# An Arizona Insurer Owes No Duty to Pay the "Undisputed Amount" of a UM or UIM Claim *Published:* 2017-12-11 *Author:* Glenn Jimerson Although the Arizona Court of Appeals resolved this issue 20 years ago, I frequently see insureds’ counsel argue that an insurer must pay the “undisputed amount” of a UM or [UIM claim](/news-publications/az-stacking-uim-coverage)—and I just saw this argument last week—so this post is a refresher. The Holding ----------- In *Voland v. Farmers Ins. Co. of Arizona*, 189 Ariz. 448, 453, 943 P.2d 808, 813 (App. 1997), the Arizona Court of Appeals held “the [implied covenant of good faith and fair dealing](/news-publications/the-implied-covenant-of-good-faith-and-fair-dealing) does not require a UM carrier to pay in advance (that is, before the insured executes a release or obtains an arbitration award) the amount of an unaccepted settlement offer which fully covers all aspects of a UM claim (including special and general damages).” The Takeaway ------------ In Arizona, the duty of good faith and fair dealing **does not require** an insurer to pay the “undisputed amount” of a UM or UIM claim. The Rationale ------------- The Arizona Court of Appeals rejected an insured’s argument that an insurer committed [bad faith](/news-publications/continuing-bad-faith-theory-of-liability-or-rule-of-evidence) by failing to pay the “undisputed amount” of a UM claim—even when the insurer’s written settlement offer stated the offered amount was the “‘fair value’ of her claim”—for three primary reasons. First, a settlement offer is simply an insurer’s evaluation of a claim, at a single point in time, based on the information known to date—not the minimum amount an insurer’s adjuster has evaluated as being owed to an insured. *Voland*, 180 Ariz. at 451, 943 P.2d 808, 812. A settlement offer is “simply a proposal to compromise and resolve \[a\] claim, nothing more and nothing less. It represent\[s\] the carrier’s evaluation or best estimate, at that point in time, of what the trier \[of fact\] might award.” Second, a requirement to tender the amount of any settlement offer would chill settlement negotiations of UM claims. “The \[insurer’s\] settlement offer did not bind \[it\] if, as it turned out, the claim could not be settled and had to be arbitrated. Nor did it set a ‘floor’ on what the arbitrators had to award or what the \[insurer\] ultimately would have to pay.” *Id*. The Court of Appeals noted that, otherwise, insurers “would have little if any incentive to settle,” imposing a requirement to pay the undisputed amount “would have a chilling effect on genuine settlement evaluations and negotiations,” and such a requirement would “deter settlement and foster litigation.” *Id*. Third, personal injury claims are different from property claims — in which an insurer is obligated to pay the undisputed amount — because “a personal injury claim is unique and generally not divisible or susceptible to relatively precise evaluation or calculation.” *Id*. Personal injury claims are “inherently flexible and subject to differing and potentially changing evaluations based on various factors.” *Id*. at 452, 453, 943 P.2d 808, 812, 813. *“In short, evaluating personal injury claims, and particularly the ‘general damage’ component, is far from an exact science. Oftentimes it is no more precise or predictable than throwing darts at a board.”* *Id*. at 453, 943 P.2d at 808, 813. The Voland Rationale Also Applies to UIM Claims ------------------------------------------------ Although *Voland* involved a UM claim, the *Voland* rationale applies to “personal injury claims” and was not limited to UM claims. *See Voland*, 180 Ariz. at 453, 943 P.2d 808, 813. Of course, UIM claims are also “personal injury claims.” Accordingly, Arizona cases have applied *Voland* to UIM claims. *See Daly v. Royal Ins. Co. of Am.*, 2002 WL 1768887 \*12 (D. Ariz. July 17, 2002) (applying *Voland* to a UIM claim and “find\[ing\] that the decisions in *Borland* and *Filasky* \[which require payment of the undisputed amount of a property claim\] are not controlling.”) ; *Young v. Allstate Ins. Co.*, 296 F. Supp. 2d 1111, 1118 (D. Ariz. 2003) (“in light of the acknowledged challenges surrounding the valuation of claims for personal injury, the Court finds that the decisions in *Borland* and *Filasky* are not controlling” in a UIM claim context). If you would like additional information regarding punitive damages in Arizona insurance bad faith cases, please contact Nate Meyer at 602.248.1032 or This and other posts can be found at my [Arizona Bad Faith Law Blog](http://arizonabadfaithblawg.com/).