Are UM/UIM Insurers Obligated To Advance To Their Insureds Undisputed Partial Payments Before Total Claim Value Is Determined?

REPRINTED WITH PERMISSION FROM INSURANCE LITIGATION REPORTER

36 No. 2 Ins. Litig. Rep. 49

Insurance Litigation Reporter

February 18, 2014

Feature Article

ARE UM/UIM INSURERS OBLIGATED TO ADVANCE TO THEIR INSUREDS UNDISPUTED PARTIAL PAYMENTS BEFORE TOTAL CLAIM VALUE IS DETERMINED?

By Steven Plitt

Steven Plitt received his LL.M. for Insurance Law, with honors, from the University of Connecticut. He is the current successor author for COUCH ON INSURANCE 3D. He is the author of Practical Tools for Handling Insurance Cases published by Thomson Reuters, as well as other books and legal publications.

Generally, insurance policies require insurance companies to exercise due care in conducting a defense of the insured, which includes an obligation to act reasonably in response to settlement offers. ¹ The insurance company’s obligation to exercise good faith in evaluating and negotiating third-party claims against its policyholder/insured, is based on the insurance policy’s implied covenant of good faith and fair dealing or upon a fiduciary-like relationship that emanates from the insurance transaction. ² The obligation to settle in the third-party context is predicated upon the insurance company’s right to control the defense of actions brought against the insured, which includes the right to control the investigation and settlement of claims. ³

Courts have adopted various trigger points for the insurer’s obligation to settle in the third-party context. The majority rule is that the insurance company’s duty to settle is not triggered until the insurance company is presented with a demand or the opportunity to settle within policy limits. ⁴ However, some courts have held that the insurance company is required to initiate settlement negotiations under specific factual circumstances. As an example, in Illinois an insurer may be required to initiate settlement discussions and/or offer its policy limits when: (1) the probability of an adverse finding on liability is great; and (2) the amount of probable damages will greatly exceed policy limits. ⁵ In Florida, the insurance company must initiate settlement discussions in the third-party context where liability has become clear and the injuries are so serious that a judgment in excess of the policy limits is likely. ⁶ In these type of situations, a total settlement is contemplated which includes a combination of special damages (medical expenses and lost wages where applicable) together with general damages (pain and suffering). It is not common practice for tortfeasors to advance partial payments for components that comprise the total case value prior to reaching a “total” settlement of the claim. ⁷

With increasing frequency insureds are demanding that partial payments be made in the UM/UIM motorist context. Those courts which have considered the issue of whether insurers are required to make partial advance payments in the UM/UIM context before the total liability of the uninsured motorist is fixed by arbitration or litigation have held that an insurer’s to pay a partial undisputed amount of a UM/UIM claim is not bad faith prior to a determination of the total claim value. ⁸

The principals and risk which underpin the duty to settle in the third-party context do not carry over into the UM/UIM context. As an example, the insurer’s refusal to settle a UM/UIM claim can never result in a judgment against the uninsured or underinsured motorist for any excess liability. Unlike the obligation to settle in the third-party liability context which is predicated upon the insurance company’s exclusive right to control the defense of actions brought against the insured, including the right to control the investigation and settlement of claims, UM/UIM claims are not controlled by the insurer to the exclusion of the insured. If the insured makes a claim for damages allegedly suffered by the insured as a result of the negligence of an uninsured or underinsured motorist, and the insurance company fails or refuses within a reasonable time to pay such claim, the insured can immediately demand arbitration and seek to procure a prompt and just settlement of the claim. The insured is not required to wait indefinitely for the insurer to investigate, evaluate, and reach a conclusion as to whether it is liable and, if so, for how much.

Similar to third-party liability claims, under the UM/UIM provisions of standard policies, the parties occupy a contractually adverse position toward each other. The UM/UIM insurer may lawfully avoid liability to its insured by proving in the arbitration proceedings that the uninsured or underinsured motorist was not guilty of negligence which proximately caused the insured’s damages; or, the insured did not suffer the damages he or she is claiming. It is the adversarial nature of the interrelationship between the insurer and its insured that blurs the traditional fiduciary-like relationship that exists between the parties in the third-party liability context. Courts have done a poor job in describing the obligations of the insurer regarding the insurer’s adversarial approach to the claim submission.

An inherent tension exists between the pure legal rights of the insurer under the contract and the vulnerabilities that insureds face when injured by an uninsured or underinsured motorist. The majority of UM/UIM policies provide that if the parties cannot agree regarding the insured’s legal liability to collect, that the dispute will be settled by arbitration. It is problematic to rationalize how either party can be charged with the commission of a tort merely because that party elected to exercise a lawful option to litigate/arbitrate open to that party under the terms of the policy. In a pure sense, it would appear to be immaterial whether the insurer’s election to arbitrate was motivated by good faith, bad faith, self-interest, malice, spite or indifference given its clear and lawful right to have the claim resolved by arbitration.

Practically, it must be recognized that an insured who has suffered a loss and is pressed financially can be at a marked disadvantage when bargaining with an insurance company over the payment of the loss. ⁹ Because of the potential vulnerability of insureds after the loss has occurred, a question arises as to whether insurance companies are obligated to make partial payments during the processing of any UM or UIM claim submission. ¹⁰ The majority of courts that have considered this question have found that insurers are generally not required to make partial payments based on the language used in UM/UIM contracts and the fact that those contracts did not expressly require periodic partial payments to be made. As an example, the Court in Keefe v. Prudential Property and Cas. Ins. Co., ¹¹ recognized that insurers do not act in bad faith when they assume that an insured desires settlement of the entire claim at least where the contract provides for general damages and the policy does not explicitly require separate assessments and payments for separate injuries in the calculation of compensatory damages. ¹²

In LeFevre v. Westberry, ¹³ the Court found that a bad faith claim in the UM context could not be predicated upon the insured’s failure to make advance payments. This case involved a determination that the uninsured motorist was 100% responsible for the accident. Under the facts presented, the Court found that while the insured was entitled to some payment under the UM coverage, the total amount of that entitlement was not capable of being fully ascertained as of the date the insurer received notice of the claim. ¹⁴ Stated differently, the Court found that as of the date the insured received notice, the insured had failed to “prove the extent of those damages” in order to become “legally entitled to collect damages from the owner or driver of the uninsured motor vehicle.” ¹⁵ Under Alabama law, there could be no breach of an uninsured motorist contract, and therefore no bad faith, until the insured proved that he or she was legally entitled to recover which included a determination of the amount of damages. ¹⁶ The Court in LeFevre ¹⁷ acknowledged that there would be some cases where the insured could prove the amount of the insured’s liability with the specificity necessary to recover against the insurer for bad faith. ¹⁸ However, in personal injury cases where the insured’s injuries first appear to be nominal and then gradually worsen, the insurer cannot be held liable for damages on a bad faith claim for failing to anticipate what even the physicians did not predict. ¹⁹

Turning to the issue of the need for a periodic payment, the Court in LeFevre found that the insurer had no contractual obligation to make advance payments under the facts that were presented. The insurer’s duties and obligations in that regard were determined by the terms of the policy and the policy made no provision for unconditional periodic payments. ²⁰ Although the insured acknowledged that the policy did not provide for advance payments, the insured argued that the obligation of good faith and fair dealing superseded the actual terms of the policy. The Court in LeFevre rejected this argument finding that the written terms of the contract governed the situation and that the Court was not at liberty to read into the policy something that was not there.

In Williams v. Nationwide Mut. Ins. Co., ²¹ the Court held that the UM policy arbitration clause did not require the insurers to promptly and unconditionally pay the undisputed amounts of benefits prior to arbitration and that the insured did not act in bad faith by failing to pay settlement offers and reserves prior to arbitration. The insurers investigated the UM/UIM claims and subsequently set aside reserve amounts purportedly based on evaluations of the insured’s claims. Some of the insurers made settlement offers that were rejected. The insureds asserted that the evaluations, reserve amounts or settlement amounts were “undisputed amounts” that they were entitled to collect promptly and unconditionally from their insurers. However, because the insureds and their respective insurers disagreed on the total evaluation of the claims, the parties submitted the claims to arbitration pursuant to the policies. While the arbitration was pending, the insureds demanded payment of the “undisputed amounts.” The insureds argued that the “undisputed amounts” should have been tendered promptly by the insurers because of the insurers nondelegable contractual duty of good faith and fair dealing to pay the amounts that the insurers had assessed as their minimum liability.

The Court in Williams found that the language of the UM/UIM policies did not require the insurers to promptly pay “undisputed amounts” to which the insureds were legally entitled to, prior to an arbitration decision settling the total amount of the claim. In rejecting the claim, the Court noted that the term “undisputed amount” was not found anywhere in the insurance policy. ²² The insureds argued that the policy arbitration clause should have contained additional language addressing undisputed amounts. However, the Court found that the mere absence of such language did not imply that the insurers had a contractual duty to promptly tender undisputed amounts. ²³ The Court in Williams rejected the concept that any settlement offers made by the insurance company equated to “undisputed amounts” of benefits that were due under the policy. ²⁴ The term “undisputed,” according to the Court, had been defined by dictionary as, “[n]ot questioned or challenged; uncontested.” ²⁵ The Court noted that under Pennsylvania law settlements were not to be construed as admissions of liability. ²⁶ The Pennsylvania approach was supported by courts which had expressed an unwillingness to infer that settlement authority invariably constituted a final, objective assessment of claim value to which an insurer may be held liable on penalty of bad faith. ²⁷

The insureds in Williams did not request and the insurers did not arrive at a valuation of the insureds’ claims with the purpose of setting a partial fixed amount of UM/UIM benefits. ²⁸ The Court noted that even if the insureds had properly plead that such a partial valuation had been made, they would have been required to plead that both parties had agreed that the amount of the partial evaluation represented an “undisputed amount” of benefits due. Without such an agreement, there could be no “undisputed amount.” ²⁹

In Garnett v. Government Employees Ins. Co., ³⁰ an injured passenger brought a UIM claim under the driver’s policy. The Court held that the insured did not act in bad faith by failing to pay a “undisputed amount” of the UIM benefits to the passenger. During the claim presentation, the insured passenger established that he had sustained $7,226.66 in damages for medical expenses and lost wages. He also alleged that he sustained damages for pain and suffering and mental anguish in the accident. The insurer valued the UIM claim somewhere between $1,000 and $3,000. The insured passenger argued that the claim should have been valued somewhere between $13,000 and $15,000. Ultimately a jury awarded the insured passenger $5,000 which was a number greater than the insurers estimate, but closer to the insurer’s range of claim value than to the passengers. ³¹ The Court noted that the UIM claim was legitimately disputed as evidenced by the jury’s award. ³² Because a legitimate dispute existed between the parties as to the value of the UIM claim, the Garnett Court affirmed summary judgment in favor of the insurer on the issue of whether the insurer’s failure to tender the undisputed amount constituted bad faith. ³³

In Pochat v. State Farm Mut. Auto. Ins. Co., 772 F.Supp.2d 1062 (D. S.D. 2011), an interesting issue arose. The insured presenting an uninsured motorist claim sued State Farm alleging that when she signed a release for a UM settlement with State Farm she was under economic duress. Because of the economic duress the insured sought relief from the settlement.

