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Arbitration Right in Underinsured Motorist Statute Not Triggered

When a person allegedly liable for the injury of a claimant “offers the limits of all liability insurance policies available to the party,” the Uninsured Motorist (UIM) statute provides an avenue through which the claimant may accept the offer but also “preserve the right to seek additional compensation from his or her UIM insurance carrier…” (internal citations omitted). In order to trigger the portion of the UIM Statute that requires a claimant’s insurance company to “elect to either participate in binding arbitration or decline arbitration and preserve its subrogation rights…,” the requirement that the insurance company of the person responsible for the injury notify the UIM carrier that the party is willing to cooperate with arbitration is mandatory, and the UIM carrier is not required to request this assurance.

In White v. State Farm Mutual Automobile Insurance Company, No. W2019-00918-COA-R3-CV (Tenn. Ct. App. Feb. 24, 2020), plaintiffs were injured in a car accident. The other driver was insured by USAA, who offered the limits of the driver’s policy as settlement for plaintiffs’ claims. Plaintiffs had car insurance with defendant State Farm, which included UIM coverage.

In April 2018, plaintiffs informed State Farm by letter that they intended “to settle with USAA for the liability insurance policy limits…[and that they] were willing to submit their UIM claim to arbitration and that they hoped to work amicably toward a settlement with State Farm.” The next month, State Farm responded that plaintiffs had permission to settle with USAA and that it was still evaluating the UIM claim. Two weeks later, State Farm told plaintiffs that “it would not offer a settlement for their UIM bodily injury coverage because State Farm believed [plaintiffs] had been fully compensated for their injuries.” Plaintiffs responded by invoking Tenn. Code Ann. § 56-7-1206 and stating that State Farm should “tender $25,000 to each insured in order to proceed to a jury trial or waive jury and go to arbitration.” State Farm responded that the provisions of the UIM statute had not been triggered.

Plaintiffs filed suit, and the trial court granted State Farm’s motion for summary judgment, holding that the UIM Statute had not been triggered. The Court of Appeals affirmed.

Tenn. Code Ann. § 56-7-1206(f) sets out a procedure allowing an insured to settle with the insurance company of the person causing the injury while also preserving the right to seek additional compensation from the insured’s UIM carrier. Tenn. Code Ann. § 56-7-1206(g) lays out the requirements that “must be met to accomplish a settlement under the Statute.” Subsection (g)(2) states that the insurance company of the person causing the injury:

shall give written notice of the offer to the insured’s UIM insurance carrier or its attorney, provide verification of the coverage upon request and confirm to the UIM insurance carrier or its attorney that the party or parties to be released will agree in writing to cooperate with the UIM insurance carrier in connection with the arbitration of the UIM claim…

Subsection (g)(3) adds that “the insured…shall give written notice to the UIM insurance carrier…of the insured’s intent to accept the offer and agreement to submit the UIM claim to binding arbitration.” If the requirements are met, the UIM carrier “may either (1) consent to settlement, agree to binding arbitration of the UIM claim, and waive its subrogation rights; or (2) decline binding arbitration and preserve its subrogation rights.” (citing Tenn. Code Ann. sections 56-7-1206(g)(4) and (k)).

In this case, it was undisputed that USAA did not give State Farm written notice of the offer of liability limits or confirm in writing that its insured would cooperate with future arbitration. Plaintiffs argued that these failures did not matter because the phrase “upon request” in the UIM Statute “applies to both the liability company’s duty to (1) provide verification of the coverage, and (2) confirm to the UIM insurance carrier that the party to be released would agree to cooperate with the UIM insurance carrier at arbitration.” Plaintiff asserted that because State Farm did not request these assurances, the UIM Statute requirements were met. The Court disagreed.

Noting that it was “bound by the general rules of grammatical construction,” the Court of Appeals pointed out that the confusion here regarding what “upon request” modified was due to the absence of an Oxford comma. In determining that “upon request” only modified the requirement that the insurance company provide verification of the coverage, and that the requirement to assure cooperation with future arbitration was mandatory, the Court reasoned:

Had the Legislature included [a] comma between “upon request,” and “and,” it would be clear that the prepositional phrase “upon request” modifies only the requirement that the liability insurance company provide verification of coverage. However, even in the absence of the Oxford Comma, the Legislature joined the last two requirements with the coordinating conjunction “and.” Coordinating conjunctions… are used to connect grammatically equal elements. …As a coordinating conjunction, “and” provides a grammatical wall between what comes before it and what comes after it in the sentence. Thus,…”upon request” modifies only the second requirement…[T]he third requirement, i.e. that USAA would confirm to State Farm that Mr. Smith would agree to cooperate with State Farm at arbitration, was a mandatory requirement, which State Farm did not have to request.

Because State Farm did not receive this mandatory assurance, its “duty to elect an option has not been triggered under the Statute” and summary judgment was affirmed.

This opinion clarifies that a plaintiff seeking to invoke the UIM Statute’s required election of options needs to be sure that the liability carrier for the party at fault sent an assurance that its insured would cooperate with arbitration. UIM carriers are not required to request these assurances, but this opinion holds they are mandatory for triggering the uninsured motorist statutory provisions.

 

NOTE:  To aid lawyers in giving clients guidance about how long it takes to receive an opinion after oral argument in the appellate courts, we are going to start sharing that information with readers.   Please understand that the length of time that elapses between oral argument and the date the opinion is released is dependent on a multitude of factors, not the least of which is the complexity of the issues presented.  In this case, the opinion was released about six weeks after oral argument.

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