Insurance coverage for underinsured and uninsured motorist coverage laws are often times confusing. One source of such confusion is the determination of coverage owed when there are multiple tortfeasors. The recent case of Illinois Emcasco Ins. Co. v. Tufano, 2016 IL App (1st) 151196 provides guidance in this circumstance.
A passenger in a car that collided with another car resulting in injuries claimed to be in the millions of dollars. Id. at ¶ 1. The passenger sued both drivers. Id. One driver had a $100,000 insurance policy that was tendered in full. Id. The other driver had a $300,000 policy that was also tendered, resulting in a payment of $295,000 under that policy. Id. The injured passenger had an underinsured motorist policy in the amount of $500,000 with Illinois Emcasco Insurance Company. Id.
The issue in this case was whether Emcasco was required to cover the difference between what was received from the two drivers collectively and the $500,000 underinsured policy, for a total of $105,000. Or, whether the $500,000 underinsured coverage could be applied to each driver separately, for a total of $605,000. Id at ¶2.
The underinsured motorist coverage in the Emcasco Policy provided:
“Underinsured Motorists Coverage”
LIMIT OF LIABILITY
The limit of liability shown in the Schedule or in the Declarations for Underinsured Motorist Coverage is our maximum limit of liability for damages because of ‘bodily injury’ resulting from any one accident. This is the most we will pay regardless of the number of:
- Claims made;
- Vehicles or premiums shown in the Declarations; or Vehicles involved in the accident.” Id at ¶10.
The Emcasco policy also contained a “set off” provision, that provided “Except in the event of a ‘settlement agreement,’ the limit of liability for this coverage 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. Id at ¶11.
Where multiple tortfeasors are involved and the insurer wants to offset the collective payments made by all tortfeasors against the underinsured coverage, the plain language of the policy is not the end of the inquiry. Id at ¶22. The court also considers whether application of the policy language violates the public policy behind the underinsured motorist statute. Id at ¶22.
Outcome of the Illinois Case Illinois Emcasco Ins. Co. v. Tufano
Three principles emerge from the Illinois case law:
- Underinsured motorist coverage should place the insured in the same position he or she would have occupied if the tortfeasor had carried insurance in the same amount as the insured;
- Underinsured motorist coverage exists to fill the gap between the amount received from the tortfeasor’s insurance and the amount of the insured’s underinsured-motorist policy limit; and
- Underinsured-motorist coverage is not intended to allow the insured to recover amounts from the insurer over and above the insured’s underinsured-motorist policy limit. Id at ¶25.
In situations such as Tufano, where there is one claimant and multiple tortfeasors, application of underinsured coverage can be complex when these three principles are taken into account. Id at ¶27. For example, in order to satisfy the second principle, Emcasco would only owe $105,000. Id. However, this would not satisfy the first principle, to put the injured passenger in the same position as if both at fault drivers had $500,000 in insurance coverage, which would entitle the injured passenger to $1,000,000 overall. Id. If the first principle was ranked above the second principle, then the third principle would be violated because Emcasco would be required to pay more than the policy limit. Id.
Ultimately, the Court determined that, where multiple tortfeasors are involved in an accident in which an underinsured motorist policyholder is injured, the policyholder must be placed in the same position as if each tortfeasor carried the same amount of insurance as the policyholder. Id. at ¶41. One tortfeasor’s payment cannot be used to offset the underinsurance gap of another tortfeasor; each instance of underinsurance must be viewed distinctly. Id. However, the amount of coverage the policyholder can receive from the underinsured motorist carrier is capped by the overall limit of the underinsured motorist policy, because the insurer should not be required to pay a policyholder more than was promised or more than the amount for which the policyholder paid in premiums. Id.
While the determination of underinsured insurance coverage involving multiple tortfeasors may be a difficult determination to make, insurers can rest assured that Illinois insurance law will not require a payment over and above the underinsured policy limit.
For information about this topic or any other insurance coverage concerns, contact Kelly Purkey at McKenna Storer.
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