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DTCI: Navigating Common Issues in UIM Litigation

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Many defense attorneys are eventually pulled into the love triangle of underinsured litigation. Like any good drama, underinsured cases are multifaceted and involve a bizarre set of twists and relationships.

Suppose you represent the provider of an underinsured motorist policy. The plaintiff is in a somewhat adversarial position but is also your client’s valued customer (although sometimes a former customer). The co-defendant is the tortfeasor whose negligence got you into this mess, but your interests are also aligned in many ways. Most notably, if the co-defendant puts on a less-than-inspired case, your client could be responsible for much of the resulting verdict.

Further complexities arise when the UIM carrier has some form of contractual repayment right against the plaintiff’s recovery, typically the result of making medical payments. In these cases, the insurer wants the plaintiff to recover enough to fairly compensate him for his injury but also seeks satisfaction of his repayment obligation. The amount of the repayment may also become a sticking point in settlement talks, with the plaintiffs sometimes seeking a reduction or waiver in exchange for the insurer’s dismissal.

Each UIM case is unique, and each presents different considerations for attorneys. This article explores some recent and recurring issues in navigating UIM litigation.

Remember to check all policy limits

Even if the underlying lawsuit is in tort, the UIM carrier’s involvement is always contractual. Before spending too much time on any underinsured file, make sure the insurance contract actually applies.

It seems that more and more underinsured carriers are joined to a lawsuit before the tortfeasor’s underlying limits are known. If the co-defendant has plenty of insurance, then there is no underinsured issue. Accordingly, get a copy of the tortfeasor’s policy as soon as possible and seek dismissal if the limits equal or exceed the plaintiff’s UIM limits.

Deciding whether to advance or allow the tortfeasor’s settlement

Once discovery wraps up and the potential evidence takes shape, the tortfeasor’s insurance provider may decide to offer its limits. If the UIM carrier is notified of a bona fide offer by the tortfeasor to settle for his policy limits, an important decision must be made. Pursuant to Ind. Code § 27-7-5-6, the UIM carrier has 30 days either to allow the tortfeasor to settle and be dismissed or to advance the settlement funds and force the tortfeasor to stay in the litigation.

There are three primary reasons why an insurer might choose to advance funds and remain subrogated to the co-defendant.

The first scenario is the least common: The tortfeasor actually has assets beyond his insurance policy, and the UIM provider intends to pursue those assets following an adverse verdict. Second, there are some arguments that are more effectively made by an individual defendant rather than by the plaintiff’s own insurance company. This is particularly true when challenging liability or alleging comparative fault; a tort defense is best made by a tort defendant.

A third consideration deals with the interjection of insurance into the case. Although the law seeks to control any prejudice created by the presence of insurance, these challenges are harder to mitigate in first-party litigation. This is well illustrated by two recent opinions from the Indiana Court of Appeals which address a creative strategy to conceal the UIM carrier following the tortfeasor’s dismissal.

In Brown-Day v. Allstate Insurance Co., the tortfeasor settled with the plaintiff and was dismissed from the lawsuit with prejudice — and with neither objection nor advancement by the UIM provider, Allstate. 915 N.E.2d 548 (Ind. App. 2009) As the plaintiff and Allstate headed toward trial, the insurer filed a motion to remove Allstate from the caption, substituting the previously dismissed tortfeasor as the sole party to be named before the jury. Allstate’s motion was granted, and an interlocutory appeal was filed.

The Court of Appeals held that Allstate could not substitute the non-party tortfeasor as a fictitious party in order to avoid an overinflated damages award in a contract case, and that such a proposal was in accordance with neither case law nor Ind. Evidence Rule 411.

This same strategy was addressed one year later, with the Court of Appeals following the same reasoning. Howard v. American Family Mutual Ins. Co., 928 N.E.2d 281 (Ind. App. 2010) In reviewing the Brown-Day opinion, Judge Robb succinctly explained Allstate’s predicament. By standing back and allowing the driver’s dismissal instead of advancing payment, Allstate “treated the cause of action to be tried before the jury as a first party claim for contract enforcement.” Id. at 284 (internal citations omitted)

These two cases send a message: If a UIM provider doesn’t want to be left alone on the caption after the tortfeasor’s settlement, advancement may be the only way out.

Tortfeasor participation post-advancement

If the co-defendant offers his limits and has no other assets, how does the UIM carrier know that he will put on a vigorous defense after advancement? With a lame duck co-defendant, the UIM counsel must tread carefully.

The carrier for the tortfeasor is contractually obligated to provide a defense, and this obligation does not vanish upon UIM advancement. Failure to defend by the tortfeasor’s carrier, or the attorney representing the tortfeasor, may expose one or both to post-trial claims for bad faith or malpractice.

