A set-off provision in an insurance policy is a means for filling the gap between what another company pays and what an insured’s policy provides
Erie Insurance Exchange (Erie) filed a declaratory judgment action against Christine Triana (Triana), Michael Wagner and Christine Wagner, (the defendants) its insured’s asking the court to determine the amount of coverage remaining under the defendant’s policy. The Defendants were riding together when they were in an automobile collision with William Weinen (Weinen). The Defendants both claimed injuries from the accident and filed claims with Weinen’s insurance company, State Farm. State Farm paid $100,000 each to the Defendants under Weinen’s policy.
The Defendants also claimed Weinen was an underinsured motorist and filed claims under their Erie insurance policy’s uninsured motorist coverage which had a $300,000 per person limit. Erie issued $100,000 each to Defendants which reflected the amount available after the disbursement from Weinen’s policy was deducted. The Defendants rejected Erie’s payment of $100,000 to each of them and demanded arbitration regarding the remaining amounts under the policy. At the same time, Erie filed a declaratory judgment action to determine the remaining policy limits. In granting Erie’s summary judgment motion, the trial court found that $100,000 for each person was the remaining amount under the Erie policy. Because of a split limit provision in Erie’s policy, the court ruled that the $200,000 that was paid to the Defendants from State Farm’s policy applied against the Erie policy limit of $300,000, which leaves $100,000 remaining in the Erie policy for each person.
The Defendants appealed from the circuit court’s decision on the basis that the granting of Erie’s summary judgment motion was erroneous, claiming they were entitled to $200,000 each under the policy and that the set-off terms of the policy were ambiguous. On de novo review, the appellate court read the provisions together, as a whole to determine if there was more than one possible meaning.
The court read the provision for set-off as a means of filling the gap between what the other company paid and what was provided for by the insured’s (the Defendants) policy. Further, the appellate court found that Erie’s policy clearly stated that the per-accident limit (in this case $300,000) is the most that will be applied per accident, regardless of how many people are involved in the accident. The court also considered the type of policy, the risks that were involved, and the overall purpose of the policy. The court found that the policy provisions were unambiguous, and affirmed the lower court’s decision. Therefore, $100,000 per person was all that was available under the Erie policy to Defendants.