Justices Find UIM Benefits Offset by All Recovered Damages
The Pennsylvania Supreme Court has ruled that recovery under an underinsured motorist insurance policy is offset by the amount of all damages paid to satisfy an underlying judgment.
In AAA Mid-Atlantic Insurance v. Ryan, the justices unanimously reversed a state Superior Court ruling that held that an insured who was injured by an underinsured motorist was entitled to UIM benefits on top of the damages recovered from all defendants pursuant to an arbitration award.
The Superior Court had found that insureds Mary Ryan and her husband, Edward J. Ryan, were entitled to UIM benefits following an accident between Mary Ryan and underinsured driver Charlotte Eckel, even though the Ryans had already recovered the full amount of damages awarded to them from both Eckel and the city of Philadelphia.
The court found that the "limit of liability" clause in the Ryans' UIM policy barring duplicate recoveries and requiring that UIM benefits be offset by the total amount of damages recovered from all tortfeasors went against the Motor Vehicle Financial Responsibility Law's public policy goal of protecting people injured by underinsured drivers.
But in a 13-page opinion issued Jan. 21, the high court, led by Justice Debra Todd, said it could "find no basis for that court's conclusion that the provisions of the policy conflict with the public policy embodied in the MVFRL by 'frustrat[ing] the MVFRL's interest' in protecting those injured by a tortfeasor who lacks adequate coverage."
"The Ryans were fully compensated for their injuries and received the entire amount of damages to which the arbitration panel held they were entitled from the city and Eckel," Todd said.
Todd was joined by Chief Justice Ronald D. Castille and Justices Thomas G. Saylor, Max Baer, J. Michael Eakin, Seamus P. McCaffery and Correale F. Stevens.
Following the motor vehicle accident in AAA, according to Todd, the Ryans filed separate suits in the Montgomery County Court of Common Pleas—one against Eckel and the other against the city of Philadelphia and the Pennsylvania Department of Transportation, alleging the highway was defectively designed, according to Todd.
The claim against PennDOT was dismissed by stipulation and the remaining claims against Eckel and the city were transferred to binding arbitration, Todd said.
Prior to arbitration, the Ryans settled with Eckel for the $25,000 limit of Eckel's motor vehicle liability insurance policy, according to Todd.