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When There Are Two Defendants in a Wreck and the Plaintiff Has Under-insured Coverage, Disregard the Offset Language

The appellate court recently held that offset language in uninsured / underinsured policies with plaintiffs injured by two defendants does not apply. Throwing out the offset language is counterintuitive to most lawyers. Lawyers are taught that you apply the language of the contract. This case reminds us that the terms of the insurance policy are applied generally, but that there are exceptions to general statements.

In Tufano the court held that the policy holder must be placed in the same position as if each tortfeasor carried the same as amount of insurance as the injury victim. Furthermore, one tortfeasor’s payment cannot be used to offset the under insurance gap of the other tortfeasor. Each instance of under insurance is viewed separately. However, the amount the plaintiff can get from each party is capped by the un-insurance/under-insurance of his or her policy.

This case is very helpful in that it discusses the prior decisions of both the appellate and supreme courts regarding uninsurance/underinsurance coverage.

Plaintiff was a passenger in a car that collided with another car. Her injuries were significant, and valued at in the millions of dollars. Plaintiff sued both drivers. One driver had a $100,000 policy and the second driver had a $300,000 policy. Plaintiff had a $500,000 underinsured motorist coverage. The plaintiff’s policy had an anti-stacking provision, also known as an offset provision. The driver with a $300,000 policy paid $295,000 rather than $300,000.  There is no explanation for that in the case, but this did not defeat the under-insurance claim.

The under-insurer wanted to add the amount both drivers paid.  This means $295,000 + $100,000 = $395,000.  Defense then said subtract that from the policy limits, $500,000.  $500,000 – 395,000 = $105,000.  Defense wanted to pay the $105,000. If you read the policy, this is what should have happened. The policy language was clear that the insurer gets an offset for the entire amount paid. The court held that this does not matter.

The plaintiff claimed she was entitled to $605,000. The math follows.  Plaintiff said take the policy limit – $500,000 – and subtract what each party paid.  $500,000 – $295,000 = $205,000.  And $500,000 – $100,000 = $400,000.  Then Plaintiff said add the $400,000 and $205,000 to get $605,000. The court disagreed and said that, at most, she could receive $500,000 from her insurer. This makes sense.

This is a very interesting case. In normal situations, the courts do not disregard set off language in a policy. The court was clear that a plaintiff has no way to do this in situations where there is only one defendant. The ambiguity only arises where there are two defendants. The court said that the policy owner must be placed in the same position as if each tortfeasor carried the same amount of insurance and as the policyholder. One tortfeasor’s payment cannot be used to offset the under insurance gap of the other tortfeasor. Each claim must be viewed separately. However, the most the policyholder can receive from the underinsured carrier is capped by the overall limit of the policy. Thus, plaintiff in Tufano could not be limited to $105,000, as the insurer wanted to do. Nor could it recover $605,000, as the plaintiff wanted to do. Plaintiff was limited to $500,000.

These underinsured uninsured policies are confusing. I suspect that, despite the holding, many insurers will offer the $105,000 to the plaintiff, claiming the language of the policy dictates. Most plaintiffs, and most lawyers, will not know about this case.

At Ackerman Law Office we keep up to date about case law. If you have a claim, please feel free to contact us. We handle injury claims on contingent fee, which means we only collect a fee if you collect from insurance company.