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No Public Policy Violation in Dual Recovery Exclusion; Estate may not double dip for liability and u

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March 01 2004 - No Public Policy Violation in Dual Recovery Exclusion; Estate may not double dip for liability and u

The estate of a man killed in a single-vehicle accident may not recover liability and underinsured motorist benefits from the same policy, a federal district judge has ruled.

While the estate argued that the decedent had no direct control over the amount of liability coverage on the policy held by his father, U.S. District Judge John E. Jones III said this is a distinction without a difference.

By insuring his vehicle under his father’s policy, the decedent, Brent A. Leiter, “must, at a minimum, be charged with constructive knowledge of the amount of liability insurance recoverable under the policy,” Jones wrote in Allstate Insurance Co. v. Leiter, PICS Case No. 04-0257 [M.D. Pa. Feb. 23, 2004] Jones, J. [16 pages]. “Had the bodily injury coverage been unsatisfactory to Decedent, he certainly could have elected to insure his vehicle under a separate policy. This, he did not do.”

To now award Brent’s estate UIM benefits, in addition to $57,500 in liability coverage, would violate not only the express terms of Charles D. Leiter’s policy with the Allstate Insurance Co. but also the public policy underlying the Motor Vehicle Financial Responsibility Law, Jones concluded.

“The Estate seeks to convert the more cheaply obtained underinsured benefits provided under the Allstate policy to more expensive liability coverage also provided therein,” the judge wrote. “This violates the spirit, if not the letter, of the MVFRL.”

The case was filed as a declaratory judgment action in June 2003, in which Allstate asked the U.S. District Court for Middle Pennsylvania to declare that at the time of the accident Brent Leiter’s vehicle did not meet the definition of an underinsured vehicle under Charles Leiter’s policy.

Brent and a friend, Andrew J. Guizio, were traveling in Brent’s Chevrolet Baretta on March 11, 2001, when they were involved in a single-vehicle accident, according to Jones’ opinion. Both men were killed in the crash. While it was unclear who was driving at the time of the accident, Brent’s estate contended that Guizio was driving, while Guizio’s estate argued that Brent was driving.

The Leiters’ policy provided $100,000 in bodily injury liability and $100,000 in UIM coverage for four vehicles, including Brent’s Baretta, the opinion stated. In April 2002, Allstate tendered the $100,000 bodily injury limit to both estates. By the terms of a mediated settlement, $57,500 was awarded to Brent’s estate, and $42,500 to Guizio’s, according to the opinion.

After the settlement, Brent’s estate filed a UIM claim, which Allstate denied, prompting the court action.

Ruling on Allstate’s motion for judgment on the pleadings, Jones agreed with the insurer that two exclusions under the Leiters’ policy precluded UIM coverage for Brent’s Baretta in this case.

The exclusions exempt UIM benefits for a motor vehicle “insured for bodily injury liability under Part 1 of this policy,” as well as a vehicle “owned by, or furnished or available for the regular use of you or any resident relative.”

Acknowledging that the exclusions preclude coverage for the Baretta in this case, the estate nonetheless argued that UIM benefits are available for the three remaining vehicles under the policy. Moreover, the estate argued, even if the terms of the policy preclude UIM coverage, such exclusions violate the public policy of the MVFRL.

Citing the dual recovery exclusion, Jones first rejected the estate’s argument that UIM benefits are available under the three vehicles not involved in the accident.

Considering the public policy arguments, Jones turned to state appellate precedent to ascertain the underlying policy of the MVFRL.

Citing the Pennsylvania Superior Court’s decision in Kelly v. Nationwide Insurance Co., 606 A.2d 470 [Pa. Super. 1992], Jones noted that statutory law governing UIM coverage suggests that such benefits are available only when an accident involves two or more vehicles with separate policies. One policy provides the source of liability coverage, which is insufficient to compensate the victim, while the other, usually held by the injured party not at fault, provides the source of UIM coverage.

“Recognizing that liability insurance is the most expensive form of insurance coverage in Pennsylvania and seeking to prevent insureds from converting less expensive UIM insurance into the more expensive liability insurance, Pennsylvania courts have repeatedly held that in cases involving single tortfeasor accidents, dual recovery of UIM benefits and liability benefits under the same contract are impermissible,” Jones explained.

In Kelly, the Superior Court rejected a challenge to the public policy underlying dual recovery exclusions. In that case, the plaintiff was involved in a single-vehicle accident, in which her husband was driving, and had recovered the policy’s liability limit for bodily injury. She argued that the UIM exclusion should be invalidated because “in substantive terms her factual position is identical to that of a separate policyholder” - her husband.

The court rejected this argument, noting that the plaintiff and her tortfeasor husband had the ability to purchase more liability coverage, if they so chose. Rather, the Kelly court said, the goal of UIM coverage is “to protect the injured claimant against the risk that a tortfeasor over whom the claimant has no control purchases an inadequate amount of liability coverage.”

In the present case, Brent’s estate attempted to distinguish its case from the Kelly ruling, arguing that neither Brent nor the named insured had control over the amount of liability coverage secured by the professed tortfeasor in this case, Guizio.

But Jones said this argument doesn’t hold any water, given that Charles controlled the amount of liability coverage purchased for the vehicle involved in the accident. Thus, Jones said, he “also had control over the liability insurance available to Guizio and Decedent at the time of the accident. ...

Counsel for the estate, John R. Bonner of Casale & Bonner in Williamsport, said his clients had no intention of appealing the judge’s ruling.

In all large truck cases it is essential that measures be taken promptly to preserve evidence, investigate the accident in question, and to enable physicians or other expert witnesses to thoroughly evaluate any injuries. If you or a loved one is a victim of a large truck accident, call the Truck Accident Lawyers Group, Inc. now at (877) 736-4222 or CLICK HERE TO SUBMIT A SIMPLE CASE FORM. The initial consultation is free of charge, and if we agree to accept your case, we will work on a contingent fee basis, which means we get paid for our services only if there is a monetary award or recovery of funds. Don't delay! You may have a valid claim and be entitled to compensation for your injuries, but a lawsuit must be filed before the statute of limitations expires.