In Pochat, the insured sued State Farm alleging that State Farm breached the insurance policy by failing to pay all of the medical expenses and bodily injury damages, suffered in a covered motor vehicle accident, in a fair and reasonable amount. The Pochats were involved in an automobile accident on August 28, 2003 when they were rear-ended. At the time of the accident, the tortfeasor was uninsured. The Pochats had an uninsured motorist policy with State Farm. As a result of the accident, Toni Pochat suffered injuries and incurred medical expenses of approximately $9,000. The State Farm policy provided medical payments coverage of $5,000 per person. The medical payments coverage benefits were fully paid out on Toni’s medical expenses. 772 F.Supp.2d at 1064. Toni’s physical injuries included pain in her head, chest, back and neck. Toni reached maximum medical improvement on May 2, 2005 and sought no further medical treatment. At the time of the accident, Toni was not employed and was not claiming any loss of income as a result of the accident. The Pochats never made State Farm aware of Toni’s financial situation. Id. at 1064-65.

Toni hired an attorney who sent a letter to State Farm on May 2, 2005 offering to settle Toni’s UM claim for $225,000. After that date, all communications between Toni and State Farm went through her attorney. On June 14, 2005 State Farm offered $8,500 to settle Toni’s claim. On June 28 Toni offered to settle her claim for $95,000. On July 12 State Farm offered to settle for $9,500. Toni reduced her offer to $30,000 and on July 13 State Farm offered to settle for $12,000. Toni then offered to settle for $20,000 and on July 15 State Farm offered to settle for $13,500. On July 18 State Farm increased its offer to $14,000. On July 19, 2005 Toni offered to settle for $18,500, which offer would remain open until the next day at 2:00pm. On July 21 State Farm offered $14,100. The next day, Toni’s attorney faxed a letter offering to settle for $18,400. On July 26 State Farm offered to settle for $14,150. On the following day, Toni offered to settle the claim for $16,500 and requested a response by State Farm by 4:00pm. That offer was renewed the next day with a request that State Farm respond by noon on July 29th. By letter dated July 29, State Farm offered $14,250. On August 2, 2005, Toni faxed a letter to State Farm indicating she would accept $14,500 to settle her UM claim so long as the check was sent by Federal Express. On August 3, 2005, State Farm sent to Toni’s attorney by Federal Express a check for $14,500, together with a letter indicating settlement of the UM claim. After receipt, Toni cashed the $14,500 check. Id. at 1065-66.

Three years after settling with State Farm on the UM claim, Toni Pochat filed a bad faith lawsuit against State Farm alleging that State Farm breached the insurance policy by failing to pay all of Toni’s medical expenses and bodily injury damages in a “fair and reasonable amount.” Id. at 1066. Toni Pochat alleged that State Farm knew that the Pochats were struggling financially and used that fact to force an unreasonable UM claim payment to Toni. Id.

The Court held that Toni Pochat was not entitled to rescind the settlement of her UM case with State Farm under the doctrine of economic duress. The Court began its analysis by recognizing that the relationship between Toni Pochat and State Farm was based on contract. Under South Dakota law, “[a]n insured’s acceptance of a check from his insurance company in settlement of a disputed sum may constitute an accord and satisfaction.” Dunes Hospitality, LLC v. Country Kitchen Int‘l, Inc., 623 N.W.2d 484 (S.D. 2001). A settlement of a UM claim is also a contractual agreement where the insured’s acceptance of a check constitutes an accord and satisfaction. However, the Court in Pochat noted that in “special, unusual, or extraordinary situations in which unjustified coercion is used a contract,” the contract may be subject to rescission for economic duress. Pochat, 772 F.Supp.2d at 1066, citing Dunes Hospitality, LLC v. Country Kitchen Int‘l, Inc., 623 N.W.2d at 489. Three elements must be present to establish economic duress:

1. One side involuntarily accepted the terms of another; and

2.That circumstances permit no other reasonable alternative; and

3. That said circumstances were the result of a coercive wrongful act of the opposite party.

772 F.Supp.2d at 1066, citing Dunes Hospitality, LLC v. Country Kitchen Int‘l, Inc., 623 N.W.2d at 490.

Toni Pochat asserted as grounds for financial distress the fact that she was recently divorced from her husband, she had incurred almost $9,000 in medical bills from her injuries, and that State Farm used her vulnerability and financial distress against her, in coercing her to agree to accept only a portion of what her UM claim was worth. 772 F.Supp.2d at 1067. The Court rejected this assertion because there was no evidence that State Farm was given notice of Toni Pochat’s financial or emotional distress, let alone the type of special, unusual or extraordinary distress contemplated by prior South Dakota precedent. Id.

Relevant to this article, the Court then addressed State Farm’s voluntary practice in paying undisputed amounts. The record demonstrated that State Farm issued the following instructions to its adjusters:

When dealing with first party claims, it is the Company’s philosophy to advance pay the amount of our initial offer when an agreement on the entire amount has not been reached and is not imminent….

What do we mean by Advance Payment of Initial Offer?

The evaluation of personal injury claims in particular, is an art, not a science. Our first offer on first party injury claims should be within the range of value…. Since our initial offer indicates a willingness to pay a particular amount, except as provided below, we will advance the amount of our offer…. In those rare cases when dispute resolution is needed to conclude a claim, advance payments reduce the effect of any delay associated with the dispute resolution process. ³⁴

The Court noted that State Farm obligates its claims adjusters to implement the above provision when State Farm and the insured have reached an “impasse.” Citing BLACK’S LAW DICTIONARY, the Court noted that generally “an impasse occurs when the parties are at [a] point … at which an agreement cannot be reached.” ³⁵ The Court then held that the uncontroverted evidence was that the parties, Toni Pochat and State Farm, never reached an impasse in their settlement negotiations. There was always movement of both parties towards resolution of the UM claim which was evidenced by the timely responses both parties made throughout the process. Id. The State Farm claim adjuster’s uncontroverted testimony was that no impasse occurred. ³⁶ Therefore, because no impasse had occurred, the advance payment of State Farm’s initials offer instruction to adjusters was not triggered. ³⁷

The Court in Pochat also found that Toni Pochat was required to demonstrate that no reasonable alternative existed but to accede to the wrongful and coercive demands of the defendant in order to establish her economic duress claim. The Court found that Ms. Pochat had another option available if she felt that State Farm was forcing her into a low ball settlement of her UIM claim which involved her declaration of an impasse and the initiation of litigation for breach of contract, bad faith, and punitive damages. Id. Finally, Ms. Pochat failed to establish that she was the victim of any unlawful or unconscionable pressure. The $5,000 medical payments coverage limit was paid toward her medical expenses. State Farm also made prompt responses to her settlement demands and the UM claim was ultimately settled in a timely fashion. Id.

A. GENERAL DAMAGES AS UNDISPUTED AMOUNTS

The predictability of general damage ranges for personal bodily injury can be highly speculative. In fact, numerous courts have recognized this. As an example, the Court observed, in Bayless II v. Boyer, M.D.: ³⁸

Pain and suffering damages are long recognized by our jurisprudence. … By its nature, pain and suffering is a subjective experience. In addition, pain and suffering is an abstract, albeit real, impairment. The award for pain and damages, then, seeks to measure this abstract harm. It requires jurors to assess the inherently subjective pain and suffering of another, and then determine the economic value of this noneconomic harm.

It is difficult for an individual to measure one’s own pain, let alone the pain of another. Yet, jurors are required to measure the pain of another with a dollar amount without clear guidance from the court. Instead, guidance comes from the attorneys who have broad latitude to present evidence of pain and suffering, and suggest how these damages should be calculated. As a result, pain and suffering awards are unpredictable and varied. Although jurors should have discretion to weigh the facts of a particular case, empirical evidence reveals significant inconsistencies in pain and suffering awards. As many scholars have noted, this variance and lack of predictability in juror awards runs contrary to the rationality and stability that is a hallmark of the rule of law. There is, of course, no way for jurors to “feel the pain” of a plaintiff, and as a result, “evidence” of such pain is reduced to factors such as how much an individual complains of pain, or the kind of physical activities that the individual performs.

One court, Voland v. Farmers Ins. Co. of Arizona ³⁹, has made the following observation:

The “pain and suffering”/general damage elements of a personal injury claim, for example, are inherently flexible and subject to differing and potentially changing evaluations based on various factors. [Citation omitted] In short, evaluating personal injury claims, and particularly the “general damage” component, is far from an exact science. Oftentimes it is no more precise or predictable than throwing darts at a board. ⁴⁰

Scholarly commentators have also discussed the inconsistency in calculating pain and suffering. ⁴¹

Because the predictability of general damage value ranges for personal bodily injury is highly speculative, values assigned to the general damages portion of an overall UM/UIM claim submission is inherently fairly debatable. The fair debatableness of the general damages value is not overridden by an insurer’s offer of settlement on the claim submission. The insurer’s offer of settlement remains fairly debatable and the insurer is not required to pay as an undisputed amount, the value of the settlement offer. Nevertheless, an insurer may be obligated to issue partial payments for fixed medical expenses or verified lost wages in cases where liability is uncontested and the amount of those type of special damages are not disputed. ⁴²

In Keefe v. Prudential Property and Cas. Ins. Co., ⁴³ the Court explained the difficulty of dividing and precisely fixing damages in personal injury claims:

Until a partial final assessment is made or requested, there is a reasonable basis for failing to make [an] offer of partial settlement: namely, it is unclear what the separate injuries are worth, or what the plaintiff would have been legally entitled to recover for bodily injury if the uninsured motorist had coverage. A request for partial final assessment or evidence that the insurer conducted such a partial final assessment is a precondition of success on a bad faith claim because of the subjective components of a pain and suffering award. As the Arizona Supreme Court has noted, “a personal injury claim is unique and genuinely not divisible or susceptible to relatively precise evaluation or calculation. The “pain and suffering”/general damage elements of a personal injury claim … are inherently flexible and subject to different and potentially challenging evaluations. ⁴⁴

In Government Employees Ins. Co. v. Quine, ⁴⁵ the insurer initiated a declaratory judgment action seeking a declaration that the insurer was not required to pay its insureds what the insureds contended was an undisputed amount of UIM benefits. The issue before the Court in Quine, was whether an insurer’s refusal to unconditionally tender a partial payment of UIM benefits constituted a breach of the obligation to act in good faith and deal fairly when (1) the insured’s economic/special damages had been fully recovered by the insured to the tortfeasor’s liability insurance; (2) the insurer promptly investigated and placed a value on the claim; (3) there was a legitimate dispute regarding the insured’s non-economic/general damages; and (4) the benefits due had not been firmly established. The Court held that the insurer’s refusal to unconditionally tender a partial payment of the UIM benefits did not amount to a breach of the obligation to act in good faith and deal fairly when the insured’s economic and special damages were fully recovered through payment from the tortfeasor’s liability insurance. The UIM insurer promptly investigated the claim and placed a value on the claim, but there was a legitimate dispute regarding the amount of non-economic and general damages suffered by the insured and the benefits due and payable had not been firmly established by either an agreement of the parties or entry of a judgment substantiating the damages.

