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Understanding the Tennessee UM/UIM Arbitration Statute


The Tennessee UM/UIM Arbitration Statute, found at TCA 56-7-1206, can be difficult to understand.  We often see claimants, or their attorneys, attempting to invoke the statute in order to promote settlement of a claim or lawsuit.  Whether you are a claimant/plaintiff or a liability carrier, one thing is certain, you must understand how it works in order to invoke it and it must be strictly followed.

I’m going to explain how this statute works without reciting much of the statutory language.  After all, it’s the statutory language that leaves everyone scratching their heads after they read it. 

To begin with, it is the liability carrier’s decision only as to whether to invoke the UM/UIM Arbitration Statute.  It is not the decision of the claimant or plaintiff, or their attorney, and it is not the decision of the UM/UIM carrier. 

A liability carrier may seek a release of its insured by offering a claimant or plaintiff the amount of all liability coverage available to its insured.  The claimant or plaintiff must then make a decision as to whether to accept the liability limits and conclude the claim or seek additional compensation from the UM/UIM carrier.

In this process, the liability carrier will need to make sure it is aware of identity the UM/UIM carrier.  The liability carrier will put the UM/UIM carrier on notice of intent to offer the liability coverage available to the claimant or plaintiff.  If the liability carrier is not aware of the identity of the UM/UIM carrier, the liability carrier may request the identity of the UM/UIM carrier from the claimant or plaintiff.

The liability carrier will then give written notice to the UM/UIM carrier of its intent to offer the liability coverage available.  The UM/UIM carrier is permitted to find out what amount of coverage is available through the liability carrier (aka, the policy limits).  The liability carrier must indicate in writing whether the party to be released (the named defendant) will cooperate with the UM/UIM carrier in connection with arbitration.  The UM/UIM carrier must agree to waive subrogation against the party being released if there is an arbitration.

Remember, the liability limits must first be offered before any of this process can begin and the offer must be made as indicated in the paragraph above.  If this happens, then the plaintiff or the plaintiff’s attorney must give written notice to the UM/UIM carrier or the attorney for the UM/UIM carrier of the plaintiff’s intent to accept the offer and the agreement to submit the claim to binding arbitration.

Once the UM/UIM carrier has received notice from the liability carrier of intent to offer the available coverage and once the UM/UIM carrier has received notice of the plaintiff’s intent to accept the offer (remember, written notice required), the UM/UIM carrier then has 30 days to give notice to the plaintiff or plaintiff’s attorney and the liability carrier that the UM/UIM carrier:

  1.  Consents to settlement;
  2. That the UM/UIM carrier will agree to binding arbitration of the UM/UIM claim; and,
  3. That the UM/UIM carrier will agree to waive subrogation against the party to be released so long as the party to be released has agreed to cooperate in the arbitration.

If all of the above happens, the plaintiff may be compensated by the liability carrier, execute a release as to the named defendant and submit the claim to binding arbitration.  All of the communication must be in writing and while certified mail is probably the preferred method, the statue simply requires proof of receipt of each written notice discussed above.

What if the UM/UIM carrier does not want to go to arbitration?  This seems to happen more often.  Under these circumstances, after all of the notices regarding the liability carrier’s intent to offer the available limits; notice to the UM/UIM carrier; confirmation of coverage; and, plaintiff’s written intent to accept, the UM/UIM carrier may chose to not go to arbitration.  If the UM/UIM carrier wants to preserve its right to a jury trial and protect the right to subrogate instead, then the UM/UIM carrier may advance to the plaintiff the liability carrier’s available coverage amount.  In other words, the UM/UIM carrier pays the plaintiff the amount the liability carrier offered in order to settle the case.  The plaintiff may accept this amount, is not required to sign a release and the case proceeds towards a jury trial.

On the other hand, the liability carrier may make the decision to not offer the liability limits under the statute. This is often a strategic decision so as to not put the liable party (the named defendant) at risk of the UM/UIM carrier subrogating should the UM/UIM carrier advance the liability coverage and protect the right to subrogation.  If the liability carrier does not offer the liability coverage pursuant to the UM/UIM Arbitration Statute, the case proceeds on with “regular” litigation.

The Tennessee UM/UIM Arbitration Statute can be difficult to understand.  Some of the important takeaways from reading the statute, if parties are proceeding under the statute are:

  1. Everything discussed above must be in writing;
  2. The statute is invoked by the liability carrier by offering the full amount of available liability coverage;
  3. Written notice of the offer must be sent to the UM/UIM carrier;
  4. Plaintiff must give written notice of acceptance;
  5. A decision must be made regarding the named defendant’s cooperation in connection with arbitration; and,
  6. The UM/UIM carrier gets 30 days to decide whether it wants to preserve the right to a jury trial by advancing the available liability coverage amount or not advance and go to arbitration.

Tommy Santel is a co-founding partner of Santel | Garner. Tommy is a former government prosecutor. He is a Tennessee Supreme Court Rule 31 General Civil Mediator. Tommy’s practice areas include criminal defense and civil litigation.

This blog is made available by Santel | Garner for educational purposes only as well as to provide general information and a general overview of the law, not provide specific legal advice. By using this blog and website, you understand that there is no attorney-client relationship between you and Santel | Garner . This blog and website should not be used as a substitute for competent legal advice from a licensed attorney in your state.