Opinion ID: 2572696
Heading Depth: 3
Heading Rank: 2

Heading: Winters and the Underinsured Tortfeasor

Text: In Winters, the insured, Sarah Winters, was injured by an underinsured tortfeasor. [3] Her immediate medical expenses were covered by payments from her PIP carrier. Winters then sought recovery from the tortfeasor and recovered the maximum limits of the tortfeasor's liability coverage. Because the tortfeasor recovery did not fully compensate her, she also pursued a UIM claim. Unlike the insured in Mahler, Winters was not fully compensated until she recovered from both the tortfeasor and her UIM carrier. Once she was fully compensated, her PIP carrier was able to seek reimbursement for the PIP benefits it paid, subject to its obligation to pay a pro rata share of the legal expenses incurred by Winters in creating the fund. Winters, 144 Wash.2d at 881, 31 P.3d 1164. As explained in Winters, [t]hese pooled funds became the common fund from which the PIP insurer was able to recoup payments it had made. Id. Winters clarified that the pro rata sharing rule articulated in Mahler is based on equitable principles, not specific policy language, and applies to PIP reimbursements from UIM recoveries as well as from tortfeasor recoveries. Id. at 878-79, 881, 31 P.3d 1164. In cases like Winters, where PIP coverage and UIM coverage are provided by the same insurance carrier, the reimbursement to the PIP carrier typically comes in the form of an offset applied to the UIM obligation. Even though the offset appears to result in a reduction to the UIM obligation, the offset functions as a mechanism to account for the PIP reimbursement and is available only when the same insurance carrier provides both PIP and UIM coverage. In cases where the PIP and UIM carriers are separate companies, the PIP carrier remains entitled to receive actual reimbursement, and the UIM carrier remains obligated to pay the entire amount of the UIM award. In such cases, no opportunity for an offset exists. When the PIP and UIM carrier is the same, however, an offset against the UIM obligation is an acceptable mechanism to account for the PIP reimbursement rights. Mahler, 135 Wash.2d at 436, 957 P.2d 632 (Provided the insurer recognizes the public policy in Washington of full compensation of insureds and its other duties to insureds by statute, regulation, or common law, the insurer may establish its right to reimbursement and the mechanism for its enforcement by its contract with the insured). [4] Winters also makes clear that Dayton and Mahler are applied separately to an insurance carrier that provides both UIM and PIP insurance to the same insured. Winters, 144 Wash.2d at 882-83, 31 P.3d 1164. An insurance carrier that provides both UIM and PIP benefits is not required to pay a pro rata share of legal expenses as UIM carrier in order to take a UIM setoff pursuant to Dayton, but is required to pay a pro rata share of legal expenses as PIP carrier in order to take a PIP offset pursuant to Mahler and Winters. Id. The fact that an insurance company providing both PIP and UIM coverage chooses to use an offset from its UIM obligations to account for its PIP reimbursement does not relieve the insurance carrier of its burdens under Mahler and Winters. As the Winters court concluded: The insured should not be worse off simply because he or she purchased two coverages from the same insurer. Id. at 882, 994 P.2d 881.