Opinion ID: 2086626
Heading Depth: 1
Heading Rank: 8

Heading: Williams and Schigur

Text: In Williams and Schigur the plaintiffs purchased the standard no-fault policy and also paid an additional premium for uninsured motorist coverage. Both plaintiffs were involved in accidents with negligent uninsured motorists. The insurers paid no-fault benefits as required by the policies. Arbitrators found both plaintiffs entitled to $20,000 uninsured motorist benefits exclusive of economic loss. Relying on a clause in the policy, the companies deducted the amount of the no-fault benefits from the $20,000 payable under the endorsement. [67] The clause reads: In consideration of the insurance afforded under section I of this endorsement and the adjustment of applicable rates any amount payable under the protection against uninsured motorists (family protection) coverage shall be reduced by the amount of any personal protection benefits paid or payable under this or any other automobile insurance policy because of bodily injury to an eligible injured person. The insurers would have us construe the clause as authorizing the subtraction of amounts paid for no-fault benefits from the policy limits of uninsured motorist protection without regard to the total damages which would be payable by the uninsured motorist or the nature of those damages, economic or non-economic. We decline to do so. The set-off clause, whether regarded as ambiguous [68] or inconsistent with the reasonable expectations of the insured, [69] cannot be enforced in the manner the insurers seek. Under the no-fault motor vehicle liability act an insured may collect from his insurer for work loss and medical expenses without regard to fault. [70] He may sue the negligent tortfeasor for excess economic loss and, if the threshold of injury is met, for non-economic loss. [71] The statute requires that motorists carry residual liability insurance in addition to no-fault insurance to provide a source of recovery to persons severely injured as a result of driver negligence. [72] If a motorist is uninsured he may be sued for all economic loss as well as above-threshold non-economic loss. [73] A purpose of the no-fault act is to provide a contractual right of action against one's own insurer for wage loss and medical expenses arising from a motor vehicle accident. [74] A tort action for non-economic and excess economic loss was preserved in cases of severe loss. The Legislature has thus divided an injured person's loss into two categories  loss for which the no-fault insurer is liable and loss for which the tortfeasor is liable. No-fault insurance provides security for the first type; uninsured motorist coverage, which presupposes that the insured is entitled to recovery under the tort system, provides security for the second type  it is offered to protect against being left with a worthless claim against an uninsured motorist. [75] One who has purchased uninsured motorist coverage would not expect to collect twice for the same economic loss and the insurer prevents this from happening through the set-off clause. But neither would he expect to have his uninsured motorist coverage reduced or eliminated altogether because of other coverage he has purchased. He would expect, even in the face of the set-off clause, that amounts paid by the insurer for economic loss would not reduce the amount payable for non-economic or excess economic loss. In providing insurance against the uninsured motorist, the insurer promises the insured that his right of action for greater than threshold injuries will not be worthless if the tortfeasor turns out to be uninsured. If the tortfeasor is insured or otherwise collectible, the insurer paying no-fault benefits has a statutory right to reimbursement for benefits theretofore paid by it only out of a recovery for those economic losses. [76] So, too, if the insurer contracts to make good for an uninsured motorist  coverage complementary and supplementary to the basic no-fault policy and standing in the place of third-party residual liability insurance  the insurer and the insured should have corresponding rights relative to amounts recoverable under an uninsured motorist endorsement; the insurer should be permitted a set-off only to the extent a recovery duplicates benefits it has already paid. The insured is entitled to payment under the all sums recoverable language of the uninsured motorist endorsement for all economic and above the threshold non-economic loss for which an uninsured motorist would be liable. Pursuant to the set-off clause, that total amount is reduced by the amount of no-fault benefits paid, and the remainder, not exceeding the limits of the endorsement, is the obligation of the insurer to the insured. In O'Donnell v State Farm Mutual Automobile Ins Co, [77] this Court approved reduction of no-fault benefits by the amount of Social Security survivors' benefits. In that case both the no-fault benefits and the Social Security benefits set off were statutorily required; the insured's expenditures for both benefits were involuntary. No issue was there presented of the reasonable expectations of persons who had voluntarily paid an additional premium for coverage beyond that provided under the no-fault act which would be defeated by minimizing that coverage by deducting amounts paid under the required coverage. Unless voluntarily purchased uninsured motorist coverage provides meaningful protection for severe, above-threshold, injuries without regard to what the insurer is required to pay under the mandatory no-fault coverage, it serves no apparent purpose in the context of a no-fault statute mandating the payment of benefits. If the set-off were enforced in the manner the insurers seek, no-fault benefits paid would reduce uninsured motorist coverage dollar for dollar. As soon as the insurer has paid out $20,000 in no-fault benefits, there would be no recovery whatsoever under the uninsured motorist endorsement. The insured could be entitled to collect substantial non-economic damages from the uninsured motorist but would, by reason of the set-off, receive nothing from the insurer. If the set-off of no-fault benefits were to be enforced in the manner the insurers seek, it would mean that the uninsured motorist endorsement, designed to secure recovery from an uninsured motorist, would provide no recovery in those cases where the injuries are most severe because the severity of the injuries maximized the no-fault benefits for work loss or medical expenses. We agree with the reasoning of the Supreme Court of Colorado: [T]he reduction of uninsured motorist coverage by PIP amounts paid or payable actually penalizes those who are more seriously injured for as the PIP benefits increase, the amounts recoverable under uninsured motorist coverage decrease. Two insureds may pay the same premium for uninsured motorist coverage in the minimum amounts. The one with PIP-type losses of less than $15,000 may recover some amounts under his uninsured motorist coverage for losses not otherwise covered by PIP, whereas the more seriously injured insured who sustains PIP-type losses in excess of $15,000 would recover nothing under his uninsured motorist policy provisions. [78] The insured paid premiums in exchange for coverage above and beyond that afforded under the no-fault act; the premium was not paid with the expectation that coverage would be afforded only in cases where no-fault benefits are paid in amounts substantially less than the limits of uninsured motorist coverage but non-economic loss is so severe as to entitle the insured to collect from the uninsured tortfeasor. A contrary holding would tend to make the coverage illusory and defeat the reasonable expectations of insureds and the policy of the no-fault act to distinguish between economic and non-economic loss. We affirm the judgments of the Court of Appeals except in Williams and Schigur, where we reverse.