Thought Leadership

Key Points:

• The federal court recently addressed the issue of the amount of credit due an underinsured motorist carrier. As part of its analysis, the court, in dicta, referenced a novel argument raised under the Fair Share Act.
• The good news is that the UIM carrier was entitled to a full credit of all underlying liability coverage irrespective of the Fair Share Act.
• The bad news is that the court predicted the Pennsylvania Supreme Court will hold, especially in third-party liability cases, that the Pennsylvania Fair Share Act only applies where the plaintiffs’ negligence is in question.

In Anderson v. Motorist Mutual Insurance Company, 2022 WL 2238955 (W.D. Pa. June 22, 2022), the plaintiffs sued third-party tortfeasors and settled all of their claims. Thereafter, the plaintiffs filed a claim for UIM benefits. That carrier denied the claim on the basis that the value of the claim did not exceed the combined $5.1 million liability limits of the various third-party tortfeasors.

In this claim, the plaintiffs’ decedent was an “innocent plaintiff”—a passenger in a motor vehicle accident. The vehicles involved had aggregate policy limits of $5.1 million.

The court noted that the carrier’s UIM endorsement stated that the carrier would only pay the UIM benefits if the limits of liability under any applicable bodily injury or coverage policies had been exhausted by payments of judgments or settlements. The carrier contended that it should receive a credit of $5.1 million.

The plaintiffs’ theory in Anderson was a novel one. They attempted to argue that, unless the carrier could prove that one of the defendants’ percentage of fault equaled or exceeded 60%, the carrier should only be entitled to a credit equal to the amount that the plaintiffs were legally entitled to recover from the joint tortfeasors, or $650,000, which was the sum of the amounts actually paid in the settlement. The plaintiffs based their argument on the applicability of the Pennsylvania Fair Share Act and its effect upon UIM coverage and joint and severability in Pennsylvania.

The Anderson court found that there is no controlling Pennsylvania Supreme Court precedent on the issue of the enforcement of exhausting clauses related to UIM benefits. However, it did indicate that several Pennsylvania Superior Court cases have held that a UIM carrier was entitled to the full amount of any liability limits that were available from the third-party tortfeasor.

The plaintiffs in Anderson attempted to make the argument that those decisions were no longer applicable due to the passage of the Pennsylvania Fair Share Act.

The court in its decision stated that, even if the Pennsylvania Fair Share Act altered the effect of these prior decisions, the plaintiffs’ argument still failed since the decedent’s negligence was not in question. Therefore, the applicability of the Pennsylvania Fair Share Act would not apply. It cited other prior Pennsylvania cases which suggest that a plaintiff’s negligence must be at issue in a case for the Fair Share Act to apply.

As a result, this Western District of Pennsylvania Federal case predicted that the Pennsylvania Supreme Court would find that the Fair Share Act does not apply in cases where a plaintiff’s negligence is not at issue and, as such, predicted that the Supreme Court would hold that traditional principles of joint and several liability, which existed before the Fair Share Act, would control .

That is the bad news for carriers. The good news is that the court held that the language of the policy’s exhaustion clause in this case mandated that the UIM carrier was entitled to a credit for the full amount of liability limits available in the underlying third-party case, totaling $5.1 million.

In conclusion, as per Anderson, any insurance carrier in Pennsylvania should evaluate whether or not there is any possible proof of negligence on the part of the plaintiff before it utilizes the Fair Share Act and its protections when evaluating such claims, in third-party liability cases and in UIM claims.

*Ed is a senior counsel in our King of Prussia, Pennsylvania, office. He can be reached at 610.354.8483 or ejtuite@mdwcg.com.

_{Defense Digest, Vol. 28, No. 3, October 2022 is prepared by Marshall Dennehey to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. ATTORNEY ADVERTISING pursuant to New York RPC 7.1. © 2022 Marshall Dennehey. All Rights Reserved. This article may not be reprinted without the express written permission of our firm. For reprints, contact tamontemuro@mdwcg.com.}