By Michael McCarty Harrison (Originally published by Arkansas Lawyer, Spring 2020)
Many Arkansas attorneys have an active bodily injury practice. Often, their clients’ claims arise as a result of motor vehicle accidents. Though Arkansas requires all vehicles operating on its public roadways to carry liability coverage of a minimum limit, not all vehicle owners do so, for a variety of reasons. Further, even if the tortfeasor has liability coverage, his or her liability policy limits may not be sufficient to satisfy all damages incurred by the injured party. Or, though the tortfeasor has a liability policy, there may be coverage exclusions applicable, such that the tortfeasor’s liability carrier denies coverage. In instances such as these, coverage may be available under the injured party’s own liability policy, assuming he or she carries uninsured or underinsured motorist coverage. Questions necessarily arise, on both sides, with regard to such coverages and the extent and applicability thereof. As most attorneys’ practices are not solely devoted to auto injury law and most insurance carriers no longer have claims adjusters physically located in Arkansas and/or that only handle Arkansas claims, the attorneys and claims adjusters may not be familiar with the specific nuances of Arkansas law as it pertains to uninsured and underinsured motorist liability coverage. This article is intended to address the more common questions raised, by both sides, concerning underinsured and uninsured motorist coverage in Arkansas.
1. Is uninsured motorist (UM) coverage mandatory or discretionary?
Uninsured motorist bodily injury coverage is mandatory, but the insured can reject it in
writing. Arkansas Code Annotated, § 23-89-403(a) states “[n]o automobile liability insurance
covering liability arising out of the ownership, maintenance, or use of any motor vehicle shall
be delivered or issued for delivery in this state with respect to any motor vehicle registered or
principally garaged in this state unless coverage is provided therein or supplemental thereto ...
[h]owever, the coverage required to be provided under this section shall not be applicable when
any insured named in the policy has rejected the coverage in writing[.]”
2. Is underinsured motorist (UIM) coverage mandatory or discretionary?
Underinsured motorist coverage is mandatory, but the insured can reject it in writing. Arkansas Code Annotated, § 23-89-209(a) states “[n]o private passenger automobile liability insurance covering liability arising out of the ownership, maintenance, or use of any motor vehicles
in this state shall be delivered or issued in this state ... unless the insured has the opportunity,
which he or she may reject in writing, to purchase underinsured motorist coverage.”
3. Is uninsured motorist property damage (“UMPD”) coverage mandatory or discretionary?
Uninsured motorist property damage coverage is mandatory, but the insured can reject in it
writing. Arkansas Code Annotated § 23-89-404 states “[e]very insured purchasing uninsured
motorist bodily injury coverage shall be provided an opportunity to include uninsured motorist
property damage coverage” which need not be offered “[a]fter the uninsured motorist property
damage coverage has been made available to an insured one (1) time and has been rejected in writing . . . unless the insured makes a written
request for the coverage.”
4. Is uninsured motorist “economic only”
(“UMEO”) coverage mandatory or discretionary?
There are no Arkansas statutes or case law
discussing uninsured motorist “economic
5. Must the UM or UIM limits match the
liability limits for “bodily injury?”
minimum UM or UIM limits?
Yes. Uninsured bodily injury and underinsured motorist benefits limits must be offered by the carrier in an amount that is not
less than the limits prescribed in Ark. Code
Ann. § 27-19-605 ($25,000 per person liability limits). Additionally, in the context of
uninsured bodily injury coverage, “[s]hould a
named insured or applicant purchase third party liability coverage in greater limits than
the minimum provided in Ark. Code Ann.
§ 27-19-605, the insurer shall have available
and the agent shall offer a named insured or
applicant coverage required under this section in limits up to his or her third-party liability limits.” See Ark. Code Ann. §§ 23-89-
209(a)(4) & 23-89-403(a)(l) & (3).
6. Must the UMPD limits match the liability limits for “property damage”?
there minimum UMPD limits?
Yes. Ark. Code Ann. § 23-89-404(b) states
“[n]o insurer shall be required to offer limits
of uninsured motorist property damage coverage greater in amount than the property damage liability limits purchased by the insured.”
7. Are there minimum limits for UMEO
There are no Arkansas statutes or case law
discussing uninsured motorists “economic
8. Are there minimum limits for other
UM coverages that are mandatory or discretionary Arkansas?
When is Coverage Available?
9. Under what circumstances is UM coverage available?
What conditions precedent
must the insured satisfy? What coverage defenses can the insurer assert?
Uninsured motorist coverage is available “for the protection of persons insured
thereunder who are legally entitled to recover damages from owners or operators of
uninsured motor vehicles because of bodily
injury, sickness, or disease, including death,
resulting therefrom.” Ark. Code Ann. § 23-
89-403(a)(l). Uninsured motorist coverage
applies when the accident in question involves the operator of another vehicle, which
is uninsured. Williams v. Shelter Mut. Ins. Co.,
315 Ark. 701, 870 S.W.2d 387 (1994). Arkansas courts have upheld policy provisions
requiring physical contact with the uninsured
vehicle, in order to avoid false “hit and run”
claims. Ward v. Consolidated Underwriters, 259·Ark. 696, 535 S.W.2d 830 (1976);
Southern Farm Bureau Cas. Ins. Co. v. Fields,
262 Ark. 144, 553 S.W.2d 278 (1977).
10. Under what circumstances is UIM
What conditions precedent must the insured satisfy? What coverage defenses can the insurer assert?
Underinsured motorist coverage “shall
enable the insured or the insured’s legal representative to recover from the insurer the amount of damages for bodily injuries to or
death of an insured which the insured is legally entitled to recover from the owner or operator of another motor vehicle whenever the
liability insurance limits of the other owner
or operator are less than the amount of the
damages incurred by the insured.” Ark. Code
Ann. § 23-89-209(a)(3). The obligation to
pay underinsured motorist benefits is not
triggered until it is determined whether the
tortfeasor is, in fact, underinsured. Hartford
Ins. Co. of the Midwest v. Mullinax, 336 Ark.
335, 984 S.W.2d 812, 815 (1999) (citing
Shepherd v. State Auto Prop. & Cas. Ins. Co.,
312 Ark. 502, 850 S.W.2d 324 (1993)). To
make this determination, the underinsured
motorist carrier must know the extent of the
insured’s damages and the liability benefits
that have been paid to the insured by the tortfeasor’s carrier. Ark. Code Ann. § 23-89-209;
Mullinax, 984 S.W.2d at 815 (citing State
Farm Mut. Auto. Ins. Co. v. Thomas, 316 Ark.
345, 871 S.W.2d 571 (1994)). The limits of
liability coverage from all tortfeasors must be
paid, in full, before the insured is entitled to
underinsurance benefits. Birchfield v. Nationwide Ins., 317 Ark. 38, 875 S.W.2d 502, 504
(1994) (applying Ark. Code Ann. § 23-89-
11. Under what circumstances is UMPD
What conditions precedent must the insured satisfy? What coverage defenses can the insurer assert?
Uninsured motorist property damage coverage is applicable to losses in excess of $200,
except the $200 deductible does not apply
when the vehicle involved in the accident is
insured by the same company for both collision and uninsured motorist property damage coverage and the driver of the uninsured
vehicle has been positively identified and is
solely at fault for the damage to the vehicle.
Ark. Code Ann. § 23-89-404(a). Uninsured
motorist property damage coverage requires
an accident involving an operator of another
vehicle and does not apply to one vehicle accidents only. Pardon v. So. Farm Bureau Cas.
Ins. Co., 315 Ark. 537, 539, 868 S.W.2d 468,
469 (1994). Arkansas courts have upheld
policy provisions requiring physical contact
with the uninsured vehicle to avoid false “hit
and run” claims. Pardon, 868 S.W.2d at 469.
