Underinsured driver: Yes or no?

Underinsured driver: Yes or no?

On September 29, 2011, Matthew Wallace was driving south on Route 26 in Woodstock; Freja Folce and her minor daughter Zoe were passengers in the vehicle. Corey Hill, who was driving in the opposite direction in a vehicle owned by his employer, Twin Pines Construction, Inc., lost control while attempting to pass another vehicle, crossed the center line, and collided with Wallace’s vehicle. The accident was caused by Hill’s negligence.

Hill was acting in the course andscope of his employment when theaccident occurred. His Twin Pines vehicle was insured under a SafetyInsurance Company policy that provided liability coverage of $50,000 per person and $100,000 per accident. Twin Pines was also insured under an excess policy issued by Alterra Excess Surplus Insurance Company that provided $2 million in excess commercial auto liability coverage. The Alterra policy required Twin Pines to maintain $1 million in primary coverage and provided that Alterra was liable only “to the extent that it would have been held liable had the insured complied” with that requirement.

Wallace was insured under a State Farm Mutual Automobile Insurance Company policy that provided uninsured motorists coverage of $100,000 per person and $300,000 per accident. Wallace was also insured under a separate State Farm policy that covered a different vehicle with the same UM coverage limits.

In August 2013, Wallace and his co-plaintiffs filed complaints against Twin Pines, Hill, and State Farm. After the plaintiffs settled with Twin Pines, Alterra paid its excess policy limits—$1 million to Wallace and $1 million to Freja Folce. Safety also paid its policy limits—$50,000 to Freja Folce and $50,000 for the benefit of Zoe. All claims against the defendants other than State Farm were then dismissed with prejudice.

The plaintiffs and State Farm agreed for purposes of summary judgment that the plaintiffs’ aggregate damages exceeded $100,000—the per-accident limit of Safety’s primary policy—which would entitle the plaintiffs to UM benefits under the State Farm policies if State Farm were liable to pay UM benefits. The parties agreed to resolve the legal issue of State Farm’s liability by summary judgment.

In May 2016, State Farm moved for summary judgment and the plaintiffs moved for partial summary judgment. On August 8, 2016, the court denied the plaintiffs’ motion and entered summary judgment for State Farm upon finding that “Defendant Hill was not an underinsured driver” at the time of the accident and therefore “State Farm is not required to pay.” The plaintiffs appealed.

On appeal, the court stated that thequestion it must resolve was whether the intermediate range from $100,000 to the limits of State Farm’s UM liability represented a gap in coverage, meaningthat Hill was an underinsured driver, orwhether the $2.1 million in payments by Safety and Alterra, significantly exceeding State Farm’s maximum UM liability, meant that, as the trial court found, “Hill was not an underinsured driver.”

State Farm’s position was: The plaintiffs’ maximum UM coverage was less than the $2.1 million that they received from Twin Pines’ liabilityinsurers; therefore, there was no underinsured motorist gap that State Farm was responsible to cover. That position, the court said, was supported by its previous decisions.

Here, the court noted, the plaintiffsrecovered far more from Hill’s insurersthan the maximum amount of UM coverage provided by the State Farmpolicies. Accordingly, they surpassed thesame recovery that would have been available had Hill been insured to the same extent.

Here, the court continued, offsetting the amount of UM coverage available to the plaintiffs with Twin Pines’ $2.1 millionpayment yielded the trial court’s result—“There is no gap in coverage and defendant State Farm is not required to pay.”

The judgment of the trial court was affirmed.

Wallace et al. vs. State Farm Mutual Automobile Insurance Company-Supreme Judicial Court of Maine-June 29, 2017-Docket: Cum–16–408.