In Quine, the insured was involved in a three car accident where she suffered personal injuries. The insured was a fault free passenger at the time of the accident. The medical bills for the insured’s injuries totaled $9,904.05. The only economic or out-of-pocket damages incurred by the insured were for those medical expenses. ⁴⁶ The tortfeasor’s liability insurance policy was insufficient to satisfy all of the claims asserted from the accident. The insured settled her personal injury claim with the tortfeasor for the sum of $13,890. ⁴⁷ The insured then notified the UIM insurer of the settlement amount. The insured’s attorney sent a demand letter to the insured seeking payment of the $100,000 UM policy limits. ⁴⁸ The insurer responded by offering $6,014.05 which was refused by the insured. As the claim progressed, the insurer increased its offers.

During the claim, the insurer received medical records and had an independent medical examination performed. After receiving the IME doctor’s report, the insurer assessed the value of the UIM claim. The range of values placed on the claim only included the insured’s damages for personal injuries and did not include any factors outside of the UIM benefits such as litigation costs, expense associated with defending against the suit, attorneys’ fees, or other amounts. ⁴⁹ The insurer determined that the UIM claim had a value of between $6,014.05 and $11,014.05. When the parties in Quine were unable to reach a full and complete resolution of the claim, the insured’s attorney presented a demand to the insurer seeking an unconditional tender of the “”undisputed amount” of benefits under the policy. The demand contained no specific dollar figure as being representative of what the insured believed the “undisputed amount” was. ⁵⁰ The insurer rejected the request for payment and responded by denying that it had an obligation to pay UIM benefits in advance without a complete release from its insured.

In rejecting the insured’s argument, the Court in Quine noted that nothing in the written insurance policy expressly required, allowed, or prohibited the insurer from withholding payment of UM or UIM benefits to its insured until the insured agreed with the company’s evaluation and executed a full and complete release of any sums exceeding its evaluation. ⁵¹

The Court in Quine began its analysis by recognizing that the insured had received compensation from the tortfeasor’s insurer in excess of her economic/special damages. ⁵² The insurer, through its evaluation, determined that the insured was entitled to some amount of UIM benefits under the policy for the non-economic/general damages element of her claim. ⁵³ The Court found the distinction between these two damage elements was particularly germane to the facts of the case before it. The Court noted that the parties could not agree on an appropriate value for the insured’s general damage claim and therefore a legitimate dispute arose. ⁵⁴ The insurer’s refusal to issue an advance payment on the UIM claim presented a scenario far different than one involving a request for partial payment needed to satisfy unpaid medical expenses, lost wages, or other economic/special damages. The later represented cases where the impact of the loss is direct, immediate, and measurable with reasonable certainty. ⁵⁵ The Court noted that the only portion of the insured’s claim remaining after payment from the tortfeasor were those indeterminate sums attributable to general damages.

In Voland v. Farmers Ins. Co. of Arizona, ⁵⁶ the Court found that the implied covenant of good faith and fair dealing did not require UM carriers to pay in advance, before the insured executed a release or obtained an arbitration award, the amount of an unaccepted settlement offer that covered all aspects of the UM claim, including special and general damages. The Court also found that the insurance carriers did not act in bad faith by failing to pay, in advance of arbitration or the insured’s execution of a release, the insured’s undisputed medical bills and lost wages.

The facts regarding the Voland case were stipulated. In March 1992, the plaintiff was injured in an accident caused solely by a negligent uninsured motorist. ⁵⁷ The insured made a UM claim for benefits under her State Farm and Farmers auto insurance policies. The policies had UM limits of $25,000 and $100,000 respectively. In April 1993, the insured made a settlement demand for the combined UM limits of $125,000. ⁵⁸ At the time the demand was made, the insured had submitted to both insurers medical records and bills totaling $5,587.14 and a verification of lost wages totaling $5,130.62. Neither insurer disputed that the medical bills were reasonable and causally related to the accident or that the lost wages resulted from the accident. ⁵⁹ By late April 1993, both insurers had determined the value of the insured’s UM claim was between $30,000 and $40,000. On behalf of both insurers, the Farmer’s representative corresponded with the insured’s counsel in May 1993 advising that the claim had a fair value of $30,000 and offering to settle the UM claim for that amount. A few days later, the insured’s attorney wrote to the insurers demanding arbitration under the policies and requesting both insurers to pay the insured the $30,000 which had been offered. ⁶⁰ The attorney for the insured disagreed with the insurers’ evaluation as being without foundation and represented evidence of bad faith. Nevertheless, counsel for the insured asserted that failure of the insurers to pay the settlement amount which counsel referenced as being a “undisputed amount” would be bad faith. ⁶¹

The insurers did not pay the $30,000 that the insured’s counsel had requested nor did the insurers pay the insured the undisputed medical expenses or lost wages. The Court in Voland noted that the insured did not specifically request that the insurers pay only the amount of the medical bills and lost earnings. ⁶² During the course of negotiations, the insurers increased their joint offer to $50,000 and the insured reduced her settlement demand to $80,000. The matter proceeded to arbitration and an arbitration award was entered in favor of the insured for $60,000. ⁶³

The Court in Voland began its analysis by recognizing that all insurance contracts in Arizona included an implied covenant of good faith and fair dealing. ⁶⁴ Seizing on the language of the insurers’ written settlement offer stating that the $30,000 was the minimum “fair value” of the claim as determined jointly by their adjusters, the insured argued that the insurers acted in bad faith by withholding that sum from her while the insurers followed the policy’s arbitration procedure to resolve the dispute about value, or until she would execute a release. ⁶⁵ The Court found the insured’s argument flawed because it overstated the significance of the insurers’ choice of the term “fair value” to describe the settlement offer. The Court found that the insurers’ settlement offer did not constitute an acknowledgement, in fact, that the amount offered was the minimum amount the insurer’s own adjuster had evaluated as being owed to the insured. “Rather, the settlement offer was simply a proposal to compromise and resolve the claim, nothing more and nothing less. It represented the carrier’s evaluation or best estimate, at that point in time, of what the trier (here, the arbitrators) might award.” ⁶⁶ As such, the insurers settlement offer did not bind them if, as it turned out, the claim could not be settled and had to be arbitrated.

The Court in Voland found that the offer of settlement did not set a “floor” on what the arbitrator’s had to award or what the insurers would ultimately have to pay. ⁶⁷ The Court agreed with State Farm that “an unaccepted settlement offer does not liquidate the amount of damages or constitute an admission of “undisputed amounts” owed.” ⁶⁸ The Court explained the problematic disincentives that would be created by adopting the insured’s contention regarding the insurers’ obligation to pay as an undisputed amount what they offered to settle for:

If, in order to avoid a bad faith claim, UM carriers were obligated to pay the amount of their lowest settlement offer without obtaining any release and before any arbitration hearing or award, they would have little if any incentive to settle. Imposing such a requirement would have a chilling effect on genuine settlement evaluations and negotiations. The effect would be to deter and foster litigation, whereas out system of justice encourages settlement and discourages litigation. ⁶⁹

The Court in Voland rejected the insured’s case authorities finding that they involved either a property loss claim, the minimum value of which could easily be calculated and promptly paid as an undisputed portion of the claim or an uncontested loss of income benefits which could have partially been paid. In rejecting these authorities, the Court noted:

Unlike the stolen personal property and lost earnings claims involved in those cases, a personal injury claim is unique and generally not divisible or susceptible to relatively precise evaluation or calculation. The “pain and suffering”/general damage elements of a personal injury claim, for example, are adherently flexible and subject to differing and potentially challenging evaluations based on various factors. ⁷⁰ The Court explained: “evaluation of a personal injury “including UM” claim often takes into account such factors as any liability issues “including negligence and causation; the claimant’s out of pocket expenses, or “special damages;” updated medical reports or discovery of old medical records showing preexisting injury or prior claims; evidence of malingering, subsequent accidents or new injuries; qualifications, appearance and demeanor of the claimant and his or her witnesses; reputation and effectiveness of counsel; findings from any surveillance efforts; and selection and background of the arbitrators.” ⁷¹

The Court in Voland recognized that evaluating personal injury claims, in particularly the “general damage” component of those claims, was far from an exact science and often times was no more precise or predictable than throwing darts at a board. ⁷²

The insured in Voland alternatively argued that, at the very least, the insurers acted in bad faith by failing to pay in advance her undisputed medical bills and lost wages totaling $10,717.76. ⁷³ The Court in Voland rejected this contention. The Court found that the insurers’ failure to pay the insured’s special damages before arbitration did not constitute bad faith. ⁷⁴ In reaching this conclusion, the Court noted that the insured never requested, let alone demanded, that the insurers pay the special damages before arbitration. The Court also noted that there was no direct or controlling authority supporting the insured’s present position, requiring UM carriers to make gratuitous advance payments which the insured did not request. ⁷⁵

Finally, the Court in Voland noted there was no claim that the insurers delayed or improperly conducted their investigation, delayed the arbitration process, or were engaged in any other questionable tactics detrimental to the insured. ⁷⁶ Under the circumstances the Court in Voland found that “any obligation the carriers had to gratuitously pay [the insured] UM benefits in advance for her special damages was, as a matter of law ‘fairly debatable.”‘ ⁷⁷ The Court also found that the insurance contracts in question did not require the insurers to offer or make advance payments of UM benefits, for allegedly “undisputed” damages or otherwise. The contracts specifically provided for binding arbitration of disputed UM claims. ⁷⁸

B. UNDISPUTED MEDICAL EXPENSES AND LOST WAGES

Courts are split on the issue of whether undisputed medical expenses and lost wages constitute undisputed amounts requiring partial advance payments before the total value of the UM/UIM claim has been determined. Compare the courts’ analysis in Quine and Voland, supra. Regarding medical expenses, it is common to have some medical expenses agreed upon as involving reasonable and customary charges causally related to a particular bodily injury while other medical expenses are challenged. In that type of situation, the insurer and insured may need to segregate the medical expenses into disputed and undisputed categories. ⁷⁹

1. Medical Expenses as Undisputed Amounts

In Weinstein v. Prudential Property and Cas. Ins. Co. ⁸⁰ the Supreme Court of Idaho found that an insurer’s refusal to pay UM benefits on undisputed medical bills before a settlement of the insured’s entire claim breached the policy requirement that UM benefits be paid within a reasonable time. ⁸¹ Additionally, the Court found that the insurer’s delay in paying UM claims supported a claim for bad faith breach of the insurance contract.

