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Winters v. State Farm Mutual Automobile Insurance Co.2/29/2000
Three questions are presented. (1) After a PIP insured has fully recovered his or her damages, does a PIP insurer have a right to reimburse itself for its earlier PIP payments by deducting the amount of such payments from a UIM award, assuming its policy so provides? (2) Does a PIP insurer maintain this right even if it elects to subrogate against the at-fault tortfeasor? (3) Is a PIP insurer's right conditioned on its paying a pro rata share of costs and fees that the PIP insured reasonably incurred to recover1full compensation ? The answer to each question is yes.
On January 30, 1994, Winters was hit head-on by Anna Cunningham, then rear-ended by James Edalgo. Winters was injured.
Cunningham had liability insurance with Leader National Insurance Company. Her limits were $25,000. Edalgo was uninsured.
Winters had personal injury protection coverage (PIP) and underinsured motorist coverage (UIM) through State Farm. Her PIP and UIM limits exceeded the amounts in issue here.
The Winters-State Farm policy provided that State Farm could recover its PIP payments from money recovered by the insured, provided the insured was fully compensated first. Using 'we' to mean State Farm, the policy stated that '{w}e are to be repaid our payments . . . out of any recovery{,}' but that '{o}ur right to recover our payments applies only after the insured has been fully compensated for the bodily injury, property damage or loss.' The policy also stated that '{a}ny amount paid or payable for damages under the first party benefits coverage will not be paid again as damages under this {UIM} coverage.'
The Winters-State Farm policy also provided that State Farm would share in the expenses of obtaining a recovery under certain circumstances. The policy stated:
If the insured recovers from the party at fault and we share in the recovery, we will pay our share of the legal expenses. Our share is that per cent of the legal expenses that the amount we recover bears to the total recovery.{}
Four proceedings took place after the accident. (1) State Farm paid Winters or her health care providers $8,271 under its PIP coverage. (2) Winters sued Cunningham. She settled for $25,000 and was paid that amount by Leader National. She did not share this recovery with State Farm. (3) State Farm or its assignee sued Edalgo, recovering a default judgment for $8,271, plus interest. The record does not show whether the judgment has been paid. (4) Winters presented a UIM claim to State Farm. She and State Farm agreed that Cunningham and Edalgo were at fault, and that she was fault-free. The arbitrator awarded total damages of $40,271, including special damages of $8,271 and general damages of $32,000. The parties agreed that State Farm could deduct $25,000, representing Cunningham's liability limits. They disagreed on whether State Farm could deduct $8,271, representing recoupment of its earlier PIP payments. State Farm unilaterally recouped its PIP payments by paying only $7,000 on the UIM award ($40,271 award, less $25,000 liability limits and $8,271 previous PIP payments).
In June 1997, Winters sued State Farm for an additional $8,271. She claimed, in effect, that State Farm had no right to reimburse itself for its PIP payments by deducting those payments from her arbitration award. She also claimed, in the alternative, that State Farm had no right to reimburse itself unless it paid a pro rata share of the fees and costs she had reasonably incurred to litigate against Cunningham and arbitrate against State Farm (in other words, unless State Farm paid a pro rata share of the fees and costs she had reasonably incurred to recover her total damages)
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