12. Under what circumstances is UMEO
There are no Arkansas statutes or case law
discussing uninsured motorist “economic
13. Under what circumstances is coverage
available under other UM coverages?
There are no other uninsured motorist
coverages recognized by Arkansas law.
Arbitrating and Litigating Disputes
14. Is arbitration of UM and/or UIM
claims allowed, or specifically prohibited?
UIM? UMPD? UMEO?
Insurers are specifically prohibited from
requiring arbitration or mediation. Arkansas Code Annotated § 23-79-203 states “[n]
o insurance policy or annuity contract shall
contain any condition, provision, or agreement which directly or indirectly deprives
the insured or beneficiary of the right to trial
by jury on any question of fact arising under
the policy or contract” and further states “[a]
ll such provisions, conditions, or agreements
shall be void.” However, the insurer and insured may, voluntarily and by mutual agreement, submit an uninsured or underinsured
motorist claim to arbitration and/or mediation. Ins. Co. of N. Am. v. Kempner, 132 Ark.
215, 200 S.W. 986 (1918). They may further
agree to proceed to trial with a binding high/
low agreement in place, such that both parties know, at the onset of trial, the minimum
and maximum amounts the insured may
receive as well as the minimum and maximum amounts the insurance carrier may be
required to pay.
15. What requirements must an insured claimant satisfy in order to file suit against
an insurer for UM or UIM coverage?
There are no special requirements under
Arkansas law. Further, in an underinsured
situation, the insured may name the insurer
as a defendant in a suit along with the tortfeasor underinsured driver even if the insured
has not yet settled the underlying bodily injury claim against the tortfeasor underinsured
driver. Prior to trial, the underinsured motorist carrier has the option of electing to proceed to trial as a participating defendant, in
which instance the jury will be aware of both
the underlying liability and the underinsured
motorist policies, and their limits, or it may
elect to agree to be bound by the verdict rendered at trial, not participate in the trial and,
thereby, prevent the jury from being aware of
either policy or the limits thereof. Brinker v.
Forrest City Sch. Dist. No. 7, 344 Ark. 171, 40
S.W.3d 265 (2001). Traditionally, most carriers elect to be bound by the verdict so as
not to interject insurance coverage into the
trial, and typically do so on the eve of trial so
that they may still participate in all discovery
conducted prior thereto.
16. What is the statute of limitations for
bringing a UM or UIM claim?
Arkansas has a five-year statute of limitations for both uninsured and underinsured
claims. Ark. Code Ann. § 23-79-202; Ark.
Code Ann. § 16-56-111; See, Shelter Mut. Ins.
Co. v. Nash, 357 Ark. 581, 587, 184 S.W.3d
425, 428 (2004) (holding an insured’s suit
against his/her insurer for underinsured motorist benefits is clearly an action by an insured against the insurer to recover a claim
arising under a policy of insurance, thus the
five-year statute of limitations applies). The
statute of limitations begins to run on uninsured motorist claims from the date of the accident, but the statute of limitations begins
to run on underinsured motorist claims from
the date of settlement with the tortfeasor’s
carrier. Shelter Mut. Ins. Co., 357 Ark. at 591,
184 S.W.3d at 430 (holding Arkansas law is
clear that no breach-of-contract cause of action accrues until the contract is breached or
repudiated, thus, the statute of limitations
does not begin to run until the moment the
contract is breached and the right to commence an action comes into existence). Because underinsured motorist benefits are not
available until it is apparent that the tortfeasor’s coverage is insufficient to compensate the insured, the Arkansas Supreme Court
rejects the view that the statute of limitations
for underinsured motorists claims begins to
run when the accident occurs. Id. at 590, 184
S.W.3d at 430.
Final Amounts Paid or Awarded
17. Can offsets against the UM, UIM,
UMPD, UMEO or other UM coverage limits be taken?
