Allocation of Underlying Settlement and UM Coverage Set-Off

Long standing Georgia law requires a claimant to exhaust the tortfeasor’s underlying liability insurance limits before looking to uninsured motorist insurance for coverage.  Daniels v. Johnson, 270 Ga. 289, 290 (1998). Additionally, Georgia public policy prohibits the recovery of punitive damages from an uninsured motorist insurer. State Farm Ins. Co. v. Weathers, 260 Ga. 123, 392 S.E.2d 1 (1990); Bonamico v. Kisella, 290 Ga.App. 211, 213, 659 S.E.2d 666 (2008); Roman v. Terrell, 195 Ga.App. 219, 219–222(2), (3), 393 S.E.2d 83 (1990).

So what is the effect on UM coverage when a claimant allocates the liability settlement payment between punitive damages and compensatory damages? According to the Georgia Supreme Court, in Carter v. Progressive Mountain Insurance Company, 2014 WL 3396496 (Ga., July 14, 2014), while allocation is not prohibited, any allocation will not increase the UM carrier’s coverages.

In Carter, the plaintiff was injured in an automobile collision with a driver allegedly driving under the influence of alcohol. Carter settled her claim with the liability carrier, pursuant to a limited liability release; but, within the terms and conditions of the release specifically allocated $29,000.00 of the $30,000.00 policy limits as payment of punitive damages and only $1,000.00 toward compensatory damages. Carter then pursued recovery of compensatory damages from her UM carrier, Progressive.

Arguing that the inclusion of such an allocation within the terms and conditions of the limited liability release effectively shifted payment of punitive damages to the UM carrier, Progressive moved for summary judgment. The trial court granted the motion, and the Court of Appeals affirmed. But, the Georgia Supreme Court reversed. The Supreme Court held that although Carter had exhausted the underlying liability limits, any additional recovery from her UM carrier remained subject to the statutory limitations of O.C.G.A. §§33–24–41.1(d)(2) and 33-7-11.

Writing for the Court, Justice Hines explained

Under OCGA § 33–24–41.1(d)(2), “the amount paid under a limited release shall be admissible as provided by law as evidence of the offset against the liability of an uninsured motorist carrier and as evidence of the offset against any verdict of the trier of fact.”  And, by the plain language of the statute, it is “the amount paid” that is admissible, not merely the amount attributed to compensatory damages. Further, … [u]nder O.C.G.A. § 33-7-11(b)(1)(D)(ii)(I), recovery under the UM policy will be limited to “the insured’s losses in addition to the amounts payable under any available [liability] coverages” and, “the insured’s combined recovery from the insured’s uninsured motorist coverages and the available [liability] coverages … shall not exceed the sum of all economic and noneconomic losses sustained by the insured.” (Emphasis in original.)

Id. at *3.

Finally, the Supreme Court noted that “punitive damages do not represent ‘losses’ by the insured, and regardless of any designation of such payments in the release, when the UM policy is brought into play, the combined recovery will not exceed the insured’s economic and noneconomic losses.” Id. Unfortunately, however, resolution of Carter type cases requires a jury trial to determine the amount of recoverable compensatory damages, and thus determine the amount of UM coverage available to the plaintiff.  But the message to claimants is clear: allocate the liability settlement any way you choose; the UM carrier still gets credit for every penny.

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Handling Complex Auto Insurance Coverage Disputes: Maximize Recovery Through Stacking Automobile Insurance Policies and Utilizing Uninsured Motorist Offsets

Too often there is an absence of adequate insurance coverage to compensate an injured party involved in a motor vehicle collision.  This proposition holds true even though Georgia law mandates availability of uninsured motorist coverage; thus, the ability for an injured party to secure adequate compensation in the event of a catastrophic automobile collision, frequently turns on insurance coverage litigation.

This article, Handling Complex Auto Insurance Coverage Disputes: Maximize Recovery Through Stacking Automobile Insurance Policies and Utilizing Uninsured Motorist Offsets, addresses complex automobile insurance coverage litigation, including:

  1. Stacking of commercial and personal liability policies;
  2. Recovery against an uninsured motorist; and
  3. Uninsured motorist offsets.

