In an en banc decision issued on September 28, 2012, the Superior Court reversed previous case law and held that a defendant is no longer entitled to a credit against a verdict for any UIM benefits a plaintiff might have received prior to trial. Since 2009, in the case of Pusl v. Means, 982 A.2d 550 (Pa. Super. 2009, defendants had been entitled to receive a credit against a jury verdict for the amount of money a plaintiff received in UIM benefits from an auto insurance carrier. The previous decision of the Superior Court held that UIM benefits were a “double recovery” and were precluded by §1722 of the Motor Vehicle Financial Responsibility Law (MVFRL). In Smith v Rohrbaugh, 2012 Pa. Super 208 (Pa. Super 2012), the Superior Court determined that Pusl was wrongly decided.

 The plaintiff in Smithreceived a jury verdict, after deduction of wage loss payments, in an amount of $35,036. The trial court, following Pusl, then granted a motion to mold that verdict to zero because the plaintiff had already recovered $75,000 in UIM benefits. The en banc Superior Court reversed and reinstated the verdict by holding that the language of §1722 of the MVFRL, which precludes plaintiffs from recovering benefits paid by certain first party benefit programs, including worker’s compensation and medical insurance benefits, did not include UIM benefits. The court further determined that the Pennsylvania legislature did not intend monies received from UIM benefits to be considered precluded “first party benefits” under §1722. Because UIM benefits were specifically designated as separate, available coverage under the MVFRL permitting UIM benefits to be credited against a third party award would violate the express intent of the legislature to provide an additional, separate coverage to insureds. The Superior Court also noted that although UIM benefits are commonly referred to as “first party benefits,” in fact, they are not so under the law as the award of the benefit is “inherently adversarial” and subject to arbitration or trial. 

The Superior Court’s en banc decision was fairly straight forward and eliminated the credit against a verdict for those amounts received by the plaintiff in UIM. However, in dicta, the court took the opportunity to also discuss the issue of how UIM subrogation may have affected preclusion in this matter. In the Smith case, the UIM insurer, State Farm, agreed to waive its subrogation rights because the tortfeasor was also a State Farm insured. Thus, the plaintiff argued that the molding of the verdict to zero by the trial court essentially reinstated the subrogation rights that were waived by State Farm. The court agreed with this argument, and confirmed that subrogation rights can be waived or modified by agreement of the parties. The court further agreed that allowing for the UIM credit against the verdict impermissibly interfered with the agreement between the plaintiff and State Farm as to the waiver of that subrogation.

What It Means to You

On the liability side, obviously those adjusting/defending motor vehicle claims where plaintiff has already received a payment for UIM benefits can no longer expect that monies received by the plaintiff will be credited against any jury verdict at trial. This will necessarily lead to increased damage exposure. For those who handle the UIM aspects of claims, since these amounts can no longer be deducted from any jury verdict, there may be less inclination to waive subrogation in UIM claims when there is the same insurer for both the plaintiff and defendant. The Smith decision has no effect on an UIM insurer’s right to receive a third-party credit in a UIM settlement or award. The law remains that such UIM awards or settlements may be molded to reflect available third party coverage, regardless of the amount of any third party settlement or award.