Brinkman v. Aid Ins. Co.

• Decision Date: 22 December 1988
• Docket Number: No. 17035,17035
• Citation: 115 Idaho 346,766 P.2d 1227
• Parties: Robert L. BRINKMAN, Jr., Plaintiff-Respondent-Cross-Appellant, v. AID INSURANCE COMPANY, Defendant-Appellant-Cross-Respondent.
• Court: Idaho Supreme Court

Page 1227

766 P.2d 1227

115 Idaho 346

Robert L. BRINKMAN, Jr., Plaintiff-Respondent-Cross-Appellant, v. AID INSURANCE COMPANY, Defendant-Appellant-Cross-Respondent.

No. 17035.

Supreme Court of Idaho.

Dec. 22, 1988.

Nelson, Rosholt, Robertson, Tolman & Tucker, Twin Falls, for defendant-appellant-cross-respondent. Terry Thomas Uhling argued.

Hepworth, Nungester, Felton & Lezamiz, Twin Falls, for plaintiff-respondent-cross-appellant. John C. Hohnhorst argued.

HUNTLEY, Justice.

This appeal involves the determination of when an accident victim's insurer may be required to pay claimant's attorney fees under I.C. § 41-1839 and more particularly, what procedural actions are required to invoke that statute, and how attorney fees are to be calculated. The appeal further involves issues of the applicability of the collateral source doctrine and when and to what extent prejudgment interest may appropriately be awarded.

BACKGROUND OF THE APPEAL

Robert Brinkman, an insured of Aid Insurance Company, was severely injured in an automobile accident caused by an under-insured motorist in Flagstaff, Arizona. Aid refused to pay Brinkman his policy limit of $300,000 and Brinkman filed suit, obtaining a jury award of $156,018.16.

Brinkman's injuries occurred in a head-on collision on September 22, 1984, when a motorist crossed the center line and hit him. Brinkman sustained multiple serious orthopedic injuries and incurred $19,830.08 in medical expenses. Brinkman was also required to withdraw from his fall semester at Northern Arizona University, where he was studying to be a high school mathematics teacher and athletic trainer. Brinkman's injuries continue to cause recurrent low back pain, inability to participate in strenuous work or athletic activities and a permanent limp. Some of his injuries are degenerative and will likely require future medical expenses such as the probability of the need for a total hip replacement due to resulting premature degenerative arthritis. Aid was notified of the accident while Brinkman was still in the hospital and began investigating shortly thereafter.

According to Brinkman, Aid refused to advance any portion of his underinsured motorist coverage without fully settling his claim. After receiving several demand letters threatening the initiation of bad faith litigation, Aid advanced $5,000 under the underinsured motorist coverage on September 23, 1985, one year after the accident.

In mid to late September, 1985, Brinkman's attorney sent a "settlement brochure" to Ralph Andre, an adjustor at Aid's Denver office. The brochure contained extensive discussion of Brinkman's injuries and Aid's liability to him, biographical information, medical bills, physician reports, etc. The brochure demanded that Aid pay $305,000--the maximum of the underinsured coverage of $300,000, plus $5,000 for medical coverage. (Aid apparently did pay $5,000 from its medical payment coverage on January 2, 1985.) Aid denies receiving the settlement brochure prior to February 5, 1986--one day before Brinkman filed suit against Aid, but the trial court found, as a matter of fact, that the brochure was mailed and received in late September/early October, 1985. The settlement brochure advised that "this offer of settlement may be accepted within fifteen (15) days of your receipt of these materials, which should be regarded as 'proof of loss' under I.C. § 41-1839(1)."

The trial court found that the "proof of loss" provisions of I.C. § 41-1839 had been met, stating:

Defendant argues that simply asking for policy limits does not support the claim nor does it constitute adequate "proof of loss." This would be true except that Aid Insurance Company knew of at least $35,000.00 already expended in actual medicals, knew that Mr. Brinkman required additional surgery in the future, knew that Mr. Brinkman had missed a year's worth of school because of his injuries, and knew that Mr. Brinkman was a very active sports enthusiast and athletic trainer. Aid Insurance, knowing all these factors and having a settlement request for $300,000, was adequately placed on notice of the nature and extent of the claim being made by its insured.

[115 Idaho 349] Notwithstanding the fact that Aid Insurance Company disputes the amount of the claim, it is clear that enough had been presented to the defendant to invoke I.C. § 41-1839.

