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USAA penalized for unreasonable delay in paying no fault PIP medical benefits

USAA, the company that advertises its "special relationship" with military families and claims to provide them with enhanced service, was penalized again this week for unreasonably delaying payment of no fault personal injury protection (PIP) benefits.  The insured, Rana Reyes, who suffered from depression, became distressed in 2008 when her boyfriend changed his Facebook status to "single."  She accompanied the love interest to the bar, where she became intoxicated and highly emotional.  As they were driving home from the bar, she became angry when her companion would not reciprocate her expressions of love and announced she was leaving the car. She opened the door and fell out at 35-40 miles per hour.  Her head was struck by the rear passenger wheel, causing a severe head injury.

The No Fault Act allows insurers to avoid paying PIP benefits to anyone who intentionally causes injury to him or herself.  The cases require, however, that the insurer show that the injury--and not simply the action causing injury--was intentional.  USAA declined to pay PIP benefits to Reyes' family or Spectrum Health because it was investigating whether she intended to commit suicide. They sued and in the meantime, the military health carrier, Tricare, paid limited, partial benefits on a conditional basis.

Although no further evidence was elicited supporting an intent to commit suicide or injury, USAA delayed paying PIP benefits for a number of months. Finally, it agreed that benefits were due, but objected to paying punitive (12%) simple interest or attorneys fees. The Court of Appeals upheld the trial judge's grant of both.  It noted that whenever PIP benefits are paid late--regardless of the reason, 12% interest is due by statute.  It further noted that the trial judge had provided sound justification for his decision to award attorneys fees that are payable only where the insurer has acted unreasonably to delay payment.

The Court pointed out that USAA never explained what evidence of intentionality it hoped to find, nor did it explain any inference of intentionally-suffered injury that caused it to delay payment.  Finally, the Court noted that USAA delayed for months before deposing witnesses with knowledge of Reyes' mental condition and intentions before agreeing that benefits were due.  Under the circumstances, the court concluded, the trial judge's decision that USAA had exercised unreasonable delay was not an abuse of discretion.


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