The Arkansas’ underinsured motorist
statute, Ark. Code Ann. § 23-89-209(a)(5),
states offsets are not allowed: “Coverage of
the insured pursuant to underinsured motorist coverage shall not be reduced by the
tortfeasor [underinsured driver’s] insurance
coverage except to the extent that the injured
party would receive compensation in excess
of his or her damages.” The Arkansas Court
of Appeals has explained “[t]he amount of
the tortfeasor’s coverage has no effect on the
[insured’s] recovery under UIM coverage except that the [insured] cannot be reimbursed
twice for the same damages.” Southern Farm
Bureau Cas. Ins. Co. v. Pettie, 54 Ark. App.
79, 924 S.W.2d 828 (1996). In holding that
an offset for medical payments was prohibited, the Arkansas Supreme Court stated that
“[p]ermitting offsets of any type would allow
insurers, by contract, to alter the provisions
of the statute and to escape all or part of the
liability, which the Legislature intended they
should provide.” State Farm Mut. Auto. Ins.
Co. v. Sims, 288 Ark. 541, 545, 708 S.W.2d
72, 74 (1986). In essence, as the insured paid
for two coverages, medical payments and underinsured motorist, he is entitled to both.
An insurer cannot offset payments made to
its insured under one coverage for another.
Gause v. Shelter Gen. Ins. Co., 81 Ark. App.
133, 135, 98 S.W.3d 854, 855 (2003).
18. Can the insurer take offsets for medical payments, workers’ compensation or
no-fault insurance? Are any other offsets allowed in the state?
A liability policy provision stating an insurer shall not be obligated, under the uninsured motorist coverage provision, to pay for
the damages the insured may be entitled to
recover from the uninsured vehicle operator
relating to expenses for medical services paid
or payable under the medical payments coverage of the policy is void and against public
policy. Heiss v. Aetna Cas. & Sur. Co., 250 Ark.
474, 479, 465 S.W.2d 699, 701 (1971). An insurance company cannot set off one payment under its policy for another one under
the same policy. Gause v. Shelter Gen. Ins. Co.,
81 Ark. App. 133, 135, 98 S.W.3d 854, 855
(2003). The amount of recovery under the
uninsured motorist provisions of a liability
policy cannot be reduced by the amount the
injured party receives under workers’ compensation coverage where the setoff provision
reduces the limit of liability under the uninsured motorist coverage. Travelers Ins. Co. v.
National Farmers Union Property & Casualty
Co., 252 Ark. 624, 480 S.W. 2d 585 (1972).
In Shepherd v. State Auto Prop. & Cas. Ins. Co.,
312 Ark. 502, 850 S.W.2d 324 (1993), the
Arkansas Supreme Court extended the decision in Travelers Ins. Co. v. National Farmers Union Property and Casualty Company to
underinsured motorist benefits. However, in
Shelter Ins. Co. v. Bough, 310 Ark. 21, 834
S.W.2d 637 (1992), the Arkansas Supreme
Court approved offsets for medical benefits
and wage loss payments against a judgment
for underinsured motorist benefits because
the insurer is not precluded from employing
its right of subrogation when the insured has
been fully compensated and is in a position
where the insured will recover twice for some
of his or her damages. In other words, the
court enforced the “made whole doctrine,”
following a finding the insured had been
made whole by the judgment, and allowed an
offset to occur.
19. What liens, if any, can be asserted
against the insured’s recovery of UM? UIM?
UMPD? UMEO? Other uninsured coverages?
Hospital liens can be asserted against underinsured motorist benefits. Stuttgart Reg.
Med. Ctr. v. Cox, 343 Ark. 209, 33 S.W.3d
142 (2000). Further, per the Medical, Nursing, Hospital, and Ambulance Service Lien
Act, codified at Ark. Code Ann. §§ 18-46-
101, et seq., they can be asserted against uninsured motorist benefits as well. Ark. Code
Ann. § 18-46-104.