In fixing the amount of prejudgment interest, the court looked to I.C. § 28-22-104(1) which provides for prejudgment interest on "money due by express contract." The court agreed with Brinkman that this case constituted a contract action but found "obvious tort aspects," which could not be ignored, and further found that it would be inequitable to award prejudgment interest for the entire amount due, because many of the damages were not readily ascertainable and were not "liquidated." The court found that Brinkman was entitled to prejudgment interest on the medical bills which became due and owing prior to suit and were not timely paid by Aid.

In sum, the jury returned a verdict awarding Brinkman $156,018.16, representing benefits due him pursuant to his underinsured motorist policy with Aid. In post trial motions, Aid sought relief from the trial court's award of $52,006.05 in attorney fees, claiming the decision was not consistent with I.C. § 41-1839. Aid further contended the award of $7,622.11 in prejudgment interest pursuant to I.C. § 28-22-104, and the failure to grant an offset against the verdict in the sum of $15,000 (representing the insurance proceeds which were received from the underinsured tortfeasor) constituted error. Aid also raises as error the court's refusal to prohibit Brinkman from offering evidence at trial regarding additional education expenses incurred as a result of his injury, which Aid contended would be paid by a collateral source in the form of a tuition waiver scholarship. Brinkman cross-appeals the trial court's refusal to allow prejudgment interest upon the entire amount of the jury award.

DISCUSSION

This appeal raises five major issues which we will discuss in turn.

I.

The first issue is whether the trial court properly awarded attorney fees to Brinkman under I.C. § 41-1839.

In essence, I.C. § 41-1839(1) provides that: any insurer which fails to pay the amount justly due under the terms of the policy within thirty days of proof of loss is liable for attorney fees. The language of this statute raises two questions: (1) the meaning of " roof of loss" and; (2) the meaning of "amount justly due."

(1) The Meaning of "Proof of Loss"

Neither I.C. § 41-1839 nor Aid's insurance policy define "proof of loss." Therefore, it is necessary to look to case law.

In In re Death of Cole, 113 Idaho 98, 100-101, 741 P.2d 734 (Ct.App.1987), the Court of Appeals stated"

[s]ome jurisdictions recognize that proof of loss provisions in insurance policies do not require the claimant to present any more proof of the insured's death than would suffice to establish a prima facie case in a court of law. (Citations omitted.) Idaho statutes do not contain a definition of or a standard for "proof of loss." No Idaho cases have been cited to us, nor has our research disclosed any, which provide guidance here.

It is significant that the court in Cole simply said that insurance policies cannot require proof any greater than that which is required in a prima facie case; not that the plaintiff must provide proof equal to that which is required in a prima facie case of death in this state.

In total, all that I.C. § 41-1839, Aid's policy, and the Idaho case law tell us is that insurance policies cannot require more proof than is necessary for a prima facie case. The law is silent on how much proof is required. To arrive at a more definitive statement of the minimum requirement, we must examine the purpose of proof of loss statements.

The purpose of a provision for notice and proofs of loss is to allow the insurer to form an intelligent estimate of its rights and liabilities, to afford it an opportunity 44 Am.Jur.2d, "Insurance," § 1323, p. 250. See also, 3 Appleman, Insurance Law and Practice, § 1471, p. 147 (revised edition 1967):

[115 Idaho 350] for investigation, and to prevent fraud and imposition upon it. (Emphasis added.)

The purpose of proof of loss statements, in general, is to furnish the insurer with the particulars of the loss and all data necessary to determine its liability and the amount thereof, if any.

From these purposes, we draw the following conclusions. The insured, when required to do so under his policy, should provide the information reasonably available to him regarding his injury and the circumstances of the accident.

The amount of information provided should be proportional to the amount reasonably available to the insured. If the information provided is insufficient to give the insurer an opportunity to investigate and determine its liability, the insurer may deny coverage. Otherwise, the insurer must investigate and/or determine its rights and liabilities. The documentation is the "proof." The explanation of physical and/or financial injury is the "loss." "Loss" must be distinguished from liability. The insurer will determine its liability with the knowledge that it must be fair and accurate or suffer the consequences.

Although it did not define "proof of loss," Aid's insurance policy did state that a person seeking coverage must submit a proof of loss when required by Aid. In the instant case, Aid never demanded or requested a proof of loss from Brinkman. Hence, by the contractual terms of Aid's own policy, Brinkman was not required to submit a proof of loss as a condition to receipt of payment from Aid.

Even though not required, Brinkman did send a settlement brochure to Aid in mid to late September 1985. The brochure demanded $305,000 and generally described Brinkman's injuries and medical expenses incurred up to that time. The brochure contained particulars of Brinkman's...