In a recent decision in State Farm Automobile Insurance Company v. Griffiths, No.20-202, 2022 WL 3618663 (August 23, 2022), the United States District Court for the Western District of Pennsylvania clarified the proper calculation of underinsured motorist (“UIM”) credit where multiple tortfeasors and UIM policies exist.
In Griffiths, the Plaintiff was injured while a passenger in a vehicle and made tort claims against both drivers. She settled her tort claim with the driver of the other vehicle for $90,000 of the $100,000 in liability coverage available. She further settled her tort claim against the driver of the vehicle she occupied for $10,000 of the $50,000 in liability available whilst executing a release. The Plaintiff also was insured by State Farm under multiple household policies that provided stacked UIM totaling $150,000 and made a claim for said benefits.
State Farm asserted that it should be entitled to a credit of $200,000 against any UIM award as follows: $100,000 credit for the liability limit as provided by the third-party tortfeasor’s policy + $50,000 credit for the liability limit as provided by the host vehicle’s policy + $50,000 credit for the UIM limit as provided by the host vehicle’s policy. The claimant argued that the host-vehicle’s UIM coverage was precluded by a “non-duplication provision,” which denied recovery of both liability and UIM benefits under the same policy and in turn should not factor into the total UIM credit. The claimant further argued that State Farm’s consent to settlement of the liability claims for less than the total limits available reduces its total UIM credit to the amount actually settled for by the Plaintiff.
The Court initially explained that the non-duplication provision contained within the host vehicle’s insurance policy is unenforceable where multiple tortfeasors exist. The Court cited to Nationwide Mutual Insurance Company v. Cosenza, 258 F.3d 197 (3d Cir. 2001), in explaining that “[T]he only construction of the dual recovery prohibition consistent with Pennsylvania case law and the MVFRL is to limit its enforceability to situations involving single tortfeasor’s where invalidating the exclusion would permit the conversion of UIM benefits to liability benefits.” Because multiple tortfeasors were involved in the accident, the Court found that the non-duplication provision was unenforceable because under the circumstances a tortfeasor that was underinsured whilst also not being covered by the liability portion of the policy existed. The Court thus refused to impute the Plaintiff’s choice to resolve the claim for less than the liability limit and further execute a release that released the insurer from liability despite UIM benefits under the host vehicle policy being available.
The Court further rejected the claimant’s position that State Farm’s consent to Plaintiff’s settlement somehow allowed for less UIM credit. Instead, the Court noted that pursuant to Boyle v. Erie Insurance Company v. 656 A.2d 941 (Pa. Super. 1995), when an insured settles [their] claim against the tortfeasor’s liability carrier for less than the policy limits, the insured’s UIM carrier is entitled to compute its payment to its injured insured as though the tortfeasor’s policy limits had been paid. Additionally, an insured’s settlement with the primary UIM insurer for less than (or none of) its UIM policy limits entitles the secondary UIM carrier to a credit for the full amount of the UIM limits of the primary UIM carrier regardless of the settlement terms.
Based upon the foregoing, the Court ultimately held that, as the secondary UIM carrier, State Farm was entitled to receive credit for the full liability and UIM policy limits available. I.e. the initial $100,000 credit as provided by the tortfeasor’s liability policy, as well as both the $50,000 in liability limits and $50,000 in UIM limits under the host vehicle policy.
The Griffiths decision can be found here.
For additional questions, please contact Joe Persichetti, Esq. and/or Scott Tredwell, Esq.
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