To read the full article, click here

This article also serves as a guide for the practitioner in ascertaining the availability of insurance coverage to compensate the injured party.  This guide is founded upon three fundamental principles critical for resolving automobile insurance coverage disputes – read and understand the terms and conditions of the applicable policies; know the applicable statutory scheme, and learn the facts.  While these principles sound fundamental, and appear self-evident, it is amazing how often they are forgotten, or overlooked.

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Seminar: Handling Complex Auto Insurance Coverage Disputes, 10/24

Carlock Copeland Attorneys Charlie McDaniel and Erica Parsons will speak at this National Business Institute Seminar offering 6 CEU or CLE hours on multiple coverage, uninsured motorist offsets, medicare set-asides and more. The seminar is designed for professionals who want to develop further proficiency in handling complicated auto insurance coverage situations, this legal course examines select, sophisticated coverage issues and brings them to life with hypothetical situations and strategies for handling them. You’ll learn how to:

  • Accurately allocate loss in insurance claims involving multiple tortfeasors.
  • Stay up to date on the latest decisions regarding uninsured motorist offsets, stacking policies and “anti-stacking” policy language.
  • Find out how the new CMS rules change Medicare set-asides and affect your settlements.
  • Stay current on the latest case law and legislative decisions influencing auto insurance coverage.
  • Examine complex subrogation issues involving ERISA, Medicare, Medicaid, and workers’ compensation.
  • Discover which bad faith actions invoke trebling of stipulated covenant judgments.
  • Determine when working with a difficult client has crossed an ethical line.
  • Exchange tips and concerns with colleagues and our experienced faculty.

Charlie’s presentation, “Stacking Insurance Coverage and Uninsured Motorist Claims,” will cover:

  • Stacking of Commercial and Personal Policies
  • When is a Negligent Motorist Considered Underinsured?
  • Uninsured Motorist Offsets: When is the Insurer Entitled to Setoff?

Erica’s presentation, “Bad Faith Trends,” will cover:

  • When Does Denial of Coverage Become Bad Faith?
  • Stipulated Covenant Judgments
  • Treble Damages

Register today to attend!

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Georgia Uninsured Motorist Law Governs UM Claim And UM Benefits Awarded Under Umbrella Policy Issued in Indiana

The Georgia Court of Appeals recently held that the Georgia Uninsured Motorist Statute applied to an insurance policy that was issued and delivered in Indiana.  In St. Paul Fire & Marine Ins. Co. v. Hughes, 2013 WL 1924393 (Ga. App.), Appellant St. Paul Fire & Marine Ins. Co. (“St. Paul”) issued a commercial umbrella policy to Townsend Tree Service Co., Inc. (“Townsend”).  One of Townsend’s employees, Appellee Wallace Hughes (“Hughes”), was injured in a motor vehicle accident in August 2005; he sought uninsured/underinsured (“UM”) benefits under the St. Paul umbrella policy.

The trial court granted partial summary judgment to Hughes on his claim that the policy provided UM coverage.  St. Paul appealed, arguing Indiana law applied, and since Indiana law did not require UM coverage at the time the policy was issued, summary judgment in its favor was required.

In its analysis, the Georgia Court of Appeals noted that Georgia’s UM statute in effect at the time of the collision, O.C.G.A. § 33-7-11(a)(a) (2005), applied to policies

“issued or delivered by any insurer licensed in this state upon any motor vehicle then principally garaged or principally used in this state . . . .”

In addition, the statute applied to umbrella policies unless the insured rejected UM coverage in writing.  The court reasoned that because the truck Hughes was driving at the time of the collision was principally used and garaged in Georgia, it was reasonable for the parties to assume that Georgia law applied.

The appellate court thus upheld summary judgment granted in favor of Hughes because St. Paul was licensed in Georgia, the truck was principally used and garaged in Georgia, and there was no written rejection of UM benefits.

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Litigating the Uninsured & Underinsured Motorist Claim Seminar

Charlie McDaniel, Erica Parsons and Jason Hammer are scheduled to present at the NBI seminar “Litigating the Uninsured & Underinsured Motorist Claim,” on Friday December 7, 2012. To register online or to download a brochure to register, visit the NBI website.

