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Insurer Is Entitled To Offset Uninsured Motorist Benefits
Payment By Amount Of Tortfeasor Settlement Even
If Insured Is Not Fully Compensated

Barbuto v. Peerless Insurance Company , No. 2006-879 (December 18, 2007) 

Facts: Barbuto was injured in an automobile accident and settled with the negligent driver for the $50,000 liability limit of his policy. At the time of the accident, Barbuto was insured by Peerless under a policy with uninsured motorist coverage in the amount of $100,000. Since the $50,000 settlement did not fully compensate for her injuries, Barbuto demanded the $100,000 policy limits from Peerless. Peerless claimed that it was entitled to reduce the amount of recoverabel uninsured motorist benefits by the amount Barbuto received from the tortfeasor, and paid only $50,000.

Barbuto filed a declaratory judgment action arguing that Peerless was not entitled to offset her award by the amount of the tortfeasor's settlement until she was fully compensated for her damages. The trial court ruled that although the uninsured motorist provisions of the policy were unambiguous and allowed Peerless to an offset in the amount of the tortfeasor's settlement, conflicting language in the "General Provisions" section of the policy resulted in an ambiguity. As a result, the court ruled that Peerless was not entitled to the offset.

Peerless appealed, arguing that the trial court erred in concluding that the policy was ambiguous. It claimed that Part F of the "General Provisions" section dealt exclusively with reimbursement and subrogation rights, and, therefore, did not conflict with the setoff rights governed by Part C of the "Uninsured Motorists Coverage" section.

Held:    Reversed. 

The Court noted that Part C of the "Uninsured Motorists Coverage" section, which provided that "[t]he limit of liability shall be reduced by all sums paid because of 'bodily injury' by or on behalf of persons or organizations who may be legally responsible," clearly and unambiguously allowed Peerless to reduce Barbuto's award by the amount of the tortfeasor's settlement.

The Court then held that Part F of the policy's "General Provisions," which addressed Peerless' right to recover from another in the event of a payment under the uninsured motorist provisions, clearly addresses reimbursement and applies only after Peerless has made an uninsured motorists payment under the policy. Under Part F, if the insured collects funds from other sources after Peerless has made a payment, Peerless is entitled to reimbursement only after the insured is fully compensated. Thus, the Court concluded that Part C and Part F do not conflict and Peerless was entitled to reduce its $100,000 payment by $50,000, the amount Barbuto received from the tortfeasor.


Mike Wallenius

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