In Weinstein, the insured was involved in an automobile accident with an uninsured driver. The automobile policy provided $5,000 in medical payments coverage and $250,000 per person UM coverage for bodily injury. The insurance company was promptly notified of the accident and the following day the insurer determined that the accident had been caused by an uninsured driver. ⁸² The insurer, Liberty Mutual, assigned a UM adjuster to the claim.

After Liberty Mutual was notified of the accident it sent the insured a letter stating that the medical payment provision of the contract required that any medical bills first be submitted to the insured’s health insurer and that Liberty Mutual would only pay for any uncovered or disallowed items assuming they were reasonable and necessary expenses. ⁸³ The adjuster requested from the insured copies of all medical bills and requested that the insured sign a medical release authorization to obtain the medical records from treatment providers. ⁸⁴ During the processing of the UM claim Liberty Mutual requested additional medical release authorizations to acquire additional records. ⁸⁵ One of the releases authorized the UM adjuster to obtain records from the medpay unit of the insurer. ⁸⁶ However, the UM adjuster did not use any of the medical authorizations nor did the adjuster attempt to obtain any medical records from any providers. ⁸⁷ The insurer was informed by the insured that they were receiving threatening phone calls concerning unpaid medical bills and that the insureds were still receiving treatment. Following this communication, Liberty Mutual responded by sending the insureds a letter stating that if Liberty Mutual did not receive any new medical bills within 30 days it would close the medpay file. Twelve days later the file was closed because the insureds had not responded to that letter. ⁸⁸

Liberty Mutual incorrectly believed that the insurance contract supported its position that it did not have to pay the medical expenses until the bills were first submitted to and denied or only partially paid by the insured’s health insurance carrier. ⁸⁹ Later in the claim process Liberty Mutual realized that the medpay provision in the policy did not apply to the daughter who was injured in the accident but only applied to the parents as the named insureds. ⁹⁰ Prior to that realization Liberty Mutual did not make any medical payments coverage available to the insureds. It was Liberty Mutual’s corporate policy to exhaust the medical payments coverage before making any payment under the UM coverage and that Liberty Mutual would not make any payments under the UM coverage until the insured desired to settle the entire UM claim. ⁹¹

The Court in Weinstein began its analysis that Liberty Mutual was entitled to rely upon the terms of the insurance policy but that it was not entitled to delay payments based solely upon its internal policies that were not part of the policy. ⁹² The Court noted that the implied covenant of good faith and fair dealing which is imputed into the insurance policy did not override the clear contract terms. ⁹³ On appeal, Liberty Mutual defined the issue before the Court in Weinstein as whether an insurer has an obligation to make multiple payments as medical bills trickle in from the claimant rather than doing a single evaluation and payment concluding the claim. ⁹⁴ The Court in Weinstein focused on the insurance contract language before it in resolving this issue. In question was the contract language stating: “our payment is based on the amount that an insured is legally entitled to recover for bodily injury but could not collect from the owner or operator of the uninsured motor vehicle.” ⁹⁵ Liberty Mutual argued that the term “”payment” was singular. The term “amount” was singular. Therefore nothing in the policy supported multiple payments because the policy referred to only one “”payment” and one “amount.” ⁹⁶ Given this policy language Liberty Mutual argued that there was no contractual duty to make multiple, piecemeal payments before the company could evaluate the UM claim in its entirety. ⁹⁷ Focusing on different contract language, the Court noted, preliminarily, the word “payment” could mean both “the active paying” and “an amount paid.” ⁹⁸ Focusing on the insuring clause, the first sentence of the insuring clause stated “if you have [UM coverage] we will pay up to our Limit of Liability for bodily injury.” The Court in Weinstein found that this leading sentence stated the maximum amount that Liberty Mutual would pay under UM coverage. The amount could not exceed the Limit of Liability for bodily injuries as set forth in the contract. Turning to the phrase “we will pay” the Court found that it could not reasonably be construed as indicating that the insurer would make only one payment. By way of example, the Court noted that the policy provision covering medical payments stated “we will pay … up to our Limit of Liability for medical payments coverage…” There was no contention by Liberty Mutual that the phrase “we will pay” meant that it would only make one payment under the medical payments coverage. ⁹⁹ Turning to the second sentence of the insuring clause which stated “our payment is based on the amount that an insured is legally entitled to recover for bodily injury…” the Court found that the word “payment” clearly referred to the phrase “we will pay” in the first sentence of the clause. If this were otherwise there would be no maximum limit on the amount Liberty Mutual was obligated to pay under the contract. ¹⁰⁰ The Court further noted that the second sentence provided that Liberty Mutual’s “payment is based on the amount that an insured is legally entitled to recover.” In its context, that portion of the sentence merely defined the amount that Liberty Mutual was obligated to pay under UM coverage. ¹⁰¹ Having done this groundwork in analyzing the terms of the contract language the Court then concluded that “[t] o make sense, the two sentences have to be read together. The first sentence set forth Liberty Mutual’s maximum obligation under UM coverage, and the second sentence set forth how the amount of its actual obligation will be determined in particular instances. When read in context, the second sentence could not reasonably be construed as stating that there will be only one payment made under UM coverage.” ¹⁰²

Next, the Court in Weinstein turned to the “how we will settle a claim” section of the UM coverage. This provision of the contract stated that the UM Limit of Liability on the declarations page was the maximum “we will pay ” for all damages arising out of bodily injury to one person. The language of the contract did not state, however, how Liberty Mutual would settle a claim was by making only one payment. ¹⁰³ This clause of the contract used the same language (“we will pay”) that was used in the medical payments provisions. The Court found that there was no basis for holding that the phrase “we will pay” meant one thing under the medical payments coverage and something else under the UM coverage.

The Court in Weinstein noted that Liberty Mutual had determined almost immediately that the uninsured motorist was solely at fault. Once Liberty Mutual made that determination its analysis in deciding whether to pay particular medical bills under the UM coverage was no different from its analysis in deciding whether to pay the same bills under medical payments coverage. ¹⁰⁴ The contract did not require the insured to specify the particular coverage under which the insured sought to be paid. In that regard it was Liberty Mutual that divided the insured’s request for payment into the components of medical payments coverage and a UM claim. It was Liberty Mutual that decided, based upon its own internal policies, that medical bills would not be paid under UM coverage until the medical payments coverage was exhausted and that once the medical payments coverage was exhausted the medical bills would not be paid under the UM coverage until the insured’s medical treatment was completed, even if that took years. ¹⁰⁵ Whether this was appropriate was dependent upon the policy language. The mere fact that in a UM context Liberty Mutual was entitled to raise any issues or defenses that could have been raised, in good faith, by the tortfeasor did not alter the terms of Liberty Mutual’s policy nor did it add provisions to the policy. ¹⁰⁶ Liberty Mutual failed to point out any specific policy provision which stated that UM benefits were only paid in one lump sum. ¹⁰⁷ Liberty Mutual did not point out any policy language which stated when UM benefits were to be paid. Absent the guidance of policy language, the Court in Weinstein looked to the law in Idaho which established that the insurer was required to pay UM coverage within a reasonable time. ¹⁰⁸ The Court rejected Liberty Mutual’s offer of evidence that it was common practice in the insurance industry to make one payment under UM coverage which would involve the entire UM claim. ¹⁰⁹ The Court rejected this assertion pointing out that common practice could not alter or supplement the terms of the insurance policy itself. ¹¹⁰

Turning to the language of the contract titled “OUR OBLIGATIONS TO YOU” which stated that the insurer “will pay up to our Limit of Liability for bodily injury as described in how we will settle a claim” the Weinstein Court noted that it did not contain any provision stating either that no payments of medical bills would be made under UM coverage until the medical payments coverage was exhausted or that UM coverage would only be paid in a single payment that included all damages that the insured was entitled to recover under the coverage. ¹¹¹

In a dissenting opinion Justice Jones in Weinstein pointed out that Liberty Mutual’s theory of the case was that a UM policy by its very nature is unambiguous in establishing that the insurer had no duty to pay UM benefits until the insurer could settle the entire claim. ¹¹² After the entire claim was evaluated, the insurer must then perform its contractual obligations within a reasonable time unless otherwise specified in the contract. Liberty Mutual also argued that it was widely accepted that insurers may settle a UM claim all at once and that a settlement must be made within a reasonable time only after the whole claim can be evaluated. ¹¹³ The dissent began its analysis of this assertion with the observation that the Idaho Supreme Court had never explained what an insurer’s contractual duties were toward an insured seeking piecemeal payment of medical benefits under a UM policy. ¹¹⁴ Previously, the Court had only addressed breach of contract claims where the insurer refused to timely respond to the UM claimant settlement offer. ¹¹⁵ The dissent also observed that while the majority found the UM provision to be ambiguous, that a provision of an insurance policy was not ambiguous just because the state’s law had not clarified a UM provider’s duties to its insureds. ¹¹⁶

