Assessing a UM/UIM Claim, pt. 2: Understanding Your Offsets

In our first article, we discussed the importance of reviewing an insurance policy following an accident, assessing liability, determining the damages caused, researching the ownership of the uninsured/underinsured vehicle, as well as any implications arising from the statute of limitations. All of these are key to ensuring your client is taken care in an efficient and timely manner.

In this article, we’ll look at a common issue in UM/UIM cases – when payments are made by an underinsured driver or their insurance carrier that then affect your client’s claim under their own UIM coverage. These are known as offsets, and they may be the difference between trying and not trying a case. Let’s dive in…

Liability and Who Can Collect What

Where it concerns liability, anyone filing a UIM claim should be aware that, should they choose to settle a liability claim for less than the policy’s full limit, the UIM carrier is entitled to deduct the full limit of the defendant’s policy from the plaintiff’s UIM benefits (also known as an offset). However, liability carriers do not get credit for earlier payments made by UM/UIM carriers.

For example, in Bartley v. Guillot, a case based on a multi-car accident, the plaintiff settled with her UM/UIM carrier for $20,000 prior to trial and dismissed the uninsured driver from the case. The case proceeded to trial against the insured driver and the plaintiff was awarded $30,000. The Court held that the Defendant was not entitled to a credit for the amount paid by plaintiff’s UM/UIM carrier because the payment was made under her insurance policy contract. This wasn’t considered a double recovery because the UM carrier’s right of subrogation was against the uninsured driver and not the insured defendant. Whether an offset applies depends on the facts of each case.

  • Worker’s Compensation: UM/UIM carriers are not always entitled to an offset/credit for worker’s compensation benefits. Worker’s compensation does not have a subrogation interest against UM(UIM) benefits paid under the injured worker’s policy, although it does under the employer’s UM/UIM coverage. As a result, whether an offset/credit is allowed depends on whether the worker’s compensation coverage was paid for by the worker or the employer.
  • Liability Settlements: UM/UIM carriers will receive credit for all the liability settlements, even if, in a subsequent trial, one of the settling defendants is exonerated from liability. In Melencon v. State Farm Mut. Auto Ins. Co., the plaintiff settled with two defendants involved in a multivehicle accident and then went to trial against the UIM carrier. The jury decided liability against the “underinsured” defendants but found only one of the defendants liable. The plaintiff argued the UM/UIM carrier should not get credit from the defendants who were exonerated because they were not “legally responsible” for the plaintiff’s damages. The court rejected that argument, allowing the UM/UIM carrier full credit for all settlements regarding liability.

So we see that, in instances where the damages recovered by the plaintiff in settlement exceed the amount of damages found by a jury, the plaintiff cannot recover any damages under the UM/UIM policy.

Other Issues: Personal Injury Protection (PIP) and MedPay

In instances where Personal Injury Protection (PIP) and MedPay are concerned, such as Texas Farmers Insurance Co. v. Fruge, PIP payments must be made to the beneficiary – not to the healthcare provider – absent a valid assignment of benefits. If the insurance company discounts payments made to a healthcare provider, and that healthcare provider accepts the discounted payment in full satisfaction of the debt, the insured does not have standing to challenge the discounted payment.

How much do you stand to recover after any potential offsets? That is the question one will have to ask when deciding to pursue any legal action. Everyone’s circumstances are different, but it may be the case that, once that number comes in under a certain amount, the return on your investment is not worth the trouble.

In our next article, we’ll look at the legal definitions of uninsured and underinsured, and how to tell when a vehicle involved in an accident is one or the other.