Wednesday, August 22, 2012

UIM Carrier Need Not File Motion to Mold To Obtain Credit Due Under Exhaustion Clause

In her recent decision of Sabella v. Nationwide Mut. Ins. Co., No. 1:12-CV-00582 (M.D. Pa. Aug. 14, 2012 Rambo, J.), Judge Sylvia Rambo of the Pennsylvania Federal Middle District Court granted Defendant Nationwide’s F.R.C.P. 12(b)(6) Motion to Dismiss for failure to state a claim in a matter in which the Plaintiff filed a Complaint setting forth claims for declaratory judgment, bad faith, and breach of contract, arising out of Nationwide’s alleged failure to pay UIM benefits to the Plaintiff in accordance with the terms of the insurance policy.  

In this matter, the UIM action between the parties had previously proceeded through arbitration pursuant to the terms of the policy.  At the arbitration, the panel of arbitrators unanimously found the valuation of damages to be $100,000.00.   In its award, the arbitrators stated that “[t]his amount has not been molded by the arbitrators and does not reflect what may have happened in the third-party action.”  

The Court in this matter noted that it was undisputed that the policy limit for the tortfeasor’s liability coverage was $300,000.00. 

Following the arbitrator’s decision, Nationwide did not move to mold the award.   The parties in this matter were in agreement that, if Nationwide had done so, by operation of law, Nationwide would have been entitled to a credit in the amount of the tortfeasor’s liability coverage, which, as noted, was $300,000.00.  This credit would have reduced the $100,000.00 UIM award to $0.  

In this matter, the Plaintiff was seeking a declaration that “the arbitration award is deemed a final judgment in the amount of $100,000.00 in light of the award and in light of Defendant’s failure to mold that award."  The Plaintiff requested damages in the amount of that award.   The Plaintiff’s bad faith and breach of contract claim were derivative to Plaintiff's belief that he was entitled to the arbitration award of $100,000.00.  Nationwide responded by filing the F.R.C.P. 12(b)(6) Motion to Dismiss.  

The District Court held that “A party’s failure to mold under these circumstances does not render the arbitrators’ award final and Nationwide is entitled to a credit of $300,000.00.  Accordingly, the amount of UIM coverage owed by Nationwide is $0.00.”  

In so ruling, Judge Rambo relied upon the case of Bremer v. Prudential Prop. & Cas. Ins. Co., 2004 U.S. Dist. LEXIS 16960 (M.D. Pa. 2004) (a case my partner Tim Foley and I defended and prevailed in).    Judge Rambo relied upon the Bremer case to support her following of the policy of enforcing exhaustion clauses.  

Judge Rambo also noted that her holding in the Sabella case is also consistent with Pennsylvania’s public policy against allowing parties to recover twice for the same injury.  In this regard, Judge Rambo cited, with approval the case of Pusl v. Means, 982 A.2d 550, 555 (Pa. Super. 2009).    Judge Rambo noted that the Court found in Pusl that an “Appellant’s receipt of both the full jury award from [tortfeasors] and the pre-trial UIM settlement from State Farm would constitute ‘double recovery’ that the [Pennsylvania Motor Vehicle Responsibility Law] was specifically designed to prevent.”  Id. at 556.  

Judge Rambo also noted that there was no case, rule, or statute on point which required the Defendant carrier to file a Motion to Mold under these facts.  

Accordingly, the Sabella court held that Nationwide was not required to file a Motion to Mold and was not responsible for any UIM payment to the Claimant under these facts.  

 Anyone desiring a copy of the decision of Sabella v. Nationwide may contact me at 

I send thanks to Attorney Paul Oven of the Moosic, Pennsylvania office of Dougherty, Leventhal & Price as well as Attorney James Kilpatrick of Scranton law firm of Munley, Munley & Cartwright for forwarding this case to my attention.   I also send thanks to Attorney Scott Cooper of the Harrisburg law firm of Schmidt, Cramer for his explanatory synopsis of the case presented.  

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