New Underinsured Motorist Opinion

Mealy’s reports on Jones v. Penn National, a North Carolina uninsured motorist case where the Plaintiff brought a bad faith claim against Penn National, the underinsured motorist carrier, in a case where the at-fault defendant – insured by Allstate, naturally – did not tender their policy. The court said that the Defendant has no obligation to offer UIM coverage before the exhaustion of liability insurance. I think a Maryland court would make the same ruling.underinsured motorist opinion

That’s the nutshell. You can stop there. Perhaps I could interest you in an overview of uninsured motorist coverage. Is that something you might be interested in? (Entourage devotees enjoy the joke. Everyone else looks annoyed.) Or we can break it down a little further.

Plaintiff gets into a serious accident. The defendant driver is killed. Allstate, who insured the defendant, offered $7,500 of its $30,000 policy. Plaintiff takes the case to verdict and gets a $185,000 verdict. Typical Allstate.

Plaintiff then brought a bad faith claim invoking North Carolina’s UIM statute and its Unfair and Deceptive Trade Practices Act. Maryland has a similar law. Plaintiff’s lawyers claimed that Penn National was bound by a statutory duty — following the car accident and before Allstate tendered its policy – to evaluate the case fairly and honestly. In other words, they argue that Penn National is not as dumb as Allstate and knew the claim was worth more.

This novel theory did not pass summary judgment. The court found “a UIM claim does not arise until liability coverage has been exhausted by a judgment or settlement.” Because there could be no UIM claim until Allstate tendered its limits, there is no UIM case and Penn National could not have engaged in any unreasonable settlement practices.

It is worth noting that if North Carolina law is like Maryland law, Allstate knew it had some latitude in evaluating this claim because Allstate had no possibility of paying more than the $30,000 limit. So the $30,000 acts as a high with no bad faith risks. This makes the defendant’s death fortuitous for Allstate regarding the exposure that it might have.

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