McClendon v. Economy Fire & Cas. Ins. Co.

• Decision Date: 07 April 1999
• Docket Number: No. 98-1537.,98-1537.
• Citation: 732 So.2d 727
• Court: Court of Appeal of Louisiana — District of US
• Parties: Charlie McCLENDON, et al., Plaintiffs—Appellants, v. ECONOMY FIRE & CASUALTY INSURANCE COMPANY, Defendant—Appellee.

732 So.2d 727

Charlie McCLENDON, et al., Plaintiffs—Appellants, v. ECONOMY FIRE & CASUALTY INSURANCE COMPANY, Defendant—Appellee.

No. 98-1537.

Court of Appeal of Louisiana, Third Circuit.

April 7, 1999.

George Arthur Flournoy, Alexandria, for Charlie McClendon et al.

Ronald E. Corkern, Jr., Natchitoches, for Economy Fire & Casualty Insurance Company.

BEFORE: THIBODEAUX, PETERS, and PICKETT, Judges.

THIBODEAUX, Judge.

Charlie McClendon, Mar-sha McClendon, Willie Harris, and Eric Hayes brought suit against Economy Fire & Casualty Insurance Company (hereinafter "Economy"), the underinsured carrier of the named insured, to recover damages for personal injuries sustained in an automobile accident and seeking an award of penalties pursuant to La.R.S. 22:1220 and 22:658. The plaintiffs appeal the trial court's refusal to assess penalties against Economy. Because Economy submitted an unconditional tender of underinsured benefits to the plaintiffs within thirty days of its receipt of satisfactory proof under La.R.S. 22:658(A)(1) and within sixty days of such receipt under La.R.S. 22:1220(B)(5), we affirm the trial court's refusal to award penalties and attorney fees pursuant to these statutes. However, we reverse the judgment of the trial court to the extent that it refused to award penalties for Economy's failure to initiate loss adjustment for the plaintiffs' medical expenses under La.R.S. 22:658(A)(3) and for Economy's failure to pay timely the medical expenses of the plaintiffs under La.R.S. 22:658(A)(1) and 22:1220(B)(5).

I. ISSUE

We shall consider whether the trial court erred in refusing to award penalties and attorney fees pursuant to La.R.S. 22:1220 and 22:658.

II. FACTS

On October 25, 1996, Charlie McClendon was involved in an automobile accident caused by Toria Jones, who struck Mr. McClendon's vehicle while attempting to make a left turn on Louisiana Highway 6. Mr. McClendon's passengers, Mar-sha McClendon, Willie Harris, and Eric Hayes, were also injured in the accident. The vehicle driven by Mr. McClendon was titled in his name and in the name of Joyce Coleman. It was covered by an insurance policy issued by Economy which provided medical pay and underinsured motorist (UM) coverage. Joyce Coleman was the named insured. Toria Jones was insured by Safeway Insurance Company (hereinafter "Safeway").

On March 12, 1997, Mr. McClendon and his guest passengers submitted a written demand to Economy, seeking the unconditional tender of $5,000.00 under the medical pay provision of the insurance policy. The letter was received by Economy on March 24, 1997. Although the letter provided the correct policy number, it did not list Joyce Coleman as the insured, nor did it explain how coverage would be extended to Mr. McClendon. Accompanying the letter was a police report which listed Mr. McClendon as the owner of the vehicle, itemized medical expense summaries, medical bills, and medical reports on each plaintiff.

On April 15, 1997, Mr. McClendon and his guest passengers settled with Safeway, exhausting the policy limits. Subsequently, on April 21, 1997, they brought suit against Economy, seeking UM benefits, penalties, and attorney fees. Economy was not informed that the limits of the Safeway policy were exhausted or the amount that each plaintiff received in settlement. On June 11, 1997, Economy received a letter from the plaintiffs stating that the limits of the Safeway policy were exhausted. Economy made an unconditional tender of benefits on July 11, 1997.

III. LAW AND ARGUMENT

Failure to Timely Pay Underinsured Benefits Under La.R.S. 22:1220 and La.R.S. 22:658

Louisiana Revised Statutes 22:1220 provides in relevant part:

A. An insurer, including but not limited to a foreign line and surplus line insurer, owes to his insured a duty of good faith and fair dealing. The insurer has an affirmative duty to adjust claims fairly and promptly and to make a reasonable effort to settle claims with the insured or the claimant, or both. Any insurer who breaches these duties shall be liable for any damages sustained as a result of the breach.

B. Any one of the following acts, if knowingly committed or performed by an insurer, constitutes a breach of the insurer's duties imposed in Subsection A:

. . . .

