In AAA Mid-Atlantic Ins. Co. v. Ryan, 2014 Pa. LEXIS 196 (Pa. Jan. 21, 2014), the Supreme Court of Pennsylvania held that the amount of damages recoverable under an insurance policy for underinsured motorist (“UIM”) coverage may be offset by all damages recovered from all tortfeasors; not only the amount paid under the automobile insurance policy of the underinsured driver/tortfeasor. In doing so, the Supreme Court reaffirmed the well-established principle that an injured party is not entitled to a double recovery for the same injury.
Mary Ryan was injured in a motor vehicle accident with another vehicle driven by Charlotte Eckel. Thereafter, Ryan and her husband filed two separate lawsuits-the first against Eckel and the other against the City of Philadelphia (“City”) and PennDOT alleging that the highway was defectively designed. Ryan settled with Eckel for the $25,000 limit of Eckel’s motor vehicle liability insurance policy. The claim against PennDot was dismissed by stipulation. Ryan proceeded to binding arbitration against the City, wherein the arbitrator apportioned liability as follows: Eckel, 50%; Ryan, 35%; and the City, 15%. The arbitrator awarded the Ryans damages in the amount of $500,000, less $175,000 based on Ryan’s comparative negligence of 35%, for a net award of $325,000. Pursuant to the doctrine of joint and several liability, the City paid the Ryans $300,000, which included a $25,000 reduction for the amount paid by Eckel’s insurance company.
While the actions against Eckel and the City were pending, the Ryans filed a claim for UIM benefits under their policy with AAA Mid-Atlantic Insurance Company (“AAA”). Their UIM policy contained a “Limit of Liability” clause, which provided that “[t]he limit of liability shall be reduced by all sums paid because of the ‘bodily injury’ by or on behalf of persons or organizations who may be legally responsible.” The clause also provided that “no one will be entitled to receive duplicate payments for the same elements of loss.” An arbitration panel concluded that AAA was responsible “up to its policy limits for all amounts for which the third party tortfeasors were underinsured, disregarding any payments made by the City … to the insured.” The arbitration panel also concluded that the Limit of Liability clause in the policy was void against public policy and not enforceable under Pennsylvania’s Motor Vehicle Financial Responsibility Law (“MVFRL”). The court of common pleas vacated the arbitration panel’s decision holding that AAA was entitled to apply the Limit of Liability clause after Mary Ryan had been fully compensated for her damages. The Ryan’s appealed and the Superior Court reversed the trial court’s order finding that the Limit of Liability clause conflicted with the public policy embodied in the MVFRL to protect those injured by a negligent driver who lacks adequate coverage. The Superior Court also found that the Limit of Liability clause was inconsistent with section 1722 of the MVFRL, which the court found set forth an exhaustive list of sources of recovery for which insurers may be credited.
On appeal, the Supreme Court of Pennsylvania reversed the Superior Court’s holding on two grounds: 1) there was no basis for the Superior Court to concluded that the Limit of Liability clause violated the MVFRL’s policy of protecting injured victims from underinsured motorists, and 2) the Superior Court’s determination was contrary to long-standing Pennsylvania law which precludes double recovery for the same injury. The court held that the Limit of Liability clause was not void and that the Ryans were fully compensated for their injuries as they received the entire amount the arbitration panel held, they were entitled from the City and Eckel. Therefore, the court remanded for reinstatement of the trial court’s order.
The full decision can be found here: