It Doesn’t Pay to Seek Penalties Not Owed

States, like Louisiana, have enacted statutes requiring insurers to pay an agreed claim immediately but no later than 30 days from the date of the agreement. In Louisiana a court can assess a penalty even if the payment is made 34 days after the settlement agreement. However, to get the penalty it is necessary that the statute be read strictly and there must be evidence to establish the date of the written agreement.

FACTUAL BACKGROUND

The plaintiffs in this automobile accident suit settled with the plaintiff/car owner’s uninsured motorist insurer. After the insurer allegedly failed to remit the settlement funds within thirty days, the plain- tiffs filed a motion for penalties. The trial court granted the motion and imposed a $5,000.00 penalty. The insurer appealed.

The underlying claims in this matter arise from an automobile accident. The plaintiffs’ vehicle was driven by Tony Barnes and owned by Shirley Cross, who was also a passenger. In addition to Mr. Barnes and Ms. Cross, Keshela Woodland, Destiny Woodland, Kimberly Miles, Antonio Barnes, Jazalyn Miles, and Ja’Kayshia Miles were all passengers in the plaintiffs’ vehicle. The defendant’s vehicle was driven by Reata West. According to the record, it was eventually determined that the only applicable insurance coverage was Ms. Cross’ uninsured motorist cover- age, which was issued by Safeway Insurance Company of Louisiana.

All eight settled with Safeway for the policy limits. However, the plaintiffs alleged that Safeway failed to fund the settlement within thirty days of the date that the agreement was put into writing, and that Safeway is liable for penalties pursuant to a Louisiana statute. Neither the plaintiffs nor Safeway agree on the date that the settlement agreement was put into writing. The trial court found that the agreement was effective March 18, 2013, and that Safeway acquiesced to that date. Accordingly, the trial court found that Safeway paid the settlement thirty-four days after the settlement agreement was reduced to writing. Having made that determination, the trial court assessed a penalty of $5,000.00 against Safeway.

ANALYSIS

Because it is penal in nature, the statute is strictly construed. When a party seeks penalties as a result of an insurer’s failure to pay a settlement within thirty days, the party need not prove that the insurer was “arbitrary, capricious, or without probable cause” in failing to pay the settlement. Instead, the party need only show that the insurer’s failure was “knowingly committed.”

The plaintiffs assert that a settlement was reached and put into writing on March 18, 2013. Safeway objects to this date and contends that the settlement was put into writing on April 5, 2013. It is undisputed that Safeway did not tender the settlement funds until April 22, 2013. If the settlement was put into writing on March 18, 2013, Safeway’s payment was untimely. However, if it was put into writing on April 5, 2013, the payment was within the thirty-day time period, and Safeway would not be liable for penalties under that provision.

On March 18, 2013, the plaintiffs’ attorney, Howell D. Jones, IV, sent a letter to Safeway’s attorney, Simone Dupre, which stated: “This will confirm that we have settled the above referenced matter for $30,000 under Shirley Cross’ UM and for $3137.00 for Ms. Cross’ property damage. Please for- ward payment and settlement documents to me at your earliest convenience.”Ms. Dupre sent Mr. Jones an email on March 28, 2013, which referenced an attached let- ter. However, the attachment, which was a letter from Ms. Dupre to Mr. Jones dated March 28, 2013, was missing from Ms. Dupre’s March 28 email. We note that although the letter indicates that it was sent via facsimile to Mr. Jones, it is unclear from the record before us if that is indeed the case. In any event, the record reveals that Ms. Dupre emailed the letter to Mr. Jones on April 1, 2013. The March 28 letter stated, in part: “This will confirm that on March 20, 2013, you and your clients agreed to accept our policy limits of $30,000.00, plus costs, and in exchange will agree to dismiss all claims of your clients’ against Safeway, with prejudice. In addition, this will confirm that Shirley Cross agrees to accept $3,137.00 (this amount is after deducting the $250.00 deductible) for payment of her property damage claims and will also dismiss her claim for property damage against Safeway, with prejudice. In addition, as discussed, since there seem to be Medicaid and/or medical liens asserted against all or most of your clients, this will confirm that you and your client agree to indemnify and hold harmless Safeway from and for any demands for payment of those liens that are related to treatment received for the subject accident. In exchange for this agreement, Safeway will agree to issue the settlement funds directly to you and your clients, and will not list the lienholders on the check.”

The parties do not dispute that a com- promise had been reached, only the date that the agreement was put into writing. The trial court found that the parties’ correspondence reflects a meeting of the minds on March 18, 2013, i.e., the date of Mr. Jones’ initial correspondence and that mentioned in Ms. Dupre’s email of April 5, 2013. The appellate court concluded that the trial court erred in so finding.

Although there is no requirement that a compromise be contained in one writing, a letter written by one party memorializing their understanding of an oral agreement is insufficient to satisfy the “in writing” requirement. Mr. Jones’ March 18 letter is unquestionably such a one-party letter. The earliest date at which multiple writings could be read together such that they would constitute a compromise is March 28, 2013, the date of Ms. Dupre’s confirmatory letter.

Moreover, we are cognizant that there must not only be an agreement to settle a dispute or uncertainty, but that the agreement must be in writing. Thus, for the purposes of invoking the statute the appellate court concluded that any purported acquiescence to a March 18, 2013 settlement date was contrary to law because, although the agreement may have existed on that date, there was no writing at that time as required by statute.

The order was reversed and the costs were imposed on the plaintiffs.

ZALMA OPINION

Penalties should only be assessed in this type of case where eight people had to share in what was left of a $30,000 settlement after the attorney takes his cut, if there is clear evidence that there was a written agreement of settlement. A one- sided letter acknowledging an oral agreement is not enough. In this case the one- sided letter did not cover the entire agreement which required the supplemental letter from the adjuster that together made a single agreement. Greed-seeking penalties that were not appropriate cost the parties plaintiff the costs incurred by the insurer and a loss of the penalty assessed. That the case went to court and then the court of appeal over $5,000 is amazing.