The nature of underinsured/uninsured motorist coverage in a given jurisdiction can determine the outcome of a bad faith claim against the UM/UIM carrier.
In Washington, uninsured/underinsured motorist coverage is secondary to liability coverage, which is primary:
Plaintiff received $95,000.00 and left over $1 million in liability insurance coverage on the table. Thus, Plaintiff cannot now argue that the available liability insurance coverage was inadequate to compensate for his injuries.
The purpose of UIM coverage is to place the insured in the same position as if a tortfeasor carried adequate liability insurance. [Citation omitted.] Thus, a UIM insured is not entitled to be put in a better position by virtue of colliding with an uninsured or underinsured motorist than by colliding with a tortfeasor that carries adequate liability insurance. [Citations omitted.]
In Washington, an “underinsured motor vehicle” is one for which “either no bodily injury or property damage liability bond or insurance policy applies at the time of an accident,” or where the “the sum of the limits of liability under all … insurance policies applicable to a covered person after an accident is less than the applicable damages which the covered person is legally entitled to recover.” RCW 48.22.030(1) (emphasis added). The fundamental policy underlying UIM is that liability insurance is primary, while UIM insurance is secondary. The intent is that UIM insurance supplement but not supplant liability insurance.
Dean v. GEICO Ins. Agency Inc., No. 2:20-cv-01496-BAT, 2021 WL 4963638, at *3-*4 (W.D. Wash. October 26, 2021) (Tsuchida, USMJ).
When an insured settles for less than the liability limits, as here, the insured's settlement is evidence in Washington that the insured's damages are less than the available UIM limits. Accordingly, the Magistrate Judge granted the UIM carrier's motion for summary judgment on all claims including the bad faith claim in this case and dismissed the case with prejudice. Dean, 2021 WL 4963638, at *4.
On the day before the Magistrate Judge in Washington ruled in the Dean case, a U.S. District Judge ruled in another UIM case, this one in Nevada. The defendant once again is GEICO. Sahinov v. GEICO Adv. Co., No. 2:21-CV-919 JCM (VCF), 2021 WL 4954311 (D. Nev. October 25, 2021).
The defendant UIM carrier filed a motion to dismiss an insured's extracontractual claims. The insured pled three groups of extracontractual claims. The District Court dismissed them all without prejudice, and all for the same reason: The claims were not alleged with enough facts but were alleged with slogans in the eyes of the District Judge, so that the claims were not plausible when they were presented to the District Judge in this Nevada case.
First, in Nevada there is an implied covenant of good faith in every contract. That includes underinsured motorist insurance contracts. However, the insured in this case pled the same facts that the insured pled in support of a claim for breach of contract. There are not two claims for the same breach of contract under Nevada law, and an alleged breach of the implied covenant is redressable as a contract claim under Nevada law. Sahinov, 2021 WL 4954311, at *2-*3.
Second, there is an actionable tort of bad faith under Nevada law. That can include an alleged bad faith denial of UIM benefits. However, the insured must allege what was not alleged in this case:
To state a claim for bad faith, the insured must plausibly allege that: (1) an insurer denied a claim; (2) without any reasonable basis; and (3) with the knowledge or reckless disregard of any reasonable basis to deny coverage. [Citation omitted.] Bad faith requires an insurer was actually or impliedly aware that there was no reasonable basis to deny the claim.
Sahinov, 2021 WL 4954311, at *3.
Third and finally, the Nevada Unfair Claim Settlement Practices Act conveys a statutory claim or cause of action for bad faith. Once again, however, the allegations in the complaint in this case did not convey plausibility on the statutory claim here. Sahinov, 2021 WL 4954311, at *4-*5.
Accordingly, the District Judge in Nevada dismissed all extracontractual claims without prejudice in this case.
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