(5) Failing to pay the amount of any claim due any person insured by the contract within sixty days after receipt of satisfactory proof of loss from the claimant when such failure is arbitrary, capricious, or without probable cause.¹

Louisiana Revised Statutes 22:658 provides in part:

A. (1) All insurers issuing any type of contract, other than those specified in R.S. 22:656, R.S. 22:657, and Chapter 10 of Title 23 of the Louisiana Revised Statutes of 1950, shall pay the amount of any claim due any insured within thirty days after receipt of satisfactory proofs of loss from the insured or any party in interest.

The trial court refused to assess penalties against Economy, explaining that Economy did not receive satisfactory proof of loss until June 11, 1997. On this date, Economy received a letter stating that the Safeway policy limits had been exhausted, and thus Toria Jones was underinsured. Subsequently, on July 11, 1997, Economy made a timely unconditional tender of benefits.

We find that the trial court did not err in refusing to assess penalties against Economy. "A trial court's conclusion concerning the assessment of statutory penalties is in part a factual determination which should not be disturbed absent a finding that it is manifestly erroneous." Sanders v. International Indem. Co., 97-1061, pp. 6-7 (La.App. 3 Cir. 2/4/98); 708 So.2d 772, 776, writ denied, 98-0597 (La.4/24/98); 717 So.2d 1173.

A plaintiff who seeks penalties under La.R.S. 22:1220 must prove that the insurer received "satisfactory proof of loss." In McDill v. Utica Mutual Insurance Co., 475 So.2d 1085, 1089 (La.1985), the Louisiana Supreme Court defined the phrase "satisfactory proof of loss" in connection with a claim for penalties under La.R.S. 22:658:

A "satisfactory proof of loss" within the meaning of La.R.S. 22:658 is that which is sufficient to fully apprise the insurer of the insured's claim. Hart v. Allstate Ins. Co., supra.

To establish a "satisfactory proof of loss" of an uninsured/underinsured motorist's claim, the insured must establish that the insurer received sufficient facts which fully apprise the insurer that (1) the owner or operator of the other vehicle involved in the accident was uninsured or underinsured; (2) that he was at fault; (3) that such fault gave rise to damages; and (4) establish the extent of those damages. Hart v. Allstate Ins. Co., supra.

See also Wells v. Houston, 95-202 (La. App. 3 Cir. 6/7/95); 657 So.2d 474,

writ denied,

95-1733 (La.10/13/95); 661 So.2d 500 (applying the McDill court's definition of "satisfactory proof of loss" to a claim for penalties under La.R.S. 22:1220).

In this case, the plaintiffs assert that they first demanded UM benefits from Economy in the April 1997 petition. They allege that Economy knew that Safeway provided primary coverage as the accident report received by Economy in March of 1997 listed Safeway as Toria Jones' insurer. Moreover, the plaintiffs contend that Economy had a duty to investigate whether the Safeway policy limits were exhausted.

We reject the plaintiffs' argument as the burden was upon them, not Economy, to establish "satisfactory proof of loss." As the trial court noted, on March 24, 1997, Economy received a copy of the accident report, along with itemized medical expense summaries, medical bills, and medical reports. The accident report stated that Safeway was the insurer of Toria Jones. However, at this time, Economy was not fully apprised that Ms. Jones was underinsured; the plaintiffs failed to provide information to Economy regarding the limits of the Safeway policy or the amount each plaintiff received from Safeway in settlement. It was not until June 11, 1997 that Economy received information establishing that Ms. Jones was underinsured as the limits of the Safeway policy were exhausted. Subsequently, on July 11, 1997, Economy made a timely unconditional tender of benefits. Accordingly, we conclude that the trial court did not err in refusing to award penalties and attorney fees pursuant to La.R.S. 22:1220 or La.R.S. 22:658.

Failure to Initiate Loss Adjustment and Pay Medical Expenses Under La.R.S. 22:658 and 22:1220

The plaintiffs contend that the trial court erred in refusing to award penalties pursuant to La.R.S. 22:658. This statute provides in relevant part:

A. (3) Except in the case of catastrophic loss, the insurer shall initiate loss adjustment of a property damage claim and of a claim for reasonable medical expenses within fourteen days after notification of loss by the claimant.... Failure to comply with the provisions of this Paragraph shall subject the insurer to the penalties provided in R.S. 22:1220.

The plaintiffs argue that Economy failed to initiate loss adjustment of their claims within fourteen days after notification of the loss. They explain that the demand letter for reimbursement of medical expenses was received by Economy on March 24, 1997. They allege that although a file was opened on March 25, 1997, no further action was taken until April 30, 1997. When questioned as to Economy's response to the demand letter, Charlie Carroll, a litigation specialist for Economy, testified that "from the time we received [the] letter, we were in the process of investigating the case." Carroll asserted that questions of coverage arose from the demand letter as the police report accompanying the letter listed Mr. McClendon as the owner of the vehicle involved in the accident. However, because Joyce Coleman was the named insured on the policy, Economy questioned whether Coleman had an insurable interest in the vehicle and whether coverage could be extended to Mr. McClendon.

Upon our review of the record, we find that ...