Medicaid liens can also be asserted against
uninsured and underinsured motorist benefits. “As a condition of eligibility, every Medicaid applicant shall automatically assign his
or her right to any settlement, judgment, or
award which may be obtained against any
third party to the Department of Human
Services to the full extent of any amount
which may be paid by Medicaid for the benefit of the applicant.” Ark. Code Ann. § 20-
77-307(a); Ark. Dep’t of Health & Human
Servs. v. Ahlborn, 547 U.S. 268, 126 S. Ct.
1752, 164 L. Ed. 2d 459 (2006).
Medicare liens too can be asserted against
uninsured and underinsured motorist benefits. Although Medicare is a secondary payer
system, when another insurer is responsible
for providing primary coverage Medicare will
make conditional payment if a primary liability insurer has not made or cannot reasonably
be expected to make payment promptly. 42
U.S.C. § 1395y(b)(2)(B)(i). Medicare may
seek reimbursement from the primary plan
or any entity receiving payment from a primary plan if the primary plan had responsibility to make the payment. 42 U.S.C. §
1395y(b)(2)(B)(ii). Responsibility for reimbursing Medicare may be demonstrated by
a judgment, a payment conditioned upon
the recipient’s compromise, waiver, or release
(whether or not there is a determination of
admission of liability), of payment for items
or services included in a claim against the primary plan or the primary plan’s insured, or
by other means. Enforcement of a primary
plan’s payment of reimbursement obligation
may be made by a direct cause of action by
the government; a subrogation claim brought
by the government; and by a private cause of
action. 42 U.S.C. § 1395y(b)(2)(B)(iii) &
(iv). If the Medicare beneficiary on whose behalf a conditional payment is made has a tort
claim, Medicare may seek reimbursement
from the insurance carrier, but only after, and
to the extent that, such carrier’s liability under the insurance policy for the services has
been determined. Stalley ex rel. United States
v. Catholic Health Initiatives, 458 F. Supp. 2d
958, 960-61 (E.D. Ark. 2006).
Additionally, child support liens may be
asserted against uninsured and underinsured
motorist benefits. “In all decrees or orders
that provide for the payment of money for the
support and care of any children, the court
shall include a provision directing a payor to
deduct from . . . [a]ny lump-sum payment
as defined in § 9-14-201, the full amount
of past due support owed by the noncustodial parent not to exceed fifty percent (50%)
of the net lump-sum payment.” Ark. Code
Ann. § 9-14-218(a)(1)(B). “Lump-sum payment” means any . . . [p]ayment regardless of
frequency that is dependent upon meeting a
condition precedent, including without limitation . . . [t]he settlement of a claim.” Ark.
Code Ann. § 9-14-201(5)(B)(iv).
20. Can different limits be stacked? If yes,
which limits? Does a specific procedure apply?
Arkansas’ uninsured and underinsured
motorist statutes do not prohibit stacking
of coverages. However, stacking may be precluded by an appropriate anti-stacking clause
in the policy. Arkansas courts have always upheld such clauses so long as they are not ambiguous. Shelter Mut. Ins. Co. v. Williams, 69
Ark. App. 35, 9 S.W.3d 545 (2000); Sweeden
v. Farmers Ins Grp., 71 Ark. App. 381, 389,
30 S.W.3d 783, 788 (2000). However, the
Arkansas Supreme Court has determined
Ark. Code Ann. § 23-89-209 requires insurance carriers to offer, at a minimum, underinsured coverage for each vehicle owned by
the insured and to be insured by the carrier. If
the carrier fails to do so, and the insured has
more than one vehicle insured with the same
insurance carrier, the insured may stack the
minimum coverages that should have been
offered but were not, even though the policy
prohibits the stacking of policies and/or all
vehicles were not insured under the same policy. Ross v. United Servs. Auto. Ass’n, 320 Ark.
604, 610, 899 S.W.2d 53, 56 (1995).
21. In UIM claims, can the UIM insurer
substitute its settlement payment for the insured’s settlement with the tortfeasor underinsured driver’s liability insurer?
