Insurer that Fails to Tender Settlement Promptly Must be Penalized

Statutory Penalties Must be Based on Evidence

Without Sufficient Evidence Penalty Assessment was Wrongful

Post 5114

When an appeal involved issues concerning the statutory penalties that apply to an insurer who knowingly or arbitrarily fails to pay a settlement to a third-party claimant within 30 days after a settlement agreement is reduced to writing The plaintiff, James Bridges, Sr., settled his claims arising from an automobile accident for $450,000. The trial court found that the settlement amount was not paid timely and applied La. R.S. 22:1892 to the penalty claim, imposing a penalty of $225,000 on one of the insurance company defendants. The insurers appealed.

In James Bridges, SS. v. Chubb Indemnity Insurance Company, Ace American Insurance Company, Southeast Louisiana Flood Protection Authority-East, East Jefferson Levee District, Deidrick Green, And Government Employees Insurance (In Its Capacity As Uninsured/Underinsured Motorist Carrier, No. 24-CA-593, Court of Appeals of Louisiana, Fifth Circuit (July 2, 2025) dealt with, what appeared to be an excessive penalty for failing to deliver payment within 30 days of settlement.

Defendants' Appeal

The defendants appealed the judgment, raising five assignments of error concerning the amount of the penalty and the sufficiency of the plaintiff's proof.

Factual and Procedural Background

James Bridges alleged that he was injured in an automobile accident caused by Deidrick Green's negligence. Bridges settled his claims with Green, Green's employer, and their alleged liability insurers for $450,000. The settlement agreement required payment within 30 days of defendants' receipt of signed release and final payment letter from CMS. He did not assert a claim for any damages sustained as a result of the late payment of the settlement funds.

Trial Court Ruling

The trial court found that Plaintiff had met that burden for several reasons, all of which are clearly based on "facts" presented solely in the supporting and opposing memoranda or in argument of counsel. The trial court found that the failure to pay the settlement timely was arbitrary, capricious, or without probable cause and imposed a penalty of $225,000. The "facts," which were not presented in the form of competent evidence caused the trial court to conclude that the delay could easily have been avoided, therefore it was not justified or reasonable and issued a judgment against Chubb for penalties of $225,000, or half of the total settlement amount, and $1,500 in attorney fees.

Trial Court Findings on Burden and Elements of Proof

The only evidence that was submitted at the penalty hearing was Bridges' evidence proving that the conditions of the Settlement Agreement were met. Bridges did not introduce any evidence proving that the settlement payment was untimely or that the delay was arbitrary, capricious, or without probable cause.

Lack of Evidence in this Record

Here, the trial court found that Bridges met his burden of proving that the settlement payment was untimely because "there was no dispute that there was no payment made within thirty days" after it became due. However, the record did not support the trial court's conclusions that Bridges met his burden of proving facts establishing his entitlement to a penalty under § 1892.

Scope of Insurer's Duty under § 1892(A)(2)

When the settlement includes property damage and medical expense claims along with other types of damage claims, as it did here, the amount of a penalty awarded under § 1892 may not exceed fifty percent of the amount of the settlement attributable to the property damage and reasonable medical expense claims, or $1,000, whichever is greater.

Analysis and Conclusion

The appellate court concluded that the trial court's broader interpretation of the statute was contrary to the statute and the Louisiana Supreme Court's directives.

Therefore, the trial court was ordered to render its decision based on the evidence properly before it for consideration and the interpretation of the penalty provisions in § 1892 set forth in the appellate decision.

ZALMA OPINION

There is usually no logical reason for an insurer to fail to pay an agreed upon settlement in more than 30 days from the settlement. For reasons never brought to the trial court or the appellate court, Chubb failed and by statute must be penalized for that failure. The trial court assessed an excessive penalty based on a lack of evidence from the parties so the trial court must reconsider based on actual evidence.

(c) 2025 Barry Zalma & ClaimSchool, Inc.

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