AMI 2303 Issues—Claim for Underinsured Motorist Coverage—Burden of Proof

Do not give the final bracketed paragraph when the case is submitted on interrogatories.

This instruction is intended to be used in cases in which the underinsured motorist is not a party (i.e., when the underinsured motorist's liability carrier has tendered the limits of that policy). If the underinsured motorist is a party, modify or supplement this instruction as appropriate.

Do not give the fourth bracketed paragraph if it is undisputed that the defendant failed to obtain the plaintiff's written rejection of underinsured motorist coverage as required by Ark. Code Ann. § 23-89-209(a)(1).

Use this instruction in an underinsured motorist case in addition to any instructions that may be necessary to address the issue of the underinsured motorist's fault in causing plaintiff's damages. For example, adapt this instruction as necessary for cases involving joint tortfeasors (see AMI 203) and give AMI 302, any applicable Special Factor Instruction from AMI Chapter 6, and any applicable Rules of the Road Instruction from AMI Chapter 9, as the case requires.

This instruction is intended to clarify for the jury the basic framework in underinsured motorist cases by identifying the elements of (1) damages, (2) fault on the part of the underinsured motorist, (3) the existence of a policy containing underinsured motorist coverage, and (4) the fact that the motorist was underinsured. See Ark. Code Ann. § 23-89-209. This instruction was approved as a correct statement of the law in Pogue v. Transcontinental Ins. Co., 2010 Ark. 222.

The case contemplated by this instruction is against the underinsured motorist coverage carrier only. Combination of the insured's claims against both the tortfeasor and the underinsured motorist coverage carrier in the same action may raise issues that are beyond the scope of this instruction. On the one hand, to be bound by the insured's judgment against or settlement with the tortfeasor, the underinsured motorist coverage carrier must be made a party to the insured's action against the tortfeasor (at least if the underinsured motorist coverage policy contains a “consent clause” providing that the carrier will not be bound by any settlement with or judgment against the underinsured motorist without its written consent). Cf. Brinker v. Forrest City School Dist. No. 7, 344 Ark. 171, 40 S.W.3d 265 (2001) (underinsured motorist coverage carrier that was severed, but not dismissed, from insured's action against the tortfeasor remained a party and therefore was bound by the verdict), with Ross v. State Farm Mut. Auto. Ins. Co., 41 Ark. App. 75, 848 S.W.2d 948 (1993) (insured who notified underinsured motorist coverage carrier of action against tortfeasor and kept carrier current on proceedings was nevertheless required to relitigate issues of liability and damages against carrier because carrier was not made a party to the action against the tortfeasor). See also MFA Mutual Ins. Co. v. Bradshaw, 245 Ark. 95, 431 S.W.2d 252 (1968) (upholding validity of policy provision that no judgment in an action by insured against uninsured motorist shall be conclusive against the uninsured motorist coverage carrier without the carrier's written consent; case involved default judgment against tortfeasor); Ross, 41 Ark. App. at 78, 848 S.W.2d at 950 (“the fact that Bradshaw involved a defaulting defendant and involved UM coverage rather than UIM coverage does not, in our judgment, make a difference in the legal principle involved”). Also, in uninsured motorist cases, the court has ruled that (aside from any obligations imposed by a duty-to-cooperate clause in the policy) “an insured has the option of suing either his insurer or the uninsured motorist or both; also, that the insurer itself is not prevented from cross-complaining against the uninsured motorist, or proceeding by a separate action against an uninsured motorist after payment of a judgment in favor of its insured.” Home Ins. Co. v. Williams, 252 Ark. 1012, 1014, 482 S.W.2d 626, 628 (1972).

On the other hand, combination in one action of claims against both the tortfeasor and the underinsured motorist coverage carrier, while avoiding a multiplicity of lawsuits, might raise a question concerning the admissibility of evidence of the tortfeasor's liability insurance. Under Ark. R. Evid. 403, “evidence relating to the existence of liability insurance is not ordinarily admissible because of its lack of relevance and its inherently prejudicial nature…. Such evidence should be admitted only when it is relevant to the issues.” Johnson Timber Corp. v. Sturdivant, 295 Ark. 622, 645, 752 S.W.2d 241, 252 (1988) (not error for trial court to admit evidence of liability insurance, with limiting instruction, in motor vehicle accident case to show agency relationship among defendants). See also Hively v. Edwards, 278 Ark. 435, 437–438, 646 S.W.2d 688, 689–690 (1983) (upholding trial court's refusal to admit evidence of insurance in medical malpractice case). Cf. Fed. R. Evid. 411 (evidence of liability insurance not admissible to prove insured's negligence, but may be admissible for other purposes, such as proof of agency, ownership, or control, or witness bias).