What is the
applicable procedure? What rights does the
UIM insurer then have?
Arkansas’s underinsured motorist statute,
codified at Ark. Code Ann. § 23-89-209,
provides a detailed procedure for handling
consent to settle with the tortfeasor and the
subrogation rights of the carrier. Subsections
(c) and (d) of the statute provide if a tentative
settlement agreement for the policy limits of
the tortfeasor underinsured driver’s liability
policy has been reached, the injured insured
must give written notice to the underinsured motorist carrier by certified mail and
request the carrier’s permission to settle the
underlying liability limits. The notice shall
include: written documentation of all pecuniary losses, a signed HIPAA authorization
for obtaining medical records and bills, written confirmation of the alleged tortfeasor’s
underinsured liability limits and the terms of
the proposed settlement. Within 30 days of receipt of the notice, the underinsured motorist carrier may either make payment to the
insured of the proposed settlement amount or
waive all of its rights of subrogation. If paid,
the underinsured motorist carrier is then entitled to subrogate the extent of the payments
to its insured’s right of recovery against the
tortfeasor underinsured driver. The benefits
to the underinsured motorist carrier to pursing this course of action are that it gives it
additional time to investigate the merits and
value of the underinsured motorist claim,
as well as leaves the tortfeasor underinsured
driver as the named defendant in the case
(assuming suit was fi led), as opposed to the
underinsured motorist carrier becoming the
named defendant in the case.
22. Does Arkansas recognize a cause of action for bad faith in the UM context? UIM?
Yes. Arkansas recognizes the tort of bad
faith against an insurer for misconduct in an
effort to avoid liability under an insurance
policy. Country Corner Food & Drug v. First
State Bank & Tr. Co., 332 Ark. 645, 655,
966 S.W.2d 894, 898 (1998) (citing Affiliated Foods Southwest, Inc. v. Moran, 322 Ark.
808, 912 S.W.2d 8 (1995); American Health
Care Providers, Inc. v. O’Brien, 318 Ark. 438,
886 S.W.2d 588 (1994); Quinn Cos. v. Herring Marathon Group, Inc., 299 Ark. 431, 773
S.W.2d 94 (1989); Aetna Casualty & Surety
Co. v. Broadway Arms Corp., 281 Ark. 128,
664 S.W.2d 463 (1983)).
23. What are the requirements for a prima
facie case of bad faith under Arkansas law?
A liability insurance carrier can be held accountable in tort for failure to settle a claim
within the policy limits. A claim based on
the tort of bad faith must include affirmative misconduct by the insurance carrier,
without a good faith defense; the misconduct
must be dishonest, malicious, or oppressive,
and in an attempt to avoid its liability under
the insurance policy. Such a claim cannot
be based upon a good faith denial, offers to
compromise a claim or for other honest errors of judgment by the insurer. Neither can
this type of claim be based upon mere negligence or bad judgment, so long as the insurer
is acting in good faith. In an action for bad
faith, actual malice is that state of mind under
which a person’s conduct is characterized by
hatred, ill will or a spirit of revenge. Actual
malice may be inferred from conduct and
surrounding circumstances. Am. Health Care
Providers v. O’Brien, 318 Ark. 438, 441–42,
886 S.W.2d 588, 590 (1994).
Though distinct from other areas of the
law, underinsured and uninsured motorist
coverage law in Arkansas is understandable
and fairly well developed. A review of the applicable policy, coupled with the applicable
statutory and case law should provide guidance to both attorneys and carriers as to what
coverages are applicable and in what circumstances.
Michael McCarty Harrison serves of counsel in the firm’s litigation practice group. She focuses her practice on insurance defense and coverage, products liability, medical malpractice, personal injury defense, transportation litigation, fire/arson investigation and defense and appellate advocacy.
Disclaimer: The information included here is provided for general informational purposes only and should not be a substitute for legal advice nor is it intended to be a substitute for legal counsel. For more information or if you have further questions, please contact one of our Attorneys.