The dissent was dismissive of the majority’s targeted debate over whether the terms of the policy provided only for a single “payment.” The dissent found that whether the contract used the word “payment” or its plural was irrelevant because the language in the policy had a well-settled legal meaning. ¹¹⁷ Relying upon established case law the Court noted that under Idaho law, “not every word or phrase in an insurance contract needed to be defined in the contract. ¹¹⁸ The mere fact that a term was undefined in the policy did not make the term ambiguous if the term had an otherwise settled legal meaning. ¹¹⁹ The Court noted that under Idaho law where a word or phrase used in an insurance contract had a settled legal meaning or interpretation that settled meaning or interpretation would be given effect though other interpretations were possible. ¹²⁰ The dissent then made the following relevant observation:

Like virtually all UM policies nationwide, the contract in this case states that Liberty Mutual’s “payment” is based on “the amount that an insured is legally entitled to recover for bodily injury but could not collect from the owner or operator of the uninsured motor vehicle” (emphasis added)…Liberty Mutual used nationally uniform contract language in its UM policy. The law throughout the country is that the term “legally entitled to recover” does not obligate the insurer to pay under a UM policy until the claimant can establish the tortfeasor’s liability and the extent of damages [citation omitted]. The district court should not have viewed the policy as ambiguous as to whether multiple payments were due. Further, because Liberty Mutual had the right to wait until all of [the insured’s] damages were reasonably clear or until the insured made a claim for a single amount they would accept as the full extent of damages before offering payment, there was no breach of contract. ¹²¹

The universal interpretation of the phrase “legally entitled to recover” was that “[t]he insured must be able to establish fault on the part of the uninsured motorist which gives rise to the damages and to prove the extent of those damages.” ¹²² “Because the claimant must be able to show the extent of his or her damages, ‘a bad faith claim either does not exist or should be held in abeyance until there is a final resolution of the contractual coverage claim.”‘ ¹²³ The dissent in Weinstein noted that there was no legally cognizable UM “claim” under the policy until the claimant was ready to show the extent of damages caused by the tortfeasor, which is not established by merely submitting individual medical bills as they came in a piecemeal fashion. ¹²⁴ According to the dissent the submission of individual medical bills showed nothing more than part of the damages overall. Because the insured had refused to settle for a single amount constituting the extent of damages they were legally entitled to recover from the tortfeasor, the dissent concluded that the insured had never submitted a policy claim. ¹²⁵

The dissent justified its finding by recognizing that any UM insurer’s liability was tied to the third-party tortfeasor’s liability and therefore UM claims present a more complex situation for insurers than a first-party claim did. UM claims were like third-party claims because the policy sets them up that way. ¹²⁶ UM claims were also like third-party claims because the insured is naturally and inherently seeking to maximize his recovery of general damages while the insurer seeks, within reasonable limits, to minimize that recovery. ¹²⁷ UM claims had another similarity to third-party claims insofar as each side is entitled, but not required, to have legal counsel, charged with the role in responsibility of advocating the interest of his or her client. ¹²⁸ Finally, UM claims were like third-party claims in the practical sense of the presentation of issues and positions which could arise in the claim. ¹²⁹ Because there was no element of control of the insured’s side of the litigation by the insurance company, a fiduciary duty did not arise in the UM context. ¹³⁰ The duty of good faith and fair dealing within the policy did not “require an insurer to sacrifice its own interests by blindly paying each and every claim submitted by an insured in order to avoid a bad faith lawsuit. ¹³¹ Different incentives and obligations existed between insureds and insurers in the UM context which permit the insurer to treat UM claimants differently than classic first-party claimants.

The dissent in Weinstein made the following final observation: UM coverage “is neither an all-risk insurance design to provide coverage for all injuries incurred nor is it a no-fault motor vehicle insurance that provides coverage without regard to whether a plaintiff is legally entitled to recover damages from an uninsured or unidentified motorist.” ¹³² Any attempt to regulate the adversarial relationship created by the uninsured motorist coverage could result in a diminishment of that adversarial relationship to the point of turning the coverage into something more like a first-party coverage than what it was designed and conceived to be. ¹³³ The dissent found that any requirement imposed upon insurers to pay medical bills on demand would essentially turn UM policies into a form of medical insurance for claimants injured by inadequately insured drivers which was not the purpose of UM coverage. ¹³⁴

2. Lost Wages as Undisputed Amounts

Unlike medical expenses where a specific service is rendered which is quantifiable once the service has been rendered, the calculation of lost wages attributable to a claimant’s injuries may not be capable of precise calculation when the insurer contests the nature or extent of the injuries received. In some cases a medical doctor may have placed the injured party on a “no work” status. A “no work” status may make the calculation of lost wages more precise and less subject to dispute. Otherwise, the lost wages may be inextricably connected to the same type of speculation associated with general damages because a person may choose not to work on a given day based upon how the individual subjectively feels.

The Pennsylvania Court in Zappile v. Amex Assur. Co., ¹³⁵ held that the insurers failure to pay the wage loss portion of a UIM claim before settling the entire claim did not constitute bad faith. In Zappile, the insured demanded the UIM policy limits while the insurer believed the value of the damages was far less than the policy limits. The parties were unsuccessful in negotiating a settlement in the case and therefore the case went to arbitration. During the processing of the case, the insurer did not officially offer more than the original amount offered in the claim and the insured never officially requested less than the policy limits. ¹³⁶

The Court in Zappile recognized that while it may be possible to separate certain elements of a damages claim, such as wage loss with a cost of a subsequent x-ray, the Court was unprepared to state that the failure to pay a minimal portion of a large demand, i.e., a $4,000 portion of a $150,000 demand, in and of itself constituted bad faith. ¹³⁷ The Court was also unprepared to state as a general rule that the failure to cut out certain portions of a general damages claim, especially where the insurance contract made no representation that such a procedure would be followed, constituted bad faith. ¹³⁸ According to the Court in Zappile, the insured made no real argument that such a piecemeal approach was inherently advantageous and the Court was disinclined to require a piecemeal settlement practice. ¹³⁹ The Court stated:

We have no idea how such a practice would impact the cost of evaluating and settling a claim, and without such information, we are extremely hesitant to require a practice and procedure that may negatively impact the cost of insurance. ¹⁴⁰

The Court in Zappile noted that the insured had never made a demand for partial payment. Although wage loss information was submitted to the insurer, there was no demand for a partial payment. ¹⁴¹ At a minimum, the prerequisite for such a partial payment is a formal demand for partial payment. ¹⁴²

C. EVIDENTIARY ISSUES

Unique evidentiary issues can arise in situations where an insurer is being sued for bad faith for its failure to pay undisputed partial amounts of a claim. Generally, the insured has the burden of proving the amount of damages for which the uninsured motorist is legally obligated to pay. ¹⁴³ Compromise settlement offers may be inadmissible. As an example, in Etherton v. Owners Ins. Co., ¹⁴⁴ the insurance company offered to settle its insured’s claim for $150,000. The insured requested an explanation for the insurance company’s valuation of the case in that amount and also requested that the insurance company tender that amount on the theory that the insurance company had effectively acknowledged that it did not dispute that the insured’s uncompensated injuries amounted to at least $150,000. The insurance company declined to tender the sum. The insured filed suit against the insurance company alleging that the insurer’s failure to tender the undisputed amount of benefits constituted a breach of the contract. The Court found that the controversy focused upon whether evidence of settlement negotiations were admissible evidence of liability. The Court found that the insured’s claim provided a textbook example of the purpose and application of Fed. R. Evid. 408. The Court stated:

[Rule 408] provides that evidence of a party’s “offering … to compromise” a “claim that was disputed as to validity or amount” is “not admissible … when offered to prove liability for … or [the] amount of” the disputed claim. Designed to encourage candid settlement discussions, the rule operates to permit parties to make offers and counter-offers in an attempt to resolve a dispute without fear that representations made during such settlement negotiations will be deemed to be “admissions” as to the party’s liability for or the value of the disputed claim in subsequent litigation. ¹⁴⁵

The Court found that the insurance company’s offer of $150,000 to the insured was an offer by the insurance company settle the entirety of the insured’s claim against it for that sum – a claim that the insurer disputed at least with regard to the amount, if not liability. ¹⁴⁶ The letter offering the amount made clear that the insurer had “serious questions of causation of [the insured’s] injuries” as well as doubts about the claimed lost wages. Notwithstanding, the insurance company offered the $150,000 in full and final settlement of a disputed claim. The Court found that the claim asserted by the insured that the insurance company’s offer of $150,000 constituted an admission and therefore established an “undisputed” amount was precisely what Rule 408 sought to prevent. Under Rule 408, the insurance company was free to offer the $150,000 to settle the claim without thereafter being deemed to have conceded that it owed the insured anything. The Court found that the insured’s contention that at least $150,000 of his claim against the insurer was undisputed was based on inadmissible evidence. ¹⁴⁷

At least one court has refused to permit expert testimony in establishing what constituted an “undisputed amount.” In Baumann v. American Family Mut. Ins. Co., ¹⁴⁸ the Court held that an expert’s opinions that an insurance company “should pay” a claim over which there was no dispute and that the insurer “had a duty” to pay the UIM claim and was “obligated” to tender the undisputed amount of the UIM claim improperly usurped the function of the trial court to instruct the jury on the law. Opinions of the insurance expert were that “[w]here there is no dispute concerning whether the insured has coverage, the insurance company should pay that portion of the claim over which there is no dispute,” “[the insurance company] had a duty to pay its insured what it undisputedly concluded [its insured] was entitled,” and “[the insurance company] was and is obligated to tender to its insured the undisputed amount that it has concluded represents the evaluation of its insured’s UM/UIM claim,” was phrased in terms of legal duties and obligations. Therefore, the opinions of the expert improperly usurped the function of the trial court to instruct the jury in the law. ¹⁴⁹

The issue of undisputed amounts came before the District Court again in Harris v. Allstate Ins. Co. (unpublished) ¹⁵⁰. Under the case facts, Allstate had made a settlement offer of $15,000 when the insured plaintiff made a settlement demand in the amount of $100,000. Allstate sought a separate trial to avoid prejudice because Allstate felt it would be unfairly prejudicial in the underlying breach of contract claim. Allstate asserted Fed. R. Evid. 408 generally prohibited such evidence of an offer to compromise in order to prevent prejudice. Permitting evidence of unsuccessful settlement negotiations also created a very real potential for jury confusion. ¹⁵¹ Allstate argued that if it were required to defend the bad faith claims while simultaneously defending the uninsured motorist claim, the plaintiff would be put at an unfair advantage in the contract claim. Allstate asserted that plaintiff would be in a better position to try her case, and negotiate a settlement of it, if she was granted access to Allstate’s claims file under the guise of prosecuting a bad faith claim. In that regard, Allstate argued that a single discovery and trial on the two claims would prejudice Allstate, because Allstate would be required to reveal information that would not be discoverable if the contract claim were tried separately. However, the Court rejected these arguments. The insured conceded that Allstate would not suffer unfair prejudice because the insured was not going to present evidence of Allstate’s offer to settle for any purpose prohibited by Rule 408. The insured argued that the settlement offer was, however, an integral part of both the insured’s breach of contract and bad faith breach of contract claims indicating that Allstate failed to pay an amount owed that was undisputed.

