Court Called On To Resolve Coverage Conundrum With Two Tortfeasors

By Don R. Sampen, published, Chicago Daily Law Bulletin [October 4, 2016]

The 1st District Appellate Court recently held that underinsured motorist coverage is paid to a victim of an accident involving two or more tortfeasors based on a comparison of the victim’s total UIM coverage with each tortfeasor’s damage payment, capped by the victim’s total coverage.

The case is Illinois Emcasco Insurance Co. v. Tufano, 2016 Il App (1st) 151196 (Sept. 8, 2016). The UIM insurer, Emcasco, was represented by Best, Vanderlaan & Harrington. Cavanagh Law Group represented the accident victim, Erin Tufano.

Tufano was a passenger in a vehicle in 2013 being driven by Margaret Zienkiewicz. Zienkiewicz’s vehicle collided with another being driven by Nicole Mann. Tufano sustained serious injuries and claimed millions of dollars in damages.

Zienkiewicz’s vehicle was insured by State Farm with a bodily injury limit of $300,000 per person. State Farm paid Tufano $295,000, exhausting the policy limit. Mann’s vehicle was insured with Allstate with a bodily injury limit of $100,000 per person. Allstate paid $100,000 to Tufano.

Tufano was separately covered under an automobile policy issued by Emcasco having UIM coverage with a combined single limit of $500,000 per accident. Because the policy limit on each of the tortfeasor’s policies was less than Tufano’s UIM coverage, the court observed that each tortfeasor’s vehicle, by definition, see 215 ILCS 5/143a-2(4), was underinsured.

The Emcasco policy, however, contained a setoff provision stating that the UIM coverage would be reduced by all sums paid because of the bodily injury by or on behalf of persons who may be legally responsible. Emcasco thus took the position that, because Tufano had received a total of $395,000 from or on behalf of the two drivers combined, it owed only $105,000 in UIM benefits.

Tufano, on the other hand, claimed that she was owed the difference between each driver’s payment and the $500,000 limit of her policy, meaning the difference between the Zienkiewicz payment of $295,000 and $500,000, or $205,000, plus the difference between the Mann payment of $100,000 and $500,000, or $400,000 — for a total of $605,000.

Emcasco brought this declaratory action to determine its UIM coverage obligations. Following cross-motions for summary judgment, the trial court found in favor of Emcasco and awarded Tufano $105,000. She brought this appeal.

General UIM principles

In an opinion by Justice David Ellis, the 1st District vacated the trial court decision and remanded for a determination of Tufano’s damages. He started with the proposition that Emcasco’s position — that the total of the tortfeasors’ payments would be deducted from the Emcasco UIM limit—– was supported by the language of the Emcasco policy. But, he said, that did not end the inquiry.

He then cited case law that supported three separate principles applicable to UIM coverage:

• UIM 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.
• UIM coverage exists to fill the gap between the amount received from the tortfeasor and the amount of the insured’s UIM policy limit.
• UIM coverage does not allow the insured to recover from the insurer in excess of the insured’s UIM limit.

Most of the time, Ellis said, these principles do not conflict. But they can when there are multiple tortfeasors. For example, to fill the gap between what Tufano received from the two drivers together and the limit of her UIM policy, Emcasco would owe only the $105,000 for which it argued (second principle).

Such a payment, however, does not put Tufano in the same position she would have occupied (first principle) if each driver had $500,000 in coverage, which would entitle Tufano to $1 million. Yet for Tufano to collect $1 million in UIM benefits from Emcasco, Emcasco would be forced to pay $605,000, which would be in excess of its limit (third principle).

Application to these facts

To reconcile these principles with the case law, Ellis reasoned that where multiple tortfeasors are involved, the UIM policyholder must be placed in the same position as if each tortfeasor carried the same amount of insurance as the policyholder. Thus, one tortfeasor’s payment cannot be used, as Emcasco attempted to do, to offset the underinsurance gap of another tortfeasor. Each instance of underinsurance must be viewed distinctly.

The amount of coverage the UIM policyholder can receive from the UIM carrier is nevertheless capped by the overall limit of the UIM policy. Thus, the insurer cannot be required to pay a policyholder more than it promised, or more than the amount for which the policyholder paid in premiums.

As applied here, this reasoning entitled Tufano to a separate consideration of each underinsured driver’s payment. She thus, at least theoretically, would be entitled to receive $400,000 in UIM coverage based on the $100,000 recovery from Mann plus $205,000 in UIM coverage based on the $295,000 recovery from Zienkiewicz — for a total of $605,000. The total UIM payment from Emcasco, however, would be capped at the $500,000 UIM limit, the maximum to which Tufano would be entitled.

Ultimately, however, Ellis observed that, although she claimed millions in damages, Tufano’s actual damages had not yet been determined. To prevent any possibility of a double recovery, he therefore said that the case needed to be remanded for a determination of actual damages.

The court therefore rejected both parties’ litigation positions and held that Tufano would be entitled to recovery of up to $500,000 in UIM benefits, if the evidence on remand justified such an award.

Key point

For automobile injuries involving two or more tortfeasors, an injured victim having UIM coverage is entitled to a UIM benefit equal to the difference between his or her UIM benefit limit and the sum paid by or on behalf of each tortfeasor, the differences then aggregated, up to the UIM benefit limit.