Recently, the Pennsylvania Supreme Court, in AAA Mid-Atlantic Insurance Company v. Ryan, No. 12 MAP 2013 (Pa. 2014) considered whether, under an insurance policy for underinsured motorist (“UIM”) coverage, the amount of an insured’s recovery may be offset by the amount of all damages paid in satisfaction of the underlying judgment, or by only the amount of compensation paid under the auto insurance policy of the underinsured driver/tortfeasor. The Supreme Court held that the amount of damages which may be offset against recovery under a UIM policy includes damages recovered from all tortfeasors and not just auto insurance policies.
Mary Ryan was driving through an intersection in Philadelphia when another vehicle, driven by Charlotte Eckel, struck Ryan’s vehicle, resulting in bodily injury to Ryan. Thereafter, the Ryans filed in the Montgomery County Court of Common Pleas two separate lawsuits, the first against Eckel and the other against the City of Philadelphia (“City”) and the Pennsylvania Department of Transportation (“PennDOT”), wherein the Ryans alleged the highway was defectively designed. The claim against PennDOT was dismissed by stipulation, and the remaining parties agreed to transfer the actions against the City and Eckel to binding arbitration.
Prior to arbitration, Eckel settled with the Ryans by tendering the $25,000 limits of her motor vehicle liability insurance policy. With the City as the sole remaining defendant, the parties proceeded to arbitration. On May 6, 2008, following a hearing, the arbitrator apportioned liability as follows: Eckel, 50%; Mary 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, and, as noted above, the remaining $25,000 was paid by Eckel’s insurance company. While their actions against Eckel and the City were pending, the Ryans filed a claim under their motor vehicle insurance policy (the “Policy”) with AAA Mid-Atlantic Insurance Company (“AAA”), which included optional coverage for compensatory damages resulting from bodily injuries caused by the owner or operator of an underinsured motor vehicle.
The Supreme Court granted review to consider whether a UIM recovery may be offset against all damages paid in satisfaction of a judgment, or only for those sums paid under the automobile policy of the other driver.
The Supreme Court noted that the Ryans were fully compensated for their injuries and received the entire amount of damages to which the arbitration panel held they were entitled from the City and Eckel. Thus, “it cannot be said that [the Policy] in any way ‘frustrated’ the MVFRL’s public policy of protecting the Ryans from inadequate compensation.” The Supreme Court continued, “…there exists a long-standing prohibition in this Commonwealth against double recoveries for a single injury.”
The Supreme Court reiterated: “[W]hen an individual who has been indemnified for a loss subsequently recovers for the same loss from a third party, equity compels that the indemnifying party be restored that which he paid the injured party; thereby placing the cost of the injury upon the party causing the harm while preventing the injured party from profiting a “double recovery” at the indemnifying party’s expense. Jones, 32 A.3d at 1270 (quoting Allstate Ins. Co. v. Clarke, 527 A.2d 1021, 1024 (Pa. Super. 1987)) (emphasis added).”
The Supreme Court continued: “We further observed that the made whole doctrine: both ensures that the insured is fully compensated for his or her injury before the insurer recovers, in cases where there are insufficient funds to satisfy both the insured and the insurer, and prevents the insured from receiving dual recovery for the same loss from both the tortfeasor and the insurer. Jones, 32 A.3d at 1271 (emphasis added).”
“As the Ryans were fully compensated for Mary Ryan’s injuries, the purpose of the MVFRL is not furthered by allowing the Ryans to recover additional damages from AAA. In summary, as there was no basis for the Superior Court to conclude that the Limit of Liability clause of the Policy violated the MVFRL’s policy of protecting injured victims from underinsured motorists, and, furthermore, because the Superior Court’s determination is contrary to Pennsylvania law which precludes double recovery for the same injury…” the Supreme Court reversed the order of the Superior Court and remanded the matter for reinstatement of the trial court’s order.