The Pennsylvania Superior Court recently decided a unique issue pertaining to the amount of credit entitled to a UIM carrier when a tortfeasor’s carrier pays more than the liability limits as a result of an excess verdict rendered in a third party case. The memorandum decision in IDS Prop. Cas. Ins. Co. v. Piotrowski, No. 2546 EDA 2018 (Pa. Super. May 28, 2019), provides an insight into the calculation of UIM credit in the face of a third party carrier paying more than the applicable policy limits.
In this matter, there was an offer to settle the third party case for $36,001.00 prior to trial. The amount of available liability coverage to the tortfeasor was $100,000. The insureds rejected the offer to settle. Prior to trial, the third party carrier assured the tortfeasor that if the case did not settle, the carrier would pay any amount awarded even if it exceeded the tortfeasor’s policy limits. At trial, the jury returned a verdict in excess of $1,000,000. After the verdict, there were additional negotiations and the case ultimately settled for a $485,000 payment from the third party liability carrier.
Thereafter, the claimant sought UIM benefits from her own auto insurance carrier. The UIM carrier filed a declaratory judgment action which sought to enforce a credit for the full amount paid in the third party action: $485,000. The claimant countered that the credit should be limited to the actual amount of third party coverage: $100,000. The trial court concluded that: 1) the insured’s vehicle was an underinsured motor vehicle as defined by Pennsylvania law and the UIM policy; and 2) the liability limit under tortfeasor’s remained at $100,000, despite the fact that the carrier had paid out more than their limit. Since the $100,000 limit was insufficient to cover the damages awarded at trial, the UIM action was permitted to proceed.
The trial court held that the additional $385,000 paid above the liability limits was not made because of bodily injury, “but rather to avoid a potential bad faith claim, including punitive damages.” Since the UIM policy specifically indicated that credit could only be applied for “the amount paid for bodily injury”, $100,000 was found to be the appropriate credit. The UIM carrier subsequently appealed the declaratory judgment decision to the Superior Court.
The Superior Court affirmed the trial court’s opinion limiting the UIM credit to the $100,000 third party limits. The Superior Court adopted the rationale of the trial court decision “as their own” and noted that in the event of any further appeal, the trial court’s decision should be attached to any filings.
