Plaintiff Barred From Pursuing UIM Claim After Participating in Third Party Non-Binding ADR

In her recent April 9, 2014 decision in the Post-Koken case of Gallagher v. Ohio Casualty Ins. Co., No. 13-0168 (E.D. Pa. April 9, 2014), Judge Nitza I. Quinones Alejandro of the Federal District Court for the Eastern District found that a Non-Binding ADR Award precluded a UIM claim but is not collateral estoppel.

According to the Opinion, the third party portion of this case settled after a non-binding arbitration was held and the arbitrator entered a "settlement value" that was approximately $59,000.00 less than the third party liability limits.

 

The insured Plaintiff initially declined to accept the value determination by the arbitrator and proceeded with the third party case.  However, after the completion of some further discovery, the third party case settled for the same amount as the non-binding arbitrator's evaluation.

 

Despite settling the third party claim for substantially less than the tortfeasor's liability limits, the Plaintiff nevertheless commenced a UIM claim against the Plaintiff's own automobile insurance carrier.

 

The UIM carrier denied a UIM even claim existed given the non-binding arbitration value placed upon the case.

 

The insured Plaintiff filed suit.  The UIM carrier continued with its argument that the UIM case could not proceed because the third party was not an "underinsured" motorist under the Pennsylvania Motor Vehicle Financial Responsibility Law (MVFRL), the third party coverage was not exhausted, and the claim was barred by collateral estoppel.

 

The Court in Gallagher agreed that the third party was not an "underinsured" motorist as defined by the MVFRL. The only evidence of the other driver being underinsured was the policy limits and the settlement. The Court found that the insured Plaintiff failed to present any evidence that the damages could meet or exceed the third party liability limits of $100,000.

 

Since the only evidence was the arbitrator’s value, the court found that the third party cannot be "underinsured" and that, therefore, the insured Plaintiff could not present a UIM claim.

 

However, the Court noted that the UIM claim would not be otherwise barred by collateral estoppel because the non-binding arbitration did not result in a final judgment as required for that doctrine to apply.

The Trial Court's Opinion in Gallagher can be view at this LINK.  The companion court Order can be viewed HERE.

UPDATE:  This decision was affirmed on appeal by the Third Circuit on January 29, 2015.  However, the Third Circuit stated that its decision was "Not Precedential."  If you wish to see a copy of that Third Circuit opinion, please contact me at dancummins@comcast.net.



To review other Tort Talk posts on other cases addressing the application of the Collateral Estoppel Doctrine in the context of Post-Koken third party liability/UIM auto accident cases, click this LINK.