Double Recovery
Farmers Auto Insurance issued a policy to defendant’s stepfather. Defendant Coulson was covered as a family member under the policy. Coulson demanded UIM benefits however Farmers declined, claiming the policy contained setoff provisions and therefore did not owe defendant any benefits. Coulson was paid benefits from Subway, where the accident occurred.
The court’s primary objective is to ascertain and give effect to the intention of the parties, as expressed in the language of the policy. However, if the policy language is ambiguous, it will be construed against the insurer who drafted the policy.
Defendant (Coulson) argued that the policy is ambiguous regarding the setoff provisions. The trial court found the language of the policy clear, and that Coulson could not recover from Farmers. This court held that trial court erred because the setoff violated public policy.
An insurance company is entitled to a set off for uninsured motorist coverage only to the extent necessary to prevent double recovery. The court found that “any amounts paid by any person or organization who may be legally responsible” to be too broad and therefore against public policy. The defendant argued that the insurance company could only set off the amounts received from other insurance policies against his UIM coverage to the extent necessary to prevent double recovery. Therefore, the amounts that were not paid on behalf of the UIM (amounts paid by Subway in this situation) cannot be deducted from the amount the insurer could potentially have to pay.