The trial court concluded that, in the interest of convenience, economy, and efficiency were better served by the breach of contract and bad faith claims remaining joined. The discovery process and witness lists would be nearly identical. As to unfair prejudice, the Court noted that any possible prejudice that might occur from the presentation of evidence of Allstate’s $15,000 settlement offer could be cured by a limiting instruction to the jury.

Footnotes
1	Cotton States Mut. Ins. Co. v. Brightman, 276 Ga. 683, 580 S.E.2d 519 (2003); Kooyman v. Farm Bureau Mut. Ins. Co., 315 N.W.2d 30, 32-34 (Iowa 1982); Short v. Dairyland Ins. Co., 334 N.W.2d 384, 387 (Minn. 1983).
2	See, Steven Plitt and Jordan R. Plitt, Practical Tools for Handling Insurance Cases, § 2:3, p. 2-9 (Thomson Reuters 2011).
3	See, e.g., Mowry v. Badger State Mut. Cas. Co., 129 WiSo.2d 496, 385 N.W.2d 171, 178 (1986); Farmers Group, Inc. v. Trimble, 691 P.2d 1138, 1141 (Colo. 1984).
4	Plitt and Plitt, Practical Tools for Handling Insurance Cases, § 2:3, p. 2-9 (Thomson Reuters 2011).
5	See, e.g., Haddick v. Valor Ins., 198 Ill.2d 409, 261 Ill.Dec. 329, 763 N.E.2d 299, 304 (2001). See also, Maine Bonding & Cas. Co. v. Centennial Ins. Co., 298 Or. 514, 693 P.2d 1296 (1985); Western World Ins. Co. v. Allstate Ins. Co., 150 N.J.Super. 481, 376 A.2d 177 (A.D. 1977); Moutsopoulos v. American Mut. Ins. Co. of Boston, 607 F.2d 1185 (7th Cir. 1979).
6	See, e.g., Powell v. Prudential Prop. & Cas. Ins. Co., 584 So.2d 12 (Fla. Ct. App. 3rd Dist. 1991). One court has cautioned that requirements to initiate a settlement offer should be “sparingly used, and then only in the most glaring cases of an insured’s liability, since trial lawyers are not endowed with the gift of prophecy so as to be able to predict the precise outcome of personal injury litigation.” Ranger Ins. Co. v. Home Indem. Co., 741 F.Supp. 716, 722 (N.D. Ill. 1990). Notwithstanding, an insurance company’s failure to either settle within policy limits or to make an offer of settlement in the third-party context may give rise to an allegation of bad faith as to whether the insurer placed its financial interest ahead of the interest of the insured who was placed at risk of an excess judgment by the insurer’s failure to settle. See, e.g., Southern General Ins. Co. v. Holt, 200 Ga.App. 759, 409 S.E.2d 852, 856 (1991), judgment aff‘d in part, reversed in part on other grounds 262 Ga. 267, 416 S.E.2d 274 (1992), and judgment vacated 305 Ga.App. 39, 421 S.E.2d 346 (1992).
7	Other jurisdictions have sought to encourage insurers by statute to make advanced or partial payments as accommodations toward the settlement of injury claims. As an example, under CAL. INS. CODE § 11583, an insurer is permitted to advance or make partial payments as accommodations toward the settlement of an injury claim and the partial payment shall not be considered an admission and the insurer will get a credit. In enacting the statute, it was California Legislature’s intent to give insurers an incentive to pay injured persons before any settlement or judgment so that they would have sufficient funds to deal with the unanticipated living expenses or medical costs caused by the accident without the insurer facing the risk of making an overpayment with the plaintiff receiving double recovery. See, e.g., Dewalt v. Berkeley Forge & Tool, Inc., 9 Cal.App.4th 1087, 11 Cal.Rptr.2d 865 (Cal. App. 4th Dist. 1992). Under MASS. GEN. LAWS. ch. 231, § 140B provides that monies paid by the insurer in the form of advance payments or settlements may be done without affecting the question of liability for such damages and the evidence of such payments are not admissible at trial. However, the insurer will get a credit for the advance payments made. Under Maine statute, ME. REV. STAT. ANN. tit. 24-A, § 2436 (Supp. 1981), an insurer is obligated to pay penalty interest and attorney’s fees if it failed to pay an undisputed amount within a prescribed period. The statute described what the undisputed amount was. An undisputed amount for purposes of the statute was when the amount of loss was established by written agreement between the insurer and the insured or the filing of an award by arbitrators as provided under the policy. In the first party property context, that portion of the insured’s claim representing “actual cash value” was determined to be undisputed as of the date the appraisers determined the actual cash value. Maine Mut. Fire Ins. Co. v. Watson, 532 A.2d 686, 690-91 (Me. 1987).
8	See, e.g., Keefe v. Prudential Property and Cas. Ins. Co., 203 F.3d 218, 227 (3rd Cir. 2000) (UM/UIM policy does not explicitly require separate assessments and payments for separate injuries in the calculation of compensable damages); Florists‘ Mut. Ins. Co. v. Tatterson, 802 F.Supp. 1426, 1436-37 (E.D. Va. 1992) (holding that implied covenant of good faith does not impose obligation on an insurer to “advance” benefits due under the policy); LeFevre v. Westberry, 590 So.2d 154, 162 (1991) (insurer has no contractual obligation to make advance payments); Williams v. Nationwide Mut. Ins. Co., 750 A.2d 881, 885 (Pa. Super. 2000); Garnett v. Government Employees Ins. Co., 2008 OK 43, 186 P.3d 935 (2008); Voland v. Farmers Ins. Co. of Arizona, 189 Ariz. 448, 943 P.2d 808 (Ct. App. 1997), rev. denied (1997); Government Employees Ins. Co. v. Quine, 2011 OK 88, 264 P.3d 1245 (2011).
9	It must be recognized that an insured who has suffered a loss and is pressed financially can be at a marked disadvantage when bargaining with an insurance company over payments for the loss. The failure to accept a less than fair proffered settlement can lead to catastrophic consequences for an insured who, as a direct consequence of the loss, may be particularly vulnerable, both economically and emotionally. There may be an improper temptation for unscrupulous insurers to delay settlement while pressures build on the insured can be great, especially if the insurer’s exposure cannot exceed the policy limits. See Lawton v. Great Southwest Fire Ins. Co., 118 N.H. 607, 392 A.2d 576, 579 (1978); Kerry B. Harvey and Thomas A. Wiseman, III, First Party Bad Faith: Common Law Remedies and a Proposed Legislative Solution, 72 Ky. L.J. 141, 146, 167-69 (1983-1984); Note, The Availability of Excess Damages for Wrongful Refusal to Honor First Party Insurance Claims – An Emerging Trend, 45 Fordham L. Rev. 164, 164-67 (October 1976).
10
11	203 F.3d 218 (3rd Cir. 2000).
12	203 F.3d at 227 (3d Cir. 2000)
13	590 So.2d 154 (1991), reh’g denied.
14	LeFevre, 590 So.2d at 157.
15	LeFevre, 590 So.2d at 157. The Court’s research revealed that several other jurisdictions had adopted a similar UM statute and had dealt with the same type of policy provision in regard to UM coverage, either identical to or similar to the Alabama statute citing Widiss, Uninsured Motorist Coverage, § 7.2 (1990); Hughes v. State Farm Mut. Auto. Ins. Co., 604 F.2d 573, 575-76 (8th Cir. 1979); Allstate Ins. Co. v. Elkins, 63 Ill.App.3d 62, 66, 21 Ill.Dec. 66, 69, 381 N.E.2d 1, 4 (1978) (concluding that the words “legally entitled to recover” mean that “a plaintiff must be able to establish fault on the part of the uninsured motorist which gives rise to damages” and not that “”the insured stands in the shoes of the uninsured motorist to who is the tortfeasor”); Allied Fidelity Ins. Co. v. Lamb, 361 N.E.2d 174, 180 (Ind. App. 1977) (the words “‘legally entitled to recover’ simply mean that the insured may recover from an insurer … only after establishing that the uninsured motorist is at fault”); Winner v. Ratzlaff, 211 Kan. 59, 64, 505 P.2d 606 (1973) (“we construe the words ‘legally entitled to recover as damages’ to mean that the insured must be able to establish fault on the part of the uninsured motorist which gives rise to damages and to prove the extend of those damages”); Satzinger v. Satzinger, 156 N.J.Super. 215, 220, 383 A.2d 753, 755 (Ch. Div. 1978) (“in this contest, the term ‘legal entitlement’ is synonymous with the factual issue of fault”); DeLuca v. Motor Vehicle Accident Indemnification Corp., 17 N.Y.2d 76, 81, 215 N.E. 2d 482, 484, 268 N.Y.S.2d 289, 292 (1966) (“the phrase ‘legally entitled’ means and denotes fault”).
16	In order to establish a prima facie case of bad faith under Alabama law the insurer bore a heavy burden which required demonstrating far more than the mere delay in payment of his or her claim. LeFevre, 590 So.2d at 158 citing National Savings Life Ins. Co. v. Dutton, 419 So.2d 1357, 1362 (Ala. 1982); Burns v. Motors Ins. Corp., 530 So.2d 824, 827 (Ala. Civ.App. 1987). The Court in LeFevre observed the highbred nature of a UM claim which had features of both first-party and third-party coverage. The Court acknowledged that while there is a covenant of good faith and fair dealing between the insurer and the insured, as with direct insurance, the insurer and insured occupied adverse positions until the uninsured motorist’s liability was fixed. Therefore, there could be no bad faith action based on conduct arising prior to that time. LeFevre, 590 So.2d at 159. The Court acknowledged the adversarial relationship created by the uninsured motorist coverage and recognized that the adversarial relationship should not be diminished to the point of turning the coverage into something more like a first-party coverage than what it was designed to be. LeFevre, 590 So.2d at 160. The Court recognized that in processing a UM/UIM claim, there is a need for some sort of procedure that would allow the insurer to aggressively defend the claim and attempt to defeat the claim, or at least to minimize the size of the award, while concomitantly fulfilling the duties imposed on it by law in the obligations imposed on it by its contract with the insurer. LeFevre, 590 So.2d at 160-61.
