Setoffs For Settlements Between Parties and For Insurers
In American Economy Ins. Co. v. Greeley, American Economy Insurance filed a declaratory judgment against Andrew Greeley, who sought uninsured motorist benefits on his policy and his company’s policy. Greeley purchased a commercial insurance policy package for himself and his company that included underinsured motorists coverage for one million dollars. Greeley suffered permanent brain injury as he exited a taxi. He filed a personal injury case against the taxi driver and its owner. His $250,000 insurance policy did not fully compensate him for his injuries. Greeley made an UIM claim with the policy he held with American Economy Insurance Company. The insurance company maintained that Greeley was not entitled to UIM coverage because he was not a named insured; and, in any event, the insurance company is entitled to an offset for amounts Greeley received as worker’s compensation benefits.
The court reviewed whether the insurer can be allowed to setoff for worker’s compensation benefits received by the insured. American Economy Insurance’s policy contains an UIM endorsement that provides the limits of liability to one million dollars per occurrence. The UIM portion of the insurance policy in question contains a section entitled “Limits of Insurance” and sets forth UIM limits both when there is and there is not a settlement agreement. In the event of a settlement, the policy allows for the limit of the insurance to be reduced by all sums paid or payable. However, there is also a provision that states that under any workers’ compensation, disability benefits, or similar law, the limits of insurance for the coverage shall not be reduced by any sums paid or payable under Social Security benefits.
On July 20, 2009, Greeley wrote to his insurance company, American Economy Insurance, and notified it that the amount of monetary damages he sustained as a result of his traumatic brain injury would result in an UIM claim under his policy with the insured. Again, on January 22, 2010, the insured wrote to his insurance company notifying it that he had a settlement offer from the owner of the underinsured motor vehicle for the full policy limits of $250,000.00 and requested instructions from his insurance company as to how to proceed. Greeley’s insurance company inquired about other existing insurance policies that might reduce his UIM claim. However, the letter did not discuss the issue of setoffs as outlined in the policy if a settlement agreement was reached between the parties. A settlement agreement under the policy merely requires the insurer and insured to agree that the insured [Greeley] is legally entitled to recover damages from the tortfeasor and agree on the amount of damages.
Therefore, the court found that given the plain definition of “settlement agreement” provided in the parties’ insurance contract, this typical exchange of letters by the insured and the insurer shows the parties reached an agreement that Greeley was entitled to recover the tortfeasor’s policy limits of $250,000 that was offered and more, since American Economy Insurance did not wish to subrogate. Because there exists an agreement between the parties that this settlement was justified, section D(3) of the Insurance Policy together with section F(3), which defined “settlement agreement,” dictates that the only setoff to be applied to the parties’ one million dollar insurance policy is the $250,000 amount paid to the defendant by the underinsured.
American Economy Ins. Co. v. Greeley, 2013 WL 968250 (Ill.App. 1 Dist., 2013)