Nevertheless, knowing your case and exercising diligence in all stages of litigation following advancement will serve you well. Communication between counsel for the tortfeasor and the UIM carrier is critical to ensure a proper defense is presented at trial.

Defending the UIM carrier at trial

When an underinsured carrier is joined to a case destined for trial, the most important decision is the extent to which the insurer should participate in the defense. This determination is highly fact-sensitive and must be carefully evaluated in each case. Consider the following scenarios.

Johnny Tortfeasor is texting, shaving and eating a sandwich while driving in the rain. He blows a red light, causing a significant collision that sends Nancy Plaintiff to the hospital. Johnny has state-minimum coverage with Big Bob’s Discount Insurance, which is reluctant to pay its policy limits. (Big Bob thinks that Nancy was the primary cause of the accident, since her windshield wipers were set only on the “low” setting.) Nancy has a UIM policy through your client, Free Range Insurance Co.

In a case like this, Free Range can’t expect much help from the co-defendant. Big Bob has taken an unreasonable position, and an unreasonable verdict will probably follow if Big Bob drives the defense. Accordingly, Free Range must be prepared to guide the jury to a reasonable award. If a verdict within the range of UIM exposure is likely, Free Range’s counsel must become more involved in the defense, taking an active approach at every stage of litigation.

Now imagine that Billy Tortfeasor (Johnny’s more responsible brother) bumps into Nancy while backing out of a parking space. Nancy gets checked out at the emergency room, follows up with her primary care physician, and experiences a few days of mild soreness. Billy admits fault, leaving only the issue of “how much?” He has a $50,000 liability policy, and Nancy has incurred $2,000 in medical bills. However, they disagree on the value of her pain and suffering. As a precaution, Nancy’s attorney has joined her underinsured carrier, Free Range, and the case is headed to trial on the issue of damages.

Billy’s case represents a low-risk scenario for the underinsured carrier. Since his participation is unlikely to affect the carrier’s ultimate liability, it would be perfectly acceptable for the UIM attorney to sit back and monitor this trial from the gallery.

Such an arrangement can actually be desirable for all parties. For the co-defendant, it may keep an insurance company off the caption and the discussion of insurance off the table. For the plaintiff, the benefits are even more apparent: one less opening statement, one less attorney questioning witnesses, and one less closing argument. For these reasons, parties will often stipulate to remove the UIM carrier from the caption.

UIM participation from the middle ground

The adventures of Johnny and Billy Tortfeasor illustrate the opposite ends of the spectrum, but the potential for UIM exposure isn’t always so clear. Fortunately, these middle-ground cases are the most exciting to defend: You get to be the voice of moderation in the courtroom, forming a closer bond with the jury than in most other cases.

Suppose you represent an insurer facing a mild or moderate risk of UIM exposure. During voir dire or opening statements, explain to the jury that your client had nothing to do with the accident but has a contract with the plaintiff that may be affected by this lawsuit. Virtually all participation beyond this point is optional.

These trials allow the UIM counsel to carefully select the issues that warrant emphasis. Know the file better than anybody else and simply participate when necessary. If the co-defendant fails to ask a question that you think is important, step in to help his case. If he starts to get overly aggressive with the plaintiff, step in and hurt his case. Remember, your goal is not to minimize the verdict, but rather to keep it within a fair and reasonable range (and above your client’s medical payments interest, if applicable). UIM counsel should strive to walk the middle ground and serve as the voice of reason.

While you may reduce your involvement during the evidentiary part of trial, UIM counsel should seldom pass up the chance to give a closing argument. You are in a unique position to establish a bond with the jury. After watching the plaintiff and tortfeasor aggressively battle throughout trial, jurors will be hungry to hear the thoughts of a lawyer who seems reasonable and detached from the accident at the center of the lawsuit.

Tell the jury what you think. Thank the jury for their time. Then ask the jury to enter a verdict that is fair and reasonable.

Final thoughts

Insurance providers are in a precarious position in any UIM litigation; the defense will almost always be driven by the tortfeasor, but the UIM insurer can be left holding the bag for unreasonable verdicts. No matter what the perceived UIM exposure, know your case intimately and be prepared to pick up any of the other parties’ fumbles in discovery or at trial.

Always be mindful of the different relationships between your client and the other parties. While the co-defendant can sometimes be a partner in your defense, there may also be a need to provide assistance to ensure all aspects of the case are properly considered. Keep a level head, ask for what is reasonable, and your client will be better for it.•

Keith Mundrick is incoming co-chair of the DTCI Insurance Section and an attorney with State Farm Litigation Counsel. He advises and represents State Farm and its policyholders in a variety of litigation across Indiana. The opinions expressed in this article are those of the author.
 

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  1. I like the concept. Seems like a good idea and really inexpensive to manage.

