Opinion ID: 1314390
Heading Depth: 2
Heading Rank: 2

Heading: Setoff of Tortfeasor's Liability Insurance Coveragethe West Virginia Requirement

Text: W.Va.Code, 33-6-31(b), as amended, the relevant part of which is quoted at the outset of section III.A. of this opinion supra, as well as the setoff language in the insurance policies in this case, see supra section I.B. of this opinion, contemplate, we conclude, that the tortfeasor's liability insurance coverage is to be set off against the amount of damages sustained by the injured person, not against the underinsured motorist coverage limits. As stated previously, the all sums ... as damages language of the statute evinces a public policy of full indemnification or compensation for damages uncompensated by the negligent tortfeasor. Thus, the statute requires the following computation of underinsured motorist coverage: the total amount of damages, reduced by the liability insurance coverage actually available to the injured person in question; the insurer providing underinsured motorist coverage is liable for the excess or uncompensated damages up to the underinsured motorist coverage limits. This approach furthers the goal of full compensation, without duplicating benefits. While W.Va.Code, 33-6-31(b), as amended, clearly requires this full compensation approach to the computation of underinsured motorist coverage when, as in this case, the injured person's underinsured motorist coverage limits exceed the alleged tortfeasor's motor vehicle liability insurance coverage limits actually available to the injured person in question, and, therefore, the alleged tortfeasor's vehicle was an underinsured motor vehicle as defined in that statute, this Court is aware of a possible internal inconsistency in this statute, by virtue of the legislature's definition of underinsured motor vehicle. That definition, comparing the tortfeasor's liability insurance limits with underinsured motorist coverage limits, instead of comparing the liability limits with the total amount of damages sustained by the injured person, causes confusion in cases, unlike here, when the underinsured motorist coverage limits are equal to or less than the tortfeasor's liability limits, but such liability limits are less than the total amount of damages. [13] The emphasis upon full compensation for damages was foreshadowed in Deel v. Sweeney, ___ W.Va. ___, 383 S.E.2d 92 (1989), wherein this Court stated: The purpose of optional underinsured motorist coverage is to enable the insured to protect himself [or herself], if he [or she] chooses to do so, against losses occasioned by the negligence of other drivers who are underinsured. Id. at ___, 383 S.E.2d at 95 (emphasis added). Moreover, courts in other jurisdictions having underinsured motorist legislation very similar to W.Va.Code, 33-6-31(b), as amended, have held that the liability insurance coverage is to be set off against total damages. For example, in American States Insurance Co. v. Estate of Tollari, 362 N.W.2d 519 (Iowa 1985), the underinsured motorist statute stated that it was for the protection of persons insured under such [motor vehicle liability insurance] policy who are legally entitled to recover damages from the owner or operator of ... an underinsured motor vehicle[.] The Supreme Court of Iowa held in that case that a buyer of underinsurance coverage is entitled to recover on that clause [of the policy] for the amount of his [or her] loss that the tortfeasor's liability insurance does not reach, subject to the limit of the underinsurance clause. Id. at 522. The court added: Any other interpretation of underinsurance would mean the victim cannot recover part of the underinsurance limit he [or she] has bought and paid for, and that portion of the [underinsured motorist coverage] limits [, if reduced by the amount of the liability insurance coverage limits,] also would be illusory. Id. A New York court similarly stated that to allow a reduction of the underinsured motorist coverage limits by the liability insurance coverage limits would allow the policy to take away the coverage that the statute required. Garry v. Worldwide Underwriters Insurance Co., 120 Misc.2d 91, 91-93, 465 N.Y. S.2d 483, 484 (Sup.Ct.1983), aff'd by mem. decision, 101 A.D.2d 717, 475 N.Y.S.2d 307 (1984). Referring to the underinsured motorist coverage, the court in Garry observed: [T]he dollar amounts of such coverage, which are stated on the face of the policy, are rendered meaningless by said reduction of underinsured motorist coverage limits by the liability insurance coverage limits. Id. In the present case the Youlers' automobile insurance policies provide that automobile liability insurance coverage of a tortfeasor is to reduce [a]ny amounts otherwise payable for damages under this [uninsured/underinsured motorist coverage] endorsement[.] (emphasis added) This policy language clearly requires the tortfeasor's liability insurance coverage to be set off against damages, not against the underinsured motorist coverage limits. [14] State Auto points to the fact that W.Va.Code, 33-6-31(b) was amended in 1988, after the operative facts in this case, to very explicitly preclude setoffs of liability insurance coverage against underinsured motorist coverage limits. The language added, in two places, is as follows. First, at the end of the statutory language, all sums ... as damages ... up to an amount not less than limits of ... liability insurance purchased by the insured, these words were added: without setoff against the insured's policy or any other policy. Second, at the end of the definition of underinsured motor vehicle in this same statute, these words were added: No sums payable as a result of underinsured motorists' coverage shall be reduced by payments made under the insured's policy or any other policy. State Auto argues that these additions in 1988 indicate a change in the law, so that prior thereto, and therefore in this case, the statute allowed a setoff of the tortfeasor's liability insurance coverage against the injured person's underinsured motorist coverage limits. We disagree. In light of the clear all sums ... as damages language in the statute prior to 1988, this Court believes that the 1988 additions in this regard to the statute constitute only a clarification of the legislature's original intent to preclude the type of setoff proposed by State Auto here. See Mid-Century Insurance Co. v. Daniel, 101 Nev. 433, 436-37, 705 P.2d 156, 158-59 (1985) (plain language of original enactment, applicable at time of case, was to embrace excess-type underinsured motorist coverage, requiring setoff to be against damages; more explicit language in subsequent amendment to statute was merely a clarification of legislature's original intent, not an indicator of a change in the law). The goal of providing full indemnification to individuals injured by the negligent operation of motor vehicles by inadequately insured motorists would be well served by employing setoffs so [that] they apply to avoid the duplication of benefits, rather than the reduction of liability for the insurer[,] when the tortfeasor's liability insurance is not adequate to provide full indemnification. 2 A. Widiss, Uninsured and Underinsured Motorist Insurance § 41.7, at 101 (2d ed. 1990). This Court holds that W.Va.Code, 33-6-31(b), as amended, on uninsured and underinsured motorist coverage, contemplates recovery, up to coverage limits, from one's own insurer, of full compensation for damages not compensated by a negligent tortfeasor who at the time of the accident was an owner or operator of an uninsured or underinsured motor vehicle. Accordingly, the amount of such tortfeasor's motor vehicle liability insurance coverage actually available to the injured person in question is to be deducted from the total amount of damages sustained by the injured person, and the insurer providing underinsured motorist coverage is liable for the remainder of the damages, but not to exceed the coverage limits. Therefore, the answer to certified question number 8, see supra note 9, is no. The reduction is from damages, not from the underinsured motorist coverage limits. [15]