Arlington attorneys who handle uninsured and underinsured cases need to be aware of this decision issued by the United States District Court, Houston Division. The decision was issued in September 2013, and is styled, Terry v. Safeco Insurance Company of America. Here is some of the relevant information.
The Terrys were involved in a car accident with an uninsured driver. In a letter from counsel dated November 20, 2009, the Terrys demanded benefits under their UM coverage. This letter stated that “Mr. Terry was willing to settle his claim for $20,000.00 and Ms. Terry was willing to settle her claim for $35,000.00.” The letter stated that the demands were “for an unconditional release of any further liability related to the incident made the basis of this potential lawsuit” and cautioned that the “offer would remain open for a period of ten days from” receipt. The letter also stated that “all written offers would be reviewed” with the Terrys but warned that “any written offer which is less than the latest written demand should be considered rejected in advance for the purposes of calculating prejudgment interest.”
In a letter dated December 4, 2009, Safeco acknowledged receipt and stated that the “demand to settle Jack Terry’s Uninsured Motorist Bodily Injury (UMBI) claim for $20,000 … must be declined and the demand to settle Mary Eden Terry’s UMBI claim for $35,000 must be declined.” After asserting that Jack Terry was 15% at fault for the accident and summarizing the Terrys’ medical bills, Safeco’s letter stated: Considering the negligence on Mr.Terry’s part and the PIP offset of $2,500 (previously paid) and the reasonable net medical bills of $5,408.92, my offer to settle Mr. Terry’s UMBI claim is $6,300.
…
Considering the negligence on Mr. Terry’s part and the PIP offset of $2,500 (previously paid) and the reasonable net medical bills of $6,163.62, my offer to settle Mrs. Terry’s UMBI claim and Liability claim is $8,165.
Safeco “looked forward to getting these two claims settled.”
The Terrys rejected Safeco’s offer and sent a “counter-demand” letter on December 11, 2009. That letter stated:
In an effort to reach an amicable resolution, Mr. Terry is willing to settle his claim for $18,000.00 and Ms. Terry is willing to settle her claim for $30,000. This offer will remain open for a period of ten days from your receipt of this demand. Please note that all written offers will be reviewed with the Terrys; however, any written offer which is less than our latest written demand is considered rejected in advance for purposes of calculating prejudgment interest. In light of the above, we ask that you re-evaluate our clients’ claims in good faith. Otherwise, we will be forced to initiate court proceedings, thereby resulting in litigation expenses for all parties.
Safeco responded with another offer, which the Terrys rejected. The Terrys then filed this lawsuit.
In their complaint, the Terrys alleged that Safeco failed to “timely acknowledge, investigate, accept, and pay the claim.” That allegation was followed by a string citation to seven subsections of § 542 of the Texas Insurance Code, including § 542.057. The court declined to grant Safeco summary judgment on the § 542.057 claim and directed further briefing. After reconsidering the issue with the benefit of the parties’ additional briefs, the court granted Safeco’s motion for summary judgment.
In making its’ decision, the Court made the following reasoning.
The prompt-payment statute differentiates between an insurer’s notice of acceptance of a claim and notice that it will pay the claim. Section 542.056, entitled “Notice of Acceptance or Rejection of Claim,” provides that:
(a) An insurer shall notify a claimant in writing of the acceptance or rejection of a claim no later than the 15th business day after the date the insurer receives all items, statements, and forms required by the insurer to secure final proof of loss.
Section 542.057, entitled “Payment of Claim,” provides:
(a) Except as otherwise provided by this section, if an insurer notifies a claimant under Section 542.056 that the insurer will pay a claim or part of a claim, the insurer shall pay the claim not later than the fifth business day after the date notice is made.
(b) If payment of the claim or part of the claim is conditioned on the performance of an act by the claimant, the insurer shall pay the claim not later than the fifth business day after the date the act is performed.
The question is whether Safeco’s rejected offers to settle the Terrys’ claim is a “notice of payment of claim” that triggered § 542.057.
Safeco did not give the Terrys notice of payment of the claim. Safeco’s offer to settle by paying a certain amount did not notify the Terrys that it would pay that amount. The Terrys’ initial demand letter had preemptively rejected any payment less than their demand. In the negotiations that followed, the Terrys changed their demands and Safeco changed its offers, which the Terrys then rejected. The Terrys did not treat Safeco’s responses to the Terrys’ demands as notices of payment, but rather as counteroffers to settle: “We are in receipt and appreciate your correspondence … wherein you offered … to settle Mr. Terry’s claim and … to settle Ms. Terry’s claim.” The five-day-payment provision does not require payment of every settlement offer. Nor does the provision require rolling pay-outs every five days even if the insured rejects a settlement offer and demands more, and the insurer then increases its offer. Safeco’s settlement offers were not notices of payment of the claim that triggered the five-day-payment provision.
The Terrys do not have an actionable claim because the settlement offer implicitly required the Terrys’ acceptance before payment became due.
This opinion is discussed at greater length but serves as an example for an Insurance Law Attorney to be aware of when advising clients.
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