Under Insured Motorist Coverage And Recovery

Most people in Weatherford, Mineral Wells, Aledo, Azle, Willow Park, Hudson Oaks, Brock, Millsap, Cool, Springtown, or anywhere else in Parker County would not have a very good idea how under insured motorist (UIM) works. Here is a case that may shed some light on how some aspects of how this coverage works.
The style of the case is, Brainard v. Trinity Universal Insurance Company. This is a Texas Supreme Court opinion that was issued in 2006.
The facts:
Edward Brainard II was killed in July of 1999, during a head on collision with a rig owned by Premier Well Service, Inc. (Premier). The surviving wife and children (survivors) of the deceased brought suit against Premier for wrongful death and sought UIM coverage from their family business insurance carrier. The carrier paid $5,000 in PIP coverage but refused to pay UIM coverage until further information was received. The survivors joined the insurance carrier as a defendant alleging breach of contract, breach of common law duty of good faith, violations of the Deceptive Trade Practices-Consumer Protection Act, and violations of the Texas Insurance Code. In December of 2000, the survivors settled with Premier for $1,000,000 and dismissed Premier from the lawsuit. The survivors demanded that the carrier tender its $1,000,000 UIM policy limit as well. The carrier offered $50,000 to settle and the extra-contractual claims were severed. A jury awarded the survivors $1,010,000 in compensatory damages and $100,000 in attorney’s fees. The trial court credited both the $1,000,000 Premier settlement and $5,000 paid out in PIP benefits, leaving only $5,000 in damages and $100,000 in attorney’s fees. The parties then cross-appealed the judgment. On appeal, the carrier argued against the attorney’s fees award, and the survivors alleged the trial court erred in refusing to award prejudgment interest on the $1,010,000 in actual damages. The court of appeals reversed the trial court’s judgment awarding attorney’s fees and affirmed the denial of prejudgment interest. The survivors then filed this appeal to the Texas Supreme Court who rendered as follows.
The Texas Supreme Court reversed the court of appeals’ judgment in part, affirmed in part, and remanded the case to the trial court to calculate prejudgment interest consistent with the opinion. First, the Court held that even though prejudgment interest accrues over time because of lost use of money, it still constitutes additional compensatory damages for the insured’s bodily injury and property damage. Second, the Court found that UIM insurance covers prejudgment interest that the insured would be legally entitled to recover from the underinsured motorist; therefore, the court distinguished an earlier Texas Supreme Court decision, Henson v. Southern Farm Bureau Casualty Insurance Company, which was a 2000 decision. The Court pointed out that Henson only applies when legal liability of the underinsured has not been established. Third, the Court then re-interated the “declining principle” formula where at each new interval between payments entitling the carrier to a credit, prejudgment interest continues to accrue only on the remaining principle because interest is computed as simple interest and does not compound. This is stated per the Texas Finance Code, Section 304.104. Fourth, the court concluded by stating that the insured may recover attorney’s fees under Chapter 38 only if the insurer does not tender UIM benefits within thirty days after the trial court signs a judgment establishing the liability and underinsured status of the other motorist. This per the Texas Civil Practice & Remedies Code, Section 38.002.
If you are not a little confused (maybe a lot confused) by the above, you are far ahead of most attorneys. This area of the law is in transition and has been for several years. It serves as yet another reason why an experienced Insurance Law Attorney should be consulted in these matters.