  2. I don't agree that this is an extreme case. There are more of these people than you realize - people that are vindictive and/or with psychological issues have clogged the system with baseless suits that are costly to the defendant and to taxpayers. Restricting repeat offenders from further abusing the system is not akin to restricting their freedon, but to protecting their victims, and the court system, from allowing them unfettered access. From the Supreme Court opinion "he has burdened the opposing party and the courts of this state at every level with massive, confusing, disorganized, defective, repetitive, and often meritless filings."

  3. So, if you cry wolf one too many times courts may "restrict" your ability to pursue legal action? Also, why is document production equated with wealth? Anyone can "produce probably tens of thousands of pages of filings" if they have a public library card. I understand this is an extreme case, but our Supreme Court really got this one wrong.

  4. He called our nation a nation of cowards because we didn't want to talk about race. That was a cheap shot coming from the top cop. The man who decides who gets the federal government indicts. Wow. Not a gentleman if that is the measure. More importantly, this insult delivered as we all understand, to white people-- without him or anybody needing to explain that is precisely what he meant-- but this is an insult to timid white persons who fear the government and don't want to say anything about race for fear of being accused a racist. With all the legal heat that can come down on somebody if they say something which can be construed by a prosecutor like Mr Holder as racist, is it any wonder white people-- that's who he meant obviously-- is there any surprise that white people don't want to talk about race? And as lawyers we have even less freedom lest our remarks be considered violations of the rules. Mr Holder also demonstrated his bias by publically visiting with the family of the young man who was killed by a police offering in the line of duty, which was a very strong indicator of bias agains the offer who is under investigation, and was a failure to lead properly by letting his investigators do their job without him predetermining the proper outcome. He also has potentially biased the jury pool. All in all this worsens race relations by feeding into the perception shared by whites as well as blacks that justice will not be impartial. I will say this much, I do not blame Obama for all of HOlder's missteps. Obama has done a lot of things to stay above the fray and try and be a leader for all Americans. Maybe he should have reigned Holder in some but Obama's got his hands full with other problelms. Oh did I mention HOlder is a bank crony who will probably get a job in a silkstocking law firm working for millions of bucks a year defending bankers whom he didn't have the integrity or courage to hold to account for their acts of fraud on the United States, other financial institutions, and the people. His tenure will be regarded by history as a failure of leadership at one of the most important jobs in our nation. Finally and most importantly besides him insulting the public and letting off the big financial cheats, he has been at the forefront of over-prosecuting the secrecy laws to punish whistleblowers and chill free speech. What has Holder done to vindicate the rights of privacy of the American public against the illegal snooping of the NSA? He could have charged NSA personnel with violations of law for their warrantless wiretapping which has been done millions of times and instead he did not persecute a single soul. That is a defalcation of historical proportions and it signals to the public that the government DOJ under him was not willing to do a damn thing to protect the public against the rapid growth of the illegal surveillance state. Who else could have done this? Nobody. And for that omission Obama deserves the blame too. Here were are sliding into a police state and Eric Holder made it go all the faster.

  5. JOE CLAYPOOL candidate for Superior Court in Harrison County - Indiana This candidate is misleading voters to think he is a Judge by putting Elect Judge Joe Claypool on his campaign literature. paragraphs 2 and 9 below clearly indicate this injustice to voting public to gain employment. What can we do? Indiana Code - Section 35-43-5-3: Deception (a) A person who: (1) being an officer, manager, or other person participating in the direction of a credit institution, knowingly or intentionally receives or permits the receipt of a deposit or other investment, knowing that the institution is insolvent; (2) knowingly or intentionally makes a false or misleading written statement with intent to obtain property, employment, or an educational opportunity; (3) misapplies entrusted property, property of a governmental entity, or property of a credit institution in a manner that the person knows is unlawful or that the person knows involves substantial risk of loss or detriment to either the owner of the property or to a person for whose benefit the property was entrusted; (4) knowingly or intentionally, in the regular course of business, either: (A) uses or possesses for use a false weight or measure or other device for falsely determining or recording the quality or quantity of any commodity; or (B) sells, offers, or displays for sale or delivers less than the represented quality or quantity of any commodity; (5) with intent to defraud another person furnishing electricity, gas, water, telecommunication, or any other utility service, avoids a lawful charge for that service by scheme or device or by tampering with facilities or equipment of the person furnishing the service; (6) with intent to defraud, misrepresents the identity of the person or another person or the identity or quality of property; (7) with intent to defraud an owner of a coin machine, deposits a slug in that machine; (8) with intent to enable the person or another person to deposit a slug in a coin machine, makes, possesses, or disposes of a slug; (9) disseminates to the public an advertisement that the person knows is false, misleading, or deceptive, with intent to promote the purchase or sale of property or the acceptance of employment;

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