A recent decision by the Pennsylvania Superior Court has changed the way underinsured motorist (UIM) claims are handled. On September 23, 2009, the Pennsylvania Superior Court issued a decision in the matter of Pusl v. Means, 982 A.2d 550 (Pa. Super. 2009). In its opinion, the Superior Court held that, where a plaintiff first obtains a UIM recovery prior to the conclusion of his/her suit against the third party defendant tortfeasor, the third party defendant is entitled to have any verdict entered against him reduced by a credit or set-off in the amount of the underinsured motorist (UIM) benefits previously secured by the Plaintiff.

The plaintiff in Pusl had recovered $75,000.00 in UIM policy limits under her personal automobile insurance policy from State Farm prior to the completion of the trial against the tortfeasor defendant. The opinion indicated that the UIM recovery was by settlement. At trial, the jury entered an award in favor of the plaintiff in the amount of $100,000.00. In post-trial motions, the defense requested that the verdict be reduced to $25,000.00 after the application of a credit or set-off of the $75,000.00 UIM benefits already previously received by the plaintiff. The trial court granted the defendant's request. Plaintiff appealed. On appeal, the Superior Court affirmed.

In affirming the trial court, the Superior Court weighed two conflicting public policies against each other. The first was a recognized public policy limiting double recoveries by plaintiffs. The second was that a tortfeasor should be liable for the all of damages he caused.

The Court in Pusl recognized that the public policy against double recoveries has been codified in Pennsylvania statutory law, specifically at 75 Pa. C.S.A. Section 1722, "Preclusion of recovering required benefits." This statute provides that "[i]n any action for damages against a tortfeasor...arising out of the maintenance or use of a motor vehicle, a person who is eligible to receive benefits under the coverages set forth in this subchapter....shall be precluded from recovering the amount of benefits paid or payable under this subchapter...." The Court went on to note that Section 1722 "was obviously designed" to refer to first party benefits under the Motor Vehicle Financial Responsibility Law (MVFRL). The plaintiff's UIM benefits were found to "fall within Section 1722's first-party benefits because the UIM benefit was paid to her from her personal insurance policy with State Farm." Therefore, according to the court, the plaintiff's receipt of both the full jury award from the defendants and the pre-trial UIM settlement with State Farm would constitute a "double recovery" that the MVFRL was specifically designed to prevent.

In challenging the trial court ruling, the plaintiff argued that the reduction of the verdict violated the second noted public policy requiring that a defendant be held responsible to pay for all of the damages he or she caused. Plaintiff also argued that the defendant was not entitled to a "set-off" of the UIM benefits previously received under the collateral source rule because the UIM benefits were collateral source benefits. Both arguments were rejected.

The Court held that by reducing the verdict down by the $75,000.00 previously received in UIM benefits, "it appears, at first glance, that the public policy underlying the collateral source rule was ignored in favor of Section 1722 by lessening the amount of damages that the jury attributed" to the defendants. The Court went on to reason that the tortfeasor's liability was not lessened or reduced at all because, by law, State Farm, the carrier that paid the UIM benefits, still had the right to pursue a subrogation claim against the defendant to recover the $75,000.00 in UIM benefits back. In other words, even though the verdict was reduced by $75,000.00, and the defendants did not have to pay that portion to the plaintiff, the defendants were still technically liable to State Farm to pay back that amount if State Farm elected to proceed on its subrogation rights. Thus, according to this opinion, the second public policy was not violated by the molding of the verdict.

In explaining its rationale, the Pusl Court stated that the "result of molding the verdict ensures that the [Plaintiff] will receive the full amount of damages the jury determined would make her 'whole,' i.e., $100,000. To allow [plaintiff] to recover $75,000 in UIM benefits from State Farm and $100,000 in damages from [defendants] flies in the face of the established policy of this Commonwealth that an injured person is entitled to only one satisfaction for the harm incurred...."

The Pusl decision could have a profound effect on the way UIM claims are handled. In the past, it was not uncommon for injured parties to pursue UIM claims prior to or during the pendency of the underlying lawsuit. Prior to Pusl, monies received in UIM claims had no effect on the underlying matter. That is no longer the case.

An appeal has been filed to the Pennsylvania Supreme Court. In the meantime, injured parties must proceed cautiously if they intend to pursue UIM claims prior to the conclusion of the underlying lawsuit. If a UIM claim is settled or concluded by way of a hearing, an injured party could unknowingly reduce their ultimate recovery. Attorneys must do their best to explain this new and confusing area of the law.

Jim Conaboy

Abrahamsen, Conaboy & Abrahamsen, P.C., a Scranton, Pennsylvania law firm, offers free consultations for personal injury, auto accidents, products liability, workers comp., social security claims and social security disability appeals. If you have been injured or disabled, you probably have questions: Do I have a case?; Who will pay my medical bills?; Should I talk to the insurance company adjuster?; Am I entitled to wage loss or disability benefits? With offices conveniently located in Scranton, Milford, Lords Valley, Stroudsburg, and Mount Pocono, our experienced attorneys can answer your questions and will work to get the benefits and compensation you deserve. No fee unless we recover for you. DON’T GO IT ALONE! Call or E-mail one of our experienced attorneys to learn about your rights.