Written by Matthew Liller, Esq.
Edited by Bill Pfund, Esq.
The Supreme Court of Virginia recently clarified that a plaintiff who reaches a pretrial settlement with their underinsured motorist (“UIM”) carrier is still entitled to receive the full amount of a subsequent jury verdict from the defendant. Llewellyn v. White, 297 Va. 588 (2019).
In Llewellyn, the plaintiff was seriously injured in an automobile accident. The plaintiff had $1 million in UIM coverage, while the defendant had $250,000 in liability coverage. Prior to trial, the plaintiff settled her potential claims against her UIM carrier for $750,000. A release of all claims was given to the UIM carrier only, and the UIM carrier agreed to waive subrogation. The then went to trial and the jury awarded plaintiff $1.5 million in damages against the defendant.
The defendant moved to reduce the verdict and apply Virginia’s statutory offset from the plaintiff’s $750,000 settlement with the UIM carrier, meaning she would only be responsible for the $750,000 difference. Va. Code § 8.01-35.1 provides, in pertinent part, that when a release is given to one of two or more persons liable for the same injury, any amount recovered against the other person(s) shall be reduced by the amount stipulated by the release. The trial court declined to reduce the verdict.
The Supreme Court of Virginia first determined that a UIM carrier is not a “person liable for the same injury,” as its obligation to pay arises only from contract, not from tort. The jury found that the defendant failed to exercise ordinary care, and that failure caused the plaintiff to suffer personal injuries. Because of that negligence, the defendant was found liable for $1.5 million in damages. By contrast, the UIM carrier’s payment to the plaintiff was not to compensate for her personal injuries, but to protect her from the potential inadequacy of defendant’s assets to pay the damages awarded. In essence, the UIM carrier’s contractual obligation to pay was because of defendant’s inadequate motor vehicle insurance, which is not the same as the defendant’s tort obligation to pay for damages caused by her negligence.
The Court then analyzed the defendant’s argument that allowing the plaintiff to retain the UIM settlement amount (a “collateral source”) in addition to the judgment amount runs afoul of common law principles against double recovery and unjust enrichment. Acknowledging the tensions between these policies, the Court recognized that one of two results must occur: either (1) give the plaintiff a double recovery and leave them in a better financial position than before the injury, or (2) permit the defendant to escape the full liability for all damages resulting from their wrong. The Court held that the better option is to allow a plaintiff to retain the windfall that results from her foresight to voluntarily purchase UIM coverage, rather than allowing a defendant, who failed to purchase enough liability coverage to adequately compensate the plaintiff for her injuries, to be the ultimate beneficiary of plaintiff’s decision to procure additional insurance coverage.
The big takeaway from this case is that the liability carrier cannot rely on a pretrial settlement between a plaintiff and their UIM carrier to reduce the amount due to the plaintiff after a jury verdict. From the UIM carrier’s perspective, a pretrial settlement and properly executed release allows the plaintiff to continue the pursuit of full recovery against the tortfeasor.
The attorneys at KPM LAW are experienced in all aspects of insurance coverage, as well as rights and obligations of insurance carriers before, during, and after trial.