Anyone in Grand Prairie, Arlington, Mansfield, Cedar Hill, Duncanville, De Soto, Irving, Fort Worth, or anywhere else in Texas would naturally wonder when a claim they submit is suppose to be paid. The lawyerly answer is: It depends. One answer in one situation is shown here.
In 2002, the San Antonio Court of Appeals issued an opinion in a case that dealt with when a claim for underinsured motorist (UIM) benefits should be paid. The style of the case is Lawrence F. Wellisch, III and Maria L Wellisch v. United Services Automobile Association. The case came to the appeals court on an appeal on a motion for summary judgement in favor of United Services Automobile Association (USAA).
Here is some background.
Judith Salinas was driving her car at about 88 miles per hour when she lost control of the vehicle. It rolled over, killing Salinas and her son and severely injuring other passengers, including 15 year old Jessica Wellisch. Jessica was in a coma for five days before dying. The Wellisch’s sued Salinas estate, and, with USAA’s permission, settled. The Wellisches then sought to recover under their USAA UIM coverage. On November 25, 1998, USAA denied the claim, and the Wellischs sued on the insurance contract and for extra-contractual claims.
A trial was held wherein the Wellishes prevailed on their contract claim. On May 2, 2000, the judgment was entered and on the same day, USAA paid the Wellisches their policy limits of $300,000.
The Wellischs then proceeded on their extra-contractual claims against USAA. The part of this that is relevant to this writing is the claim for delay in paying the claim from November 25, 1998, to May 2, 2000. USAA filed a motion for summary judgement asking the court to rule that there was no liability and the court granted that motion. This appeal ensued.
The Wellisches asserted that USAA’s denial of their claim on November 25, 1998, was a violation of the Texas Insurance Code, Prompt Payment of Claims Act, and thus they were entitled to Section 542.060 penalties. USAA countered, arguing that the money was not due until judgment was rendered on May 2, 2000, and since they paid on that same day, they had no liability under Section 542.060.
The USAA policy provided that USAA would “pay all damages which a covered person is legally entitled to recover ….”
In discussing this case the court looked at how other courts have ruled and stated, “Various courts have construed the phrase ‘legally entitled to recover’ in similar UIM policies to mean that the insured must establish the uninsured motorist’s fault and the extent of the resulting damages before becoming entitled to recover UIM benefits.” They went on to say that those other courts make clear that an insurer is not obligated to pay UIM benefits until the insured becomes legally entitled to those benefits. Thus, an insurer has the right to withhold payment of UIM benefits until the insured’s legal entitlement is established.
In looking at the statute, they said that the plain objective of the statute is to obtain prompt payment of claims, and as a court, they must liberally construe the statute to promote its underlying purposes. Failure to comply with the statute is what would result in penalties for failure to comply with the statute.
However, as the court stated, “Nothing in (the prompt payment of claims act) suggests that an insurance company cannot dispute and deny a claim. In fact, the statute is premised on the presumption that carriers have the right to dispute claims. It merely requires that they do so promptly. Further, nothing in (the act) precludes an insurer from awaiting a judicial determination of an insured’s ‘legal entitlement’ to UIM benefits. It merely requires that the insurer notify the insured of its reasons for delaying the acceptance or rejection of a claim.”
An experienced Insurance Law Attorney can read Section 542.055, 542.056, and 542.057 and advise a client how best to proceed. These situations can be very fact specific. When dealing with UIM cases, too many times a person has to wait until there has been a judicial determination of fault and damages. Most other cases do not require this wait.
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