17	590 So.2d at 158 citing Quick v. State Farm Mut. Auto. Ins. Co., 429 So.2d 1033, 1035 (Ala. 1983) and Aetna Cas. & Surety, Inc. v. Beggs, 525 So.2d 1350 (Ala. 1988).
18	LeFevre, 590 So.2d at 158.
19	LeFevre, 590 So.2d at 158.
20	LeFevre, 590 So.2d at 162.
21	750 A.2d 881 (Pa. Super. 2000).
22	750 A..2d at 885.
23	750 A.2d at 885-86.
24	750 A.2d at 887.
25	750 A.2d at 887 citing BLACK’S LAW DICTIONARY, 1528 (7th Ed. 1999).
26	750 A.2d at 887 citing 42 Pa.C.S. § 6141(a) and Strutz v. State Farm Mut. Auto. Ins. Co., 415 Pa. Super. 371, 609 A.2d 569, 570 (1992).
27	See, e.g., Kosierowski v. Allstate Ins. Co., 51 F.Supp.2d 583, 592 (E.D. Pa. 1999); Voland v. Farmers Ins. Co. of Arizona, 189 Ariz. 448, 943 P.2d 808, 812 (Ct. App. 1997).
28	750 A.2d at 888-89.
29	750 A.2d at 889.
30	2008 OK 43, 186 P.3d 935 (2008).
31	186 P.3d at 944.
32	Id.
33	Id.
34	772 F.Supp.2d at 1067-68.
35	Id. at 1068.
36	Id.
37	Id.
38	180 S.W.3d 439, 454 (Ky. 2005). See also, McDaniel v. Carencro Lions Club, 934 So.2d 945, 972 (La. App. 2006) (“General damages include an award for the victim’s pain and suffering, and as such, are intrinsically speculative and not subject to mathematical certainty.”); Blankenship v. Union Pacific Railroad Co., 742 P.2d 680, 682 (Or. App. 1987) (“The majority view is based on the fact that the degree and timing of a plaintiff’s future pain and suffering are so variable, unpredictable and unquantifiable that they are far less susceptible to a present value adjustment, either mechanically or as a realistic measure of compensation …”); Gourley v. State Farm Mutual Auto. Ins. Co., 822 P.2d 374, 384 (Cal. 1991) (damages for pain and suffering are uncertain and speculative); E.S.I. Meats, Inc. v. Gulf Florida Terminal Co. & Crest Importing Co., 639 F.2d 1348, 1357 (5th Cir. 1981) (mental anguish, and the indefiniteness of items such as future pain and suffering are speculative); Boddy v. Canteau, 441 S.W.2d 906, 915 (Tex. App. 1969) (“Matters of pain and suffering and future pain and suffering are necessarily speculative and it is peculiarly within province of jury to resolve these matters and set amount of such damages.”).
39	189 Ariz. 448, 943 P.2d 808 (2nd Div. 1997), review denied.
40	Voland v. Farmers Ins. Co. of Arizona, 189 Ariz. at 453, 943 P.2d at 813. The Court further observed: Evaluation of a personal injury (including UM) claim often takes into account such factors as any liability issues (including negligence and causation); the claimant’s out-of-pocket expenses, or “special damages”; up-dated medical reports or discovery of old medical records showing pre-existing injury or prior claims; evidence of malingering, subsequent accidents or new injuries; qualifications, appearance and demeanor of the claimant and his or her witnesses; reputation and effectiveness of counsel; findings from any surveillance efforts; and selection and background of the arbitrators. Voland, 943 P.2d at 813.
41	See, e.g., Randall R. Bovbjerg et. al., Valuing Life and Limb in Tort: Scheduling Pain and Suffering, 83 NW. U. L. REV. 908, 913-16, 917 (1989); Paul V. Niemeyer, Awards for Pain and Suffering: The Irrational Centerpiece of Our Tort System, 90 VA. L. REV. 1401 (2004); Joseph H. King, Jr., Pain and Suffering, Noneconomic Damages, and the Goals of Tort Law, 57 SMU L. REV. 163 (2004).
42	Courts are split on this issue, however. See, e.g., Government Employees Ins. Co. v. Quine, 2011 OK 88, 264 P.3d 1245 (2011) (suggesting that undisputed medical expenses or lost wages may be the proper subject of partial payments); with Voland v. Farmers Ins. Co. of Arizona, 943 P.2d 808 (Ariz. Ct. App. 1997) (insurance carriers do not act in bad faith by failing to pay, in advance of arbitration or the insured’s execution of a release, the insured’s undisputed medical bills and lost wages).
43	203 F.3d 218, 226 (3rd Cir. 2000).
44	Citing Voland v. Farmer’s Ins. Co. of Arizona, 189, Ariz. 448, 943 P.2d 808, 812 (Ct. App. 1997); LeFevre v. Westberry, 590 So.2d 154, 163 (Ala. 1991).
45	2011 OK 88, 264 P.3d 1245 (2011).
46	264 P.3d at 1247.
47	Id.
48	Id.
49	Id.
50	Id.
51	Id.
52	264 P.3d at 1250.
53	Id.
54	Id.
55	Quine, 264 P.3d at 1250.
56	189 Ariz. 448, 943 P.2d 808 (Ariz. Ct. App. 1997), rev. denied.
57	189 Ariz. at 450, 943 P.2d at 810.
58	Id.
59	Id.
60	The insured relied upon Borland v. Safeco Ins. Co., 147 Ariz. 195, 709 P.2d 552 (Ct. App. 1985) and Filasky v. Preferred Mut. Risk Ins. Co., 152 Ariz. 591, 734 P.2d 76 (1987). In making the demand of $30,000 and agreeing to arbitrate the difference.
61	Id. To spanport the insured’s arguments, the insured relied upon Arizona case law requiring insurers to pay any undisputed portion of a first-party claim promptly. Voland, 189 Ariz. 452, 943 P.2d 812 (Ct. App. 1997) acknowledging the insured’s reliance upon Borland v. Safeco Ins. Co., 147 Ariz. 195, 709 P.2d 552 (Ct. App. 1985) and Filasky v. Preferred Risk Mut. Ins. Co., 152 Ariz. 591, 734 P.2d 76 (1987). As an example, in Borland v. Safeco Ins. Co., the Court found that in those situations where coverage was not contested but the amount of a first-party loss was disputed, insurance companies were under a duty to pay any undisputed portion of the claim promptly. Failure to do so constituted bad faith. Borland involved a burglary claim under a homeowner’s policy. The Court found that with that type of claim presentation, the insurer could have easily calculated the minimum amount it owed for the stolen jewelry and should have promptly paid that amount as an undisputed portion of the claim. In Filasky v. Preferred Risk Mut. Ins. Co., the insured alleged that the carrier unreasonably delayed paying loss of income benefits under an auto policy after an auto accident caused the insured to miss work. Ultimately the insurer paid all lost income benefits due to the insured. However, the insurer admitted that some lost income benefits were due earlier than the total settlement but had not been paid because the total amount due was questionable. The Court found that because the amount of benefits due rather than coverage, was contested, the insurer had a duty to pay promptly any undisputed portion of the claim. Failure to have paid those amounts constituted bad faith. Neither Borland nor Filasky involved UM claims.
62	Id.
63	Id.
64	189 Ariz. at 451, 943 P.2d at 811 citing Rawlings v. Apodaca, 151 Ariz. 149, 154, 726 P.2d 565, 570 (1986). Although no reported Arizona decisions had addressed bad faith allegations relating to an insurance company’s handling of a UM claim, the Court in Voland found no reason why the implied covenant of good faith and fair dealing should not apply to the UM context. Id.
65	189 Ariz. at 451, 943 P.2d at 811.
66	189 Ariz. at 453, 943 P.2d at 812.
67	Id.
68	Id.
69	Id. citing State Farm Mut. Auto. Ins. Co. v. Peaton, 168 Ariz. 184, 194, 812 P.2d 1002, 1012 (Ct. App. 1990).
70	Voland, 189 Ariz. at 452-53, 943 P.2d at 812-13.
71	Id. at 483(n)(3), 943 P.2d at 813(n)(3).
72	Id.
73	Id.
74	198 Ariz. at 453, 943 P.2d at 813.
75	Id.
76	Id.
77	Id. citing Noble v. National American Life Ins. Co., 128 Ariz. 188, 190, 624 P.2d 866, 868 (1981); Lasma Corp. v. Monarch Ins. Co., 159 Ariz. 59, 63-64, 764 P.2d 1118, 1122-23 (1988); Rawlings v. Apodaca, 151 Ariz. 149, 156, 726 P.2d 565, 572 (1986).
78	Id. The U.S. District Court in Daly v. Royal Ins. Co. of America, 2002 WL 1768887 (D. Ariz. July 17, 2002) reaffirmed the finding of the Voland Court in a case involving the wrongful death of the insured. The insured filed a lawsuit against the at fault driver and eventually recovered the full policy limits of $50,000 from the tortfeasor. The decedent’s estate then pursued a UIM claim against the decedent’s UIM coverage. The parties proceeded with arbitration and before the conclusion of the arbitration hearings, the parties settled the UIM claim for $1.5M. Thereafter, the insured filed a complaint for breach of the implied covenant of good faith and fair dealing against the insurer. The insured alleged that the insurer had failed to pay the undisputed damages in a timely manner. The evidence showed that the internal documents of the insurer indicated the insured’s recognition that the UIM claim appeared to be “a very bad damages case” and that the insurer’s preliminary estimate that $1.5M may be in the low range value of the case. Id. Counsel representing the insurer estimated that the economic loss fell within the range of $400,785 to $746,300 and that value of the loss of consortium was between $800,000 and $1,100,000. After accounting for possible offsets, the attorney calculated the net claim value to be within $700,000 to $1,350,000. An economic analyst retained by the insurer issued a report concluding that the estate suffered an economic loss of approximately $499,681. The statutory wrongful death beneficiaries argued that the insurer was obligated to pay the undisputed amount of $499,681 which represented the minimum economic losses and the amount of $1,000,000 which the statutory wrongful death beneficiaries characterized as the minimum total value of the claim. On this record, the Court found that the statutory wrongful death beneficiaries failed to present evidence showing that a truly undisputed minimum amount of economic loss or total loss had developed during the case. The insurer’s calculations of the value of the claims were merely tentative, preliminary estimates which were not intended to represent the absolute minimum value of the claims. The Court relied upon the Voland Court’s reasoning regarding the imprecise nature of personal injury claims which provided a meaningful distinction from the personal property or lost earnings claims involved in prior Arizona case law involving the payment of undisputed amounts. The mere fact that the insurer’s economic analysis concluded that the value of economic loss was $499,681 was not sufficient to establish an undisputed sum because the insured did not indicate its acceptance of the analysis.
