Underinsured Motorist Coverage Issues

Lawyers in the Dallas and Fort worth areas who handle underinsured motorist (UIM) cases need to read this 2017 opinion from the Texas Supreme Court.  It is styled, Okelberry v. Farmers Texas County Mutual Insurance Co.

Steven Okelberry and his wife, Patricia, had an auto policy with Farmers that provided $500,000.00 in UIM coverage.

Steven and his two sons were injured in an 18-wheeler accident insured by Home State.  Steven suffered a neck injury requiring surgery and the possibility of additional surgeries.

Steven’s property damage claim was settled for $20,066.12 out of the policy limits of $750,000.00.  On February 25, 2007, Steven and his two sons sued the driver of the 18-wheeler.

As required for making a UIM claim, Steven asked for and was given consent by Farmers to settle the claim with the 18-wheeler.  The parties settled for $729,993.88, which was the amount of money left under the Home State policy.  Under the settlement agreement which was signed by both Steven and Patricia, the parties agreed to the following payments:

  1.  $269,212.06 payable to Steven’s counsel on Steven’s behalf;
  2.  $320,776.71 payable to Steven and Patricia;
  3. $50,000.00 payable to Ingenix Subrogation Services on Steven’s behalf.

Steven then sued Farmers for UIM benefits.  At trial, the jury awarded Steven $825,675.84 for past and future pain, mental anguish , physical impairment, and medical expenses, as well as loss of earning capacity.  This amount exceeded Farmers $500,000.00 policy limit.

Following the verdict, Farmers filed a “Motion to Apply Credits” in which Farmers argued it was entitled to offset the jury’s verdict by $639,988.77 which had been previously paid to Steven.  The facts and opinion get complicated from here after Steven made arguments about community property and Farmers made the same arguments plus arguments about Patricia not being part of the lawsuit and her claim being barred by the Statute of Limitations.

In its first of three issues, Farmers contends that the trial court erred in failing to credit Farmers the full amount of the settlement Steven received in the underlying case because (a) no legally sufficient evidence supports the court’s apportionment of the liability settlement to any person other than Steven; (b) Farmers did not consent to liability settlement that purported to compensate Steven’s wife, Patricia, for damages she never asserted; (c) the court incorrectly held that Texas’s community property assumption applied to the settlement proceeds; (d) any settlement by Patricia was not supported by consideration; and (e) the court’s interpretation of the contract terms violates public policy.  Because the Court found this first issue dispositive, it did not address the other two issues.

The allotment of the monies and the arguments about community property and the offsets and credits gets complicated at this point.  For an attorney finding himself and his client in a similar situation, this case is a good resource for understanding how the courts are going to see a similar case.