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Whether Motor Vehicle in “Use” at Time of Accident Generally Question of Fact

The Georgia Court of Appeals recently issued two opinions addressing the question of when an incident arises out of the “use” of a motor vehicle for purposes of UM coverage.

In Mough v. Progressive Max Ins. Co., a man was shot and killed while riding his motorcycle.  The motorcyclist was involved in a road-rage incident and was clipped by the driver of another vehicle. Id. at *1.  After following the driver of the vehicle to her house, the motorcyclist was shot and killed by the driver’s father. Id.

The motorcyclist’s policy provided uninsured motorist coverage for injury arising out of the “use” of an uninsured motor vehicle. Id. at *1.  The motorcyclist’s parents argued that his death arose out of the “use” of the driver’s vehicle because “without [the vehicle] leading [the motorcyclist] to the barrel of [the shooter’s gun], the occasion for [the motorcyclist] to be shot and killed would not have occurred.” Id.

The Georgia Court of Appeals noted that “‘arising out of’ does not equal proximate cause or require that the injury be directly caused by the use of a vehicle; only a ‘slight causal connection’ between the damages and the use of the vehicle is required.” Id.

In cases involving shootings, the “general rule is that where a connection appears between the ‘use’ of the vehicle and the discharge of the firearm and resulting injury, such as to render it more likely that the one grew out of the other, it comes within the coverage defined.” Id.

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Extending UM Coverage for Accidents Involving Golf Carts

golfcartinmotionMany personal policies of insurance define the term “auto” as a private passenger vehicle designed for operation principally on public roads.  While no Georgia courts have decided the issue, courts in other jurisdictions have determined that a golf cart is not an “auto” under private auto policies of insurance. See Bailey v. Netherlands Ins. Co., 615 F.Supp.2d 1332 (M.D. Fla. 2009); Progressive Casualty Insurance Co. v. Dunn, 665 A.2d 322 (Md. 1995); Herr v. Grier, 671 A.2d 224, 226 (Pa. Super. Ct. 1996); Progressive Cas. Ins. Co. v. McCrea, 2010 WL 2108965 (Conn. Super. Ct. 2010); Jennings v. Midville Gold Club, Inc., 636 A.2d 707, 708 (R.I. 1994); Seaboard Fire & Marine Ins. Co. v. Gibbs, 392 F.2d 793, 794 (4th Cir. 1968).

The reasoning of these cases is strong.  An unmodified, run-of-the-mill golf cart, is not made for use “principally” upon public roadways, particularly in light of the fact that its maximum speed is about 25 miles per hour and it lacks the safety features necessary for travel on public roadways, including a full windshield, doors, a solid roof, turn signals, and a gear-shifting mechanism.  Even though such a case has yet to be decided by a Georgia court, it is likely that a Georgia court would determine that a golf cart is not an “auto” under the standard definition set forth in many policies.  As such, it is likely that most automobile liability insurance policies do not provide any coverage for accidents involving golf carts.

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When A Payment is “Otherwise” Under Georgia’s UM Statute, UM Liability Exposure Increases

The Georgia Supreme Court’s decision in State Farm Mutual Automobile Insurance Company v. Adams, declined to extend the rationale of Thurmond v. State Farm Mutual Automobile Ins. Co., and appeared to make it more difficult for UM insurers to easily determine the amount by which UM limits exceed the liability limits for a loss.  Payments made by the liability insurer to a hospital (Adams) did not serve to reduce the available liability limits to the injured party, while reimbursement of federal worker’s compensation payments (Thurmond) were deemed to reduce the available liability limits, and thus increase the exposure of the UM carrier.

However, upon closer examination, the decisions reveal that the determination of how to apply such payments to third parties depends upon the authority by which the payments are made.  In Thurmond, the Supreme Court determined that the payments were made pursuant to federal law, which specifically provides that the federal law supersedes and preempts any state or local law.  The Georgia Supreme Court, in Adams, which involved payment of a hospital lien imposed pursuant to O.C.G.A. § 44-14-470, held that

“payment of a hospital lien should not be subtracted from a tortfeasor’s tort liability coverage to determine the underinsured coverage of an insured who has been injured in an accident,”

as the payment of the hospital lien was for the direct benefit of the insured.

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