5.1.9 Paying Undisputed Claim Amounts

• Jurisdiction: Arizona

In those situations where coverage is not contested but the amount of a first-party loss is disputed, insurance companies are under a duty to pay any undisputed portion of the claim promptly.^[131] Failure to do so constitutes bad faith.

This principle is not directly applicable to UM and UIM claims that blend features of both first-party and third-party coverage:

"Uninsured motorist coverage . . . is a hybrid in that it blends the features of both first-party and third-party coverage. The first-party aspect is evidence in that the insured makes a claim under his own contract. At the same time, however, third-party liability principles also are operating in that the coverage requires the insured to be 'legally entitled' to collect-that is, the insured must be able to establish fault on the part of the uninsured motorist and must be able to prove the extent of the damages to which he or she would be entitled."^[132]

In Voland v. Farmers Insurance Co. of Arizona,^[133] the court held that the implied covenant of good faith and fair dealing does not require the insurance company, in the uninsured motorist claim context, to pay the insured the amount of any unaccepted settlement offer before the insured executes a release or obtains an arbitration award. The court noted that an unaccepted settlement offer does not liquidate the amount of damages or constitute an admission...