Malone v. Nationwide Mutual Insurance

Opinion

CROSBY, J.

We hold here that underinsured motorist coverage is not the equivalent of full excess coverage. As the statutory scheme is designed, the underinsured motorist carrier gets a dollar-for-dollar credit for all payments by third party tortfeasors to the insureds, whether the insureds are made whole or not. In other words, a carrier providing underinsured motorist benefits

never

pays the full amount, only the difference between the policy limits and all contributions by all tortfeasors to all insureds.

I

Jo Ann Malone’s husband was struck by a car and killed as he changed a tire on a roadway. Plaintiff was in their truck at the time and witnessed his death. The driver was insured by a Teachers Insurance Company policy with limits of $100,000 per person and $300,000 per accident. Nationwide provided single limit underinsured motorist coverage for the Malone vehicle in the amount of $500,000. Malone’s children assigned their rights as their father’s heirs to her, and she recovered $100,000 from Teachers in wrongful death damages. Her husband’s workers’ compensation carrier paid an additional $17,528.87. Nationwide paid its $500,000 policy limits less the sums received by Malone, for a total of $382,471.13.

1

At the time Nationwide paid the underinsured motorist obligation, Malone had not yet settled her own claim for emotional distress against the alleged tortfeasor. The release signed by Malone when she received the Nationwide disbursement acknowledged the parties’ disagreement as to the

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disposition of any settlement she might receive: Malone contended she would be entitled to keep the money because she had not made a claim against Nationwide for her own injuries. Relying on Insurance Code section 11580.2, subdivision (p), the carrier took the position that because it paid the policy limits less credits for sums already received, it would be entitled to any money Malone received from the alleged tortfeasor.

Malone settled her own emotional distress claim with Teachers for $100,000. Per the parties’ agreement, she placed the funds in a trust account. She then initiated this declaratory relief action. Nationwide prevailed in the trial court.