The Arkansas Supreme Court has distinguished uninsured from underinsured motorist coverage: “Uninsured motorist coverage applies when a tortfeasor either has no insurance or has less than the amount required by law. Coverage is designed to guarantee a minimum recovery equal to that amount. Underinsured coverage applies when the tortfeasor has at least the amount of insurance required by law, but not enough to fully compensate the victim. This coverage is designed to provide compensation to the extent of the injury, subject to the policy limit.” Clampit v. State Farm Mut. Auto. Ins. Co., 309 Ark. 107, 109–110, 828 S.W.2d 593, 595 (1992). See also State Farm Mut. Auto. Ins. Co. v. Beavers, 321 Ark. 292, 901 S.W.2d 13 (1995) (underinsured motorist coverage did not apply when insured struck by uninsured motorist and policy clearly distinguished between the two kinds of coverage); State Farm Mut. Auto. Ins. Co. v. Thomas, 316 Ark. 345, 871 S.W.2d 571 (1994) (upholding underinsurance policy requirement that limits of tortfeasor's liability insurance are to be “used up” before underinsurance coverage applied). Thus, the obligation to pay underinsured motorist benefits does not arise until it is established that the tortfeasor was indeed underinsured, a determination which “necessarily entails knowing the extent of the insured's damages and the liability benefits that have been paid by the tortfeasor's carrier.” Hartford Ins. Co. of Midwest v. Mullinax, 336 Ark. 335, 341, 984 S.W.2d 812, 815 (1999). In addition, “the limits of the liability coverage from the tortfeasors must be paid in full before the insured is entitled to underinsurance benefits.” Id. (citing Birchfield v. Nationwide Ins., 317 Ark. 38, 875 S.W.2d 502 (1994) (upholding underinsurance policy provision requiring “exhaustion by payments” of all other liability insurance)).

Although the Civil Justice Reform Act of 2003 did away with joint liability in personal injury, medical injury, property damage and wrongful death cases (Ark. Code Ann. § 16-55-201(a)), it did not amend the underinsured motorist statute's requirement that the limits of the liability coverage be exhausted before the insured is entitled to underinsurance benefits. Accordingly, Birchfield is still controlling. Corn v. Farmers Ins. Co., 2013 Ark. 444, 6–9. The court, however, “strongly encourage[d]” the General Assembly to revisit the underinsured motorist statute and the joint-and-several-liability modification statute to address whether, given the modification of joint and several liability, it is unreasonable to require exhaustion of all liability policies in a multiple-tortfeasor case before underinsured motorist coverage is triggered, and to address other issues likely to evolve. Id. at 8–9.

Section 23-89-209 provides for “add-on” benefits rather than “difference-of-limits” benefits. American Cas. Co. of Reading, Pa. v. Mason, 312 Ark. 166, 848 S.W.2d 392 (1993); Henderson v. Universal Underwriters Ins. Co., 768 F. Supp. 688 (E.D. Ark. 1991). The Arkansas Supreme Court has interpreted a policy requirement that the insured be “legally entitled to recover” from an uninsured motorist to require only a showing of fault by the uninsured motorist, Hettel v. Rye, 251 Ark. 868, 475 S.W.2d 536 (1972) (dismissal of claim against estate of uninsured motorist for failure to file copy of complaint in probate proceedings did not preclude uninsured motorist coverage); and the Arkansas Court of Appeals has applied the Hettel reasoning to underinsured motorist coverage. Southern Farm Bureau Cas. Ins. Co. v. Pettie, 54 Ark. App. 79, 924 S.W.2d 828 (1996) (neither exclusive remedy doctrine of workers' compensation law nor expiration of limitations period in favor of underinsured motorist prevented insured employee from being “legally entitled to recover” from underinsured motorist).

Stacking of underinsured motorist coverage is not prohibited by the statute but may be precluded by an applicable anti-stacking clause in the policy, and the court has upheld such exclusions. E.g., Chamberlin v. State Farm Mut. Auto. Ins. Co., 343 Ark. 392, 36 S.W.3d 281 (2001); Smith v. Prudential Property and Cas. Ins. Co., 340 Ark. 335, 10 S.W.3d 846 (2000); Clampit v. State Farm Mut. Auto. Ins. Co., 309 Ark. 107, 828 S.W.2d 593 (1992); Shelter Mut. Ins. Co. v. Williams, 69 Ark. App. 35, 9 S.W.3d 545 (2000); Kanning v. Allstate Ins. Companies, 67 Ark. App. 135, 992 S.W.2d 831 (1999).

Underinsurance coverage up to the minimum statutory amount ($25,000 under Ark. Code Ann. § 27-19-605) will be implied if the insurer fails to obtain written rejection of the coverage as required by Ark. Code Ann. § 23-89-209(a)(1); and, if the insured has more than one car insured under the same policy, the insured will be allowed to “stack” such implied minimum coverage with respect to each vehicle if such stacking is not precluded by the policy. Ross v. United Services Auto. Ass'n, 320 Ark. 604, 899 S.W.2d 53 (1995) (anti-stacking provision in question precluded stacking of policies, but not stacking of vehicles within the policy).

A policy requirement that the injury was “caused by an accident arising out of the operation, maintenance or use of an underinsured motor vehicle” was held to require neither “but for” nor proximate causation, at least when the injury was inflicted by the underinsured vehicle itself. Hisaw v. State Farm Mut. Auto. Ins. Co., 353 Ark. 668, 122 S.W.3d 1 (2003) (injury caused when door of underinsured motor vehicle, which had previously run off the road, swung shut and struck fire chief as he was inspecting vehicle). The term “use” was held to be ambiguous, presenting a jury question on that issue as well as the issue of causation.