Safeco Gets a Win in Underinsured Motorist Coverage Dispute

The Connecticut Appellate Court has ruled that an auto insurer is not obligated to pay underinsured benefits to make up the difference between the coverage limits available and the lower amount its insureds actually receive from the at-fault driver’s insurer because some of the payments went to other injured claimants.

The appeals court cited past state Supreme Court decisions that set forth the rule that where the applicable underinsured liability limits in the at-fault driver’s policy are equal to or greater than the underinsured benefits in the claimant’s policy, the claimant’s motor vehicle is not underinsured and the coverage is not triggered. The benefits are triggered only when the liability insurance of the tortfeasor is less in amount. Whether the insured actually receives that full amount is not considered.

The case involved insureds of Safeco Insurance Co., the Bouchards, who were involved in an accident and sued the at-fault drivers, the Wheelers. The Wheeler policy issued by State Farm Mutual provided underinsured motorist coverage of up to $100,000 per person and $300,000 per accident. State Farm made payments to the plaintiffs and other individuals injured in the accident. State Farm paid $80,500 to Caitlyn Bouchard, $60,000 to Kayla Bouchard and $50,000 to Madalyn Bouchard. It also paid $109,500 to settle claims by additional injured persons, thereby exhausting the coverage limits.

The Bouchards’ policy with Safeco also had limits of $100,000 per person and $300,000 per accident. Since the Bouchards did not get their full $300,000 from State Farm, they turned to their own underinsured benefits to fill the gap. Safeco denied that claim, maintaining the Bouchards were not entitled to underinsured motorist benefits because their underinsured motorist coverage did not exceed the liability limits of the Wheelers’ policy.

In ruling as it did in agreement with Safeco, the appeals court reversed a trial court that in 2021 found for the Bouchards because it concluded that a 2014 amendment to the state’s underinsured motorist law legislatively overrode the rule set by the Supreme Court.

The trial court reasoned that the legislative amendment (P.A. 14-20) required that the proper comparison of the applicable limits of the policies of the tortfeasor and the claimant must be between the amount of liability insurance actually available to a plaintiff under a tortfeasor’s policy, after other claimants under that policy are paid, with the amount of a plaintiff’s underinsured motorist coverage.

Because the total recovery obtained by the plaintiffs was less than the $300,000 per accident limit for coverage under the Safeco policy, the trial court concluded that the Bouchards were entitled to additional underinsured motorist benefits. The trial court denied a Safeco motion for summary judgment.

But the appeals court said that the 2014 amendment was intended to address scenarios where offsets properly may be taken by an insurer but it did not apply to this case in which the tortfeasor and the claimant had identical coverage limits. The amendment only had to do with situations where the claimant’s underinsured motorist coverage exceeded the limits of tortfeasor’s liability coverage.

According to the appeals court, in passing the amendment, the legislature did not intend to alter the definition of an underinsured motor vehicle or to overrule the precedent of the Supreme Court concerning that definition.

The appeals court noted that the legislative objective in enacting the original underinsured motorist law was “simply to give an insured who is injured in an accident the same resource he would have had if the tortfeasor had carried liability insurance equal to the amount of the insured’s uninsured motorist coverage.”

The court cited the state Supreme Court which has said that while underinsured motorist coverage is meant to protect the named insured and other additional insureds from suffering an inadequately compensated injury, ”[i]t does not follow, however, that the legislature, in providing for underinsured motorist coverage, necessarily intended to guarantee that each and every accident victim would be fully, or even adequately, compensated for injuries caused by an underinsured motorist.”

The fact that the tortfeasor’s liability coverage has been exhausted because of multiple claims does not change the effect of the statute in activating uninsured motorist coverage only when the liability insurance of the tortfeasor is less in amount, the appeals court wrote, again citing the high court.

The appeals court further recognized that in 1993 the legislature enacted a law that requires auto insurers to offer an option known as underinsured motorist conversion coverage for an additional premium to consumers who wish to purchase it in lieu of standard underinsured coverage. In contrast to traditional underinsured motorist coverage, underinsured motorist conversion coverage is not reduced by the amount of any payment received by or on behalf of the tortfeasor or a third party. The Bouchard policy did not provide underinsured motorist conversion coverage.