Burden Of Proof For Under Insured Coverage

Fort Worth insurance attorneys handling car wreck cases need to understand how underinsured insurance coverage works. There are many aspects of this understanding. One thing to know is that when a claim for underinsured benefits is made, the burden of proof is on the insurance company to prove the underinsured driver is actually underinsured. This is exemplified in a 1999, Austin Court of Appeals case styled, Wiley v. State Farm Mutual Automobile Insurance Company. Here is relevant portions of the opinion.
Kay Wiley was injured in an automobile collision caused by Satyn Kaura. Unable to recover her full damages from Kaura, Wiley sued Kaura’s insurer, Farmers, and her own insurer, State Farm in separate suits. She settled with Farmers. After a trial to the court based on stipulated facts, the court found State Farm was liable to Wiley by virtue of her underinsured motorist policy. This court affirmed the judgment.
The collision occurred in September 1993. Kaura’s insurance carrier, Farmers, initially did not compensate Wiley for her personal injuries. In October 1993, Wiley told State Farm she intended to file claims under her policies for personal injury protection (PIP) and underinsured motorist benefits.
Wiley sued Kaura in September 1995, recovering a default judgment on February 20, 1996; State Farm did not consent to that suit, nor did it agree that Kaura was liable for the accident, that it was bound by a judgment rendered against Kaura, or that Wiley was entitled to damages. After Wiley obtained a default judgment against Kaura on February 20, 1996, the following events occurred in 1996:
February 23 Wiley demands that State Farm pay its policy limits under her uninsured motorist policy.
March 20 State Farm informs Wiley it does not believe she has an uninsured motorist claim; State Farm requests additional information to assess the underinsured motorist claim.
April 10 Wiley reasserts coverage under her uninsured motorist policy and advises State Farm that it has the burden of proving whether Kaura was insured.
May 9 State Farm refuses to pay on the uninsured motorist policy because Kaura was insured by Farmers.
June 10 Farmers denies coverage to Kaura for failing to notify it of Wiley’s suit.
June 17 Wiley informs State Farm of Farmers’s refusal to pay, and demands that State Farm pay its policy limits.
July 1 State Farm advises Wiley that it will handle her claim as an uninsured motorist claim.

Wiley rejected State Farm’s settlement offers that followed. In her petition, she alleged the highest offer was $6000.
On November 12, 1996, Wiley filed separate suits against Farmers and State Farm. In her suit against Farmers, she alleged she was a third-party beneficiary of Kaura’s policy with Farmers; Farmers settled, paying Wiley $20,000. In her suit against State Farm, she sought recovery of the policy limits under her underinsured motorist policy. Contending State Farm had the burden to prove whether Kaura was insured, she also requested recompense for the attorney’s fees she incurred in her suit against Farmers. Though State Farm, in its original answer, denied that Kaura was uninsured, it deleted that allegation in an amended answer. State Farm disagreed that it was obligated to seek a judicial determination regarding Kaura’s coverage status.
The court found that Wiley had suffered $25,295.49 in damages from the collision. The court found State Farm was entitled to an offset for the $20,000 Farmers paid to Wiley as well as for $3972.31 State Farm had paid under her personal injury protection policy, and rendered judgment for $1323.18 under her policy for her uncompensated damages. The district court denied Wiley’s claim for the $5887.50 in attorney’s fees incurred suing Farmers.
Wiley contends that the court erred by denying her claim for the attorney’s fees she incurred suing Kaura’s insurer, Farmers. She contends that State Farm was contractually bound to sue Farmers to prove Kaura’s insured status. Wiley argues that State Farm’s failure to sue Farmers compelled her to sue Farmers herself; she contends that State Farm must compensate her for the attorney’s fees she incurred as a result.
Normally, to recover attorney’s fees in a suit against the insurer on an insurance contract, the claimant must show she recovered a valid claim in a suit on a contract, was represented by an attorney, presented the claim to the opposing party, and had the opposing party fail to tender the amount owed before thirty days expire after presentment.
This court concluded that the trial court did not err by declining to award Wiley attorney’s fees from State Farm. Though the trial court found State Farm liable to Wiley on the underinsured motorist policy, the court did not find a breach of contract; that failure to find is not challenged. The record shows that State Farm had no obligation to pay Wiley under the policy until the damages were established in this suit. The record also supports the trial court’s rejection of Wiley’s contention that State Farm breached a duty established by the policy provision that states, “If we and you do not agree as to whether or not the vehicle is actually uninsured, the burden of proof as to that issue shall be on us.” Though Wiley contends this provision obligated State Farm to sue Farmers to prove Kaura’s insured status, the provision lacks an express requirement that State Farm sue anyone. Nor did the court find an implied requirement to sue, because State Farm could carry its burden of proof numerous ways other than suing the supposed insurer of the other party. The policy provision allocates the burden in a dispute between the contractual parties, but does not create an affirmative duty to sue others. Because the contract did not impose a duty on State Farm to sue Farmers, the trial court did not abuse its discretion by declining to assess against State Farm the attorney’s fees Wiley incurred in suing Farmers.
Though Wiley’s suit against Farmers reduced State Farm’s liability to Wiley from $20,000 to just over $5000, that fact does not require a finding that State Farm breached a contractual duty to her by not undertaking the suit against Farmers that reduced its liability. Because evidence supports the conclusion that State Farm did not breach the insurance contract by not suing Farmers, it was concluded that the court did not abuse its discretion by declining to award attorney’s fees to Wiley on a breach-of-contract theory.

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