the claim that Ms. Thomas’s injuries would require compensation in excess of amounts payable by other insurers which had written primary liability coverage for John Laughlin and David Spears who were the other motorists involved in the accident in which she was injured. The day before the trial was to begin, Farmer’s Insurance Co. tendered to the Thomases $100,000, which was its liability limit on behalf of its insured, John Laughlin. State Farm then paid the $25,000 underinsured motorist benefits despite the fact that Farm Bureau Insurance Co. which insured David Spears for $25,000 against liability had not yet tendered payment. The Trial Court ruled that Ms. Thomas was entitled to the statutory penalty and attorneys’ fees under §23-79-208(a). Section 23-79-208(a) imposes the penalty and fee requirement on an insurer which fails to pay a claim “within the time specified in the policy.” The policy provides, “[t]here is no coverage until the limits of liability of all bodily injury liability insurance policies or bonds that apply to the insured’s bodily injury have been used up by payment of judgments or settlements.” According to State Farm, the “time specified in the policy” was the time after primary liability coverage was exhausted. No explanation is given for the payment by State Farm while the additional $25,000 liability coverage of David Spears had not been tendered and was thus not exhausted. The underinsured motorist coverage law was enacted to supplement benefits recovered from a tortfeasor’s liability carrier. See Shepherd v. State Auto Property & Cas. Ins. Co., 312 Ark. 502, 850 S.W.2d 324 (1993). The purpose of underinsured motorist coverage is to provide compensation to the extent of the injury, subject to the policy limit. See Clampit v. State Farm Mutual Auto. Ins. Co., 309 Ark. 107, 828 S.W.2d 593 (1992). The penal nature of §23-79-208 is directed against the unwarranted delaying tactics of insurers. Shepherd v. State Auto Property and Cas. Co., supra. The penalty attaches to a claim against an insurance company if suit is filed even though judgment is confessed before trial. See Federal Life and Casualty Company v. Weyer, 239 Ark. 663, 391 S.W.2d 22 (1965). The nature of the goal to be achieved by this punitive law remains constant and is not dependent upon the type insurance to which the statute applies. While § 23-79-208(a), as the majority opinion states, “only requires payment ‘within the time specified in the policy,”’ the question we must face is whether an insurance company should be allowed to provide a policy which permits it to delay and con- ' test payment of a claim which it could have ascertained to be payable long before the insured was forced to file suit. The majority opinion cites no case law in support of its decision, but relies on the statute and the language of the policy. I question that reliance in view of the cases we have decided in other insurance contexts. We should not allow an insurer to circumvent the intent of the statute. The majority also states, “that it is pure common sense that underinsurance should not pertain until it is determined whether the insured is in fact underinsured.” I question that approach. It suggests that an insurer can write a policy which requires payment only upon final judgment which requires it. Indeed, if we followed State Farm’s argument and allowed it to delay for the duration provided in its policy it would not have to pay until not only a judgment had been rendered against the person or persons liable for the injury but could delay until there has been “payment” by the liable parties, and that cannot be the law. We rejected argument of that type in Farm Bureau Mut. Ins. Co. Inc. v. Mitchell, supra. There the insurance company denied coverage of an uninsured motorist. After the insured received a favorable jury verdict and judgment, the Trial Court awarded a penalty and attorneys’ fee. On appeal the insurer argued the award was erroneous as its responsibility to the insured did not become fixed or definite until the jury returned its verdict. We held that after the insured was injured and asserted a claim, the insurer was entitled to a reasonable time to investigate, but when the insurance company elected to defend the suit brought by its insured, its decision carried with it the risk of having to pay the penalty. There is no reason an insurer writing an underinsured motorist policy should not be subject to the same requirement of investigation and payment as the issuer of an uninsured motorist policy to investigate the amount of its liability. In both instances, the insurer should be expected to exercise good faith while dealing with its insured and should be penalized for delaying tactics. The statutory penalty attaches when a demand for payment is made and, with knowledge of the State’s clear public policy, the insurer refuses. Shepherd v. State Auto Property and Cas. Co., supra. While the rule has not been applied to an underinsured motorist insurer, the public policy involved is the same as has been applied in other cases. An insurer should not be allowed to write a policy in violation of it and thus be permitted to avoid its duty to investigate its responsibility and delay payment on the basis of what other insurers may or may not do when its investigation would have revealed implication of the underinsured motorist coverage of its insured. I respectfully dissent.