79	See Anderson v. Farmers Ins. Co., 947 P.2d 1003, 1006-07 (Idaho 1997) (rejecting plaintiff’s argument that the insurer should have paid “”undisputed” medical bills where the insured’s bills were not segregated by the insured and the insurer disputed overall reasonableness of the treatment).
80	149 Idaho 299, 233 P.3d 1221 (2010), reh’g denied.
81	The goal of UM/UIM coverage is “to afford the same protection to a person injured by an uninsured motorist as would have been enjoyed had the tortfeasor carried liability insurance.” Weinstein v. Prudential Property and Cas. Ins. Co., 149 Idaho 299, 345, 233 P.3d 1221, 1267 (2010); Ryals v. State Farm Mut. Auto. Ins. Co., 134 Idaho 302, 307, 1 P.3d 803, 808 (2000). The universal principle that undergirds the purpose of UM and UIM coverage is met “by placing the insured in the same position as if the uninsured motorist [an underinsured motorist] had been insured, not in a better position.” Matarese v. New Hampshire Mun. Ass‘n Property Liability Ins. Trust, Inc., 147 N.H. 396, 791 A.2d 175, 181 (2002); Vogelin v. American Family Mut. Ins. Co., 346 Or. 490, 213 P.3d 1216, 1222 (2009); Theis v. Midwest Sec. Ins. Co., 232 Wis.2d 749, 606 N.W.2d 162, 167 (2000). If UM/UIM claimants are in fact put in the same position they would have been in if they were claiming directly against the tortfeasor, then logically the insurer is not obligated to pay medical bills as they arrive anymore than the tortfeasor would be. Weinstein, 149 Idaho at 345, 233 P.3d at 1267. The amount of damages that a tortfeasor would be legally required to pay will only be determined by settlement, arbitration, or litigation. In all of these methods of claim resolution, a single agreement or judgment is typically entered fixing damages. The settlement or judgment itself would provide not only for past undisputed medical bills but also for less quantifiable damages such as pain and suffering or emotional distress as well as for less certain damages such as future medical costs and lost wages. In that regard some types of damages cannot be valued until all damages are known such as pain and suffering, permanent injuries or disabilities or lost limbs. Weinstein, Id.
82	149 Idaho at 307, 233 P.3d at 1229.
83	149 Idaho at 305, 233 P.3d at 1229. Liberty Mutual had an internal policy to exhaust the medpay coverage before making any payment under the UM coverage and to not make any payments under the UM coverage until the insured desired to settle the entire UM claim. Liberty Mutual exhausted the medpay benefits of $5,000 when it made a partial payment to the hospital for surgery that the insured had. Thereafter Liberty Mutual sent the insured’s medical providers letters stating that her maximum policy limits of $5,000 for medical expenses related to the accident had been paid and that no further payments would be made and that the providers may wish to contact the patient (insured) or the appropriate health insurance carrier for payment of future bills. Liberty Mutual did not include in the letters the fact that the insured had ample UM coverage to pay the medical bills. 149 Idaho at 308, 233P.3d at 1230. This resulted in the insured being pursued by collection agencies. The insured became attorney represented. The attorney sent a letter to the adjuster containing medical bills and records and demanded the unpaid medical bills of $16,669.64 but Liberty Mutual did not pay any of the bills but did increase its reserve on the case.
84	Id.
85	Id.
86	Id.
87	Id.
88	Id.
89	149 Idaho at 308, 233 P.3d at1230.
90	Id.
91	Id.
92	149 Idaho at 317, 233 P.3d at 1239.
93	Id.
94	149 Idaho at 315-16, 233 P.3d at 1237-38.
95	149 Idaho at 316, 233 P.3d at 1238.
96	Id.
97	Id.
98	Id.
99	Id.
100	Id.
101	Id.
102	Id.
103	149 Idaho at 317, 233 P.3d at 1239.
104	149 Idaho at 318, 233 P.3d at 1240.
105	Id. The Court in Weinstein began its analysis that Liberty Mutual was entitled to rely upon the terms of the insurance policy but that it was not entitled to delay payments based solely upon its internal policies that were not part of the policy. 149 Idaho at 317, 233 P.3d at 1239. The Court noted that the implied covenant of good faith and fair dealing which is imputed into the insurance policy did not override the clear contract terms. Id.
106	Id.
107	Id.
108	Id. citing Curzon v. Wells Cargo, Inc., 86 Idaho 38, 43, 382 P.2d 906, 908 (1963).
109	Id.
110	Id.
111	149 Idaho at 321, 233 P.3d at 1243.
112	149 Idaho at 342, 233 P.3d at 1264.
113	Id.
114	149 Idaho at 343, 233 P.3d at 1264.
115	Id., 233 P.3d at 1264 citing by way of example Brinkman v. Aid Ins. Co., 115 Idaho 346, 350, 766 P.2d 1227, 1231 (1998).
116	Id.
117	149 Idaho at 343, 233 P.3d at 1265.
118	Id., citing National Union Fire Ins. Co. v. Dixon, 141 Idaho 537, 540, 112 P.3d 825, 828 (2005).
119	Id., citing Melichar v. State Farm Fire & Cas. Co., 143 Idaho 716, 721, 152 P.3d 587, 592 (2007).
120	Id., citing Nielsen v. Provident Life & Accident Ins. Co., 100 Idaho 223, 226, 596 P.2d 95, 98 (1979).
121	149 Idaho at 343, 233 P.3d at 1265.
122	149 Idaho at 343, 233 P.3d at 1265 citing Patrons Mut. Ins. Ass‘n v. Norwood, 231 Kan. 309, 647 P.2d 1335, 1338 (1982) Accord, Singer v. State Farm Mut. Auto. Ins. Co., 116 F.3d 373, 378 (9th Cir. 1997) (applying California law); Harvey v. Mitchell, 522 So.2d 771. 773 (Ala. 1988); Borjas v. State Farm Mut. Auto. Ins. Co., 33 P.3d 1265, 1269 (Colo. Ct. App. 2001); Cincinnati Ins. Co. v. Trosky, 918 N.E.2d 1, 9 (Ind. Ct. App. 2009); Winner v. Ratzlaff, 211 Kan. 59, 505 P.2d 606, 610 (1973); U.S. Fidelity and Guar. Co. v. Preston, 26 S.W.3d 145, 148 (Ky. 2000); Booth v. Fireman’s Fund Ins. Co., 253 La. 521, 529, 218 So.2d 580, 583 (1969); West American Ins. Co. v. Popa, 352 Md. 455, 723 A.2d 1, 7 (1998); Oates v. Safeco Ins. Co., 583 S.W.2d 713, 715 (Mo. 1979); Swift v. Dairyland Ins. Co., 250 Neb. 31, 547 N.W.2d 147, 151 (1996); Boradiansky v. State Farm Mut. Auto. Ins. Co., 141 N.M. 387, 156 P.3d 25, 30 (2007); Karlson v. City of Oklahoma City, 711 P.2d 72, 74-75 (Okla. 1985); Vega v. Farmers Ins. Co., 134 Or. App. 372, 895 P.2d 337, 342 (1995); Brainard v. Trinity Universal Ins. Co., 216 S.W.3d 809, 815 (Tex. 2007).
123	149 Idaho at 344, 233 P.3d at 1266 citing Martin v. State Farm Mut. Auto. Ins. Co., 960 F.Supp. 233, 236 (D. Nev. 1997) Accord, 46A C.J.S. INS.. § 2331 (2009); Vest v. Travelers Ins. Co., 753 So.2d 1270, 1276 (Fla. 2000) (stating that a bad-faith action quote is premature until there is a determination of liability and extent of damages owed”).
124	149 Idaho at 344, 233 P.3d at 1266.
125	Id.
126	Id.
127	Id.
128	Id.
129	Id.
130	Id. citing Craft v. Economy Fire & Cas. Co., 572 F.2d 565, 569 (7th Cir. 1978).
131	Weinstein, 149 Idaho at 245, 233 P.3d at 1267 citing Condio v. Erie Ins. Exchange, 899 A.2d 1136, 1145 (Pa. Super. 2006).
132	149 Idaho at 345, 233 P.3d at 1267 citing Masler v. State Farm Mut. Auto. Ins. Co., 894 S.W.2d 633, 635 (Ky. 1995).
133	Weinstein, 149 Idaho at 245, 233 P.3d at 1267 citing William A. Mayhew, Bad Faith in the Uninsured Motorist Claim, 19 FORUM 618, 636 (1984).
134	149 Idaho at 345, 233 P.3d at 1267.
135	2007 PA Super. 171, 928 A.2d 251 (2007), reh’g denied.
136	928 A.2d at 253.
137	928 A.2d at 257.
138	Id.
139	Id.
140	Id.
141	Id. at 257.
142	Id.
143	In Wilson v. State Farm Mut. Auto. Ins. Co., 795 F.Supp. 1077 (D. Wyo. 1992), the Court found that the insured has the burden of proving the amount of the liability in the UM context and until the insured does prove the amount of damages liability, the amount is “fairly debatable.” Id. at 1081, citing Quick v. State Farm Mut. Ins. Co., 429 So.2d 1033, 1035 (Ala. 1983) and State Farm Mut. Auto. Ins. Co., Inc. v. Griffin, 51 Ala.App. 426, 286 So.2d 302 (1973). In Quick v. State Farm, the Court observed that the term “legally entitled to recover as damages” meant “that the insured must be able to establish fault on the part of the uninsured motorist, which gives rise to damages, and must be able to prove the extent of those damages. In a direct action by the insured against the insurer, the insured has the burden of proving in this regard that the other motorist was uninsured, legally liable for damage to the insured, and the amount of this liability.” Adopted by Wilson v. State Farm, 795 F.Supp. at 1081.
144	2011 WL 4565733 (D. Colo., Sept. 29, 2011).
145	Id. at *2.
146	Id.
147	Id.
148	836 F.Supp.2d 1196 (D. Colo. 2011).
149	836 F.Supp.2d at 1202.
150	2010 WL 865010 (D. Colo. 3/8/2010).
151	Id. at *1. End of Footnote(s).

36 No. 2 INSLITREP 49

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