Justices Find UIM Benefits Offset by All Recovered Damages
Later, following an arbitration hearing with the city as the only remaining defendant, the arbitrator found Eckel 50 percent negligent, Mary Ryan 35 percent negligent and the city 15 percent negligent, Todd said.
The arbitrator awarded the Ryans $500,000 in damages, less $175,000 for Mary Ryan's comparative negligence, leaving a net award of $325,000, according to Todd.
Under the doctrine of joint and several liability, the city paid the Ryans $300,000 and Eckel's insurer paid the remaining $25,000, Todd said.
While their suits against Eckel and the city were still pending, according to Todd, the Ryans filed a UIM claim with AAA, their motor vehicle insurer.
AAA denied the claim, however, citing the limit of liability clause in its policy, and the matter proceeded to arbitration, Todd said.
A three-member arbitration panel found that while the Ryans' UIM recovery must be offset by the damages recovered from Eckel, the Ryans were entitled to recover from AAA the same amount of damages already paid by the city, according to Todd.
Following a second arbitration hearing, Todd said, the panel concluded that while its decision would allow the Ryans to make a double recovery, such a result was required under the Superior Court's 1996 ruling in Allwein v. Donegal Mutual Insurance, which barred an insurer from offsetting the amount it owed its insured by the amount the insured received from the tortfeasor's insurer.
The arbitration panel found that AAA was responsible "'up to its policy limits for all amounts for which the third-party tortfeasors were underinsured, disregarding any payments made by the city'" to the Ryans, according to Todd.
AAA filed a petition to vacate the arbitration award in the Montgomery County trial court and Montgomery County Court of Common Pleas Judge Wendy Demchick-Alloy reversed the arbitration panel's decision, holding that AAA was entitled to offset the amount it owed to the Ryans by the amount of damages the Ryans had already recovered from both Eckel and the city, Todd said.
The Superior Court, on a 2-1 vote, reversed that holding on appeal, however, saying that the limit of liability clause in AAA's policy conflicted with the MVFRL's public policy goals by allowing insurers to reduce the amount of benefits they owe by "'any sum paid, regardless of the source,'" Todd said. The Superior Court acknowledged that its ruling would allow insureds to make double recoveries but found that result to be the "'lesser of two evils,'" according to Todd.