Monday, October 13, 2014

ARTICLE: Collateral Estoppel Doctrine Precludes Additional UIM Recovery

The below article of mine was recently published in the October 7, 2014 edition of the Pennsylvania Law Weekly and is republished here with permission from the publisher American Law Media.
Civil Litigation

Collateral Estoppel Doctrine Precludes Additional UIM Recovery

, The Legal Intelligencer                        
Spurred by a number of state and federal court decisions over the past year, the issue of whether a previous award secured by an injured plaintiff can serve to preclude the plaintiff from seeking additional coverage from an underinsured motorist carrier on the same claims has become a hot topic in post-Koken auto accident litigation.

The cases show that a previous recovery by a plaintiff can serve as a roadblock on the road to additional recoveries following a motor vehicle accident.

Binding Arbitration Implicates Collateral Estoppel

In auto accident matters, a plaintiff will often proceed to a binding arbitration by agreement to resolve the claims against the defendant driver before proceeding to the related UIM claim. Such a plan of attack could prove troublesome.

In his Jan. 15 opinion in Borrelli v. AIU North America, No. 0430, Control No. 13110820 (C.P. Phila. 2014), Philadelphia Court of Common Pleas Judge Mark I. Bernstein granted a UIM carrier's motion for summary judgment based upon the collateral estoppel doctrine in a case where the plaintiff proceeded through an agreed-upon high/low arbitration with the tortfeasor defendant first.

In Borrelli, the plaintiff, with consent of his own UIM carrier, resolved the third-party claim by way of a binding arbitration. At the arbitration, the arbitrator entered an award that was less than the defendant driver's policy limits. This award below the liability limits, by definition, raised the question of whether the plaintiff had indeed been injured by a tortfeasor who was underinsured so as to enable the plaintiff to pursue UIM benefits from the plaintiff's own automobile insurance carrier.

After the arbitration, the plaintiff then filed a UIM lawsuit in Philadelphia against the UIM carrier. The UIM carrier eventually filed a motion for summary judgment based upon the application of the collateral estoppel doctrine in light of the prior arbitration award. The argument was that the doctrine precluded the plaintiff from relitigating the amount of her damages.

Bernstein granted the carrier's motion after finding that all of the elements of the collateral estoppel doctrine were met. The court more specifically ruled that the issue of the full amount of damages to which the plaintiff was entitled had been previously litigated and determined to be less than the tortfeasor's liability limits.

The court noted that it therefore followed that the arbitration award precluded any UIM recovery as the defendant driver was not underinsured. Stated otherwise, the plaintiff was found to have been fully compensated for the alleged injuries by the award entered on the third-party side of the case.

A similar result was also handed down by the U.S. District Court for the Eastern District of Pennsylvania. In his decision in Harvey v. Liberty Mutual Group, No. 130-CV-04693 (E.D. Pa. 2014), Judge J. Curtis Joyner ruled that an injured party was barred by the doctrine of collateral estoppel from proceeding on a UIM claim after having agreed to a high/low arbitration on the third-party side with a high parameter being a number below the third-party liability limits and where the arbitration award was entered at a number even below that high parameter.

The court ruled in this fashion even though there was an express agreement between the parties in the third-party liability case that the binding arbitration was not intended to preclude any subsequent proceedings.

In Harvey, the liability limits on the third-party side were $2.25 million. The high parameter agreed to between the parties for the binding arbitration of the third-party case was $1.35 million. The arbitrator entered an award in the amount of $680,000.

The third-party proceedings and the award entered implicated the collateral estoppel doctrine, as the damages claims were fully litigated and the award entered was below the agreed-upon high parameter (which was also well below the available liability limits).

Joyner noted that to avoid the effects of the collateral estoppel doctrine, the parties easily could have written into the binding high/low agreement an express provision to the effect that "the binding high figure is not intended to have any preclusive effect."

Multiple Levels of UIM Coverage

The application of the collateral estoppel doctrine to UIM claims has also been held to apply where a plaintiff first recovers a primary level of UIM coverage and then proceeds to attempt to obtain an additional recovery from a second-level UIM carrier.

This scenario arises when a plaintiff is injured in a car accident while a passenger in someone else's vehicle. The UIM coverage on the vehicle represents the primary, or first-level, UIM coverage available to the plaintiff. If that plaintiff also has their own UIM coverage on their own vehicle, that other UIM coverage would apply as a second level of possible benefits for the plaintiff, assuming no exclusions to coverage apply.

In a recent nonprecedential memorandum opinion in the case of United Services Automobile Association v. Hudson, No. 224 EDA 2014 (Pa. Super. 2014), the Pennsylvania Superior Court addressed a matter involving a claim for second-level UIM benefits after an arbitration award was previously entered for UIM benefits under a primary UIM policy.

In this auto accident matter, the plaintiff initially secured the tortfeasor's $15,000 in liability limits by settlement and then proceeded to her UIM claims.

The primary UIM coverage on the vehicle in which the plaintiff was located as a passenger at the time of the accident provided for $100,000 in UIM limits. An arbitration award of $75,000 was eventually entered on that claim.

After a credit for the third-party coverage of $15,000 was applied to that initial UIM arbitration award, the plaintiff received $60,000 of the primary UIM carrier's $100,000 UIM policy limit.
The plaintiff then sought to recover a second level of UIM benefits under her own personal UIM policy. That second-level UIM carrier denied the claim by arguing that the issue of damages had already been fully litigated, with the result being a number that was below the first-level UIM carrier's policy limits, thereby precluding the claim for second-level benefits.

The trial court upheld the insurance company's collateral estoppel argument and the plaintiff appealed. The Superior Court affirmed by ruling that the insured was estopped from relitigating the claim as the issue of damages had already been litigated. Since the UIM award was less than the amount of the UIM limit on the first policy, the court ruled that the plaintiff could not recover under the second-level UIM policy.

Nonbinding ADR

In addition to being found to apply to binding arbitration, Pennsylvania courts have also found that the doctrine of collateral estoppel may apply to looser forms of alternative dispute resolution proceedings.

In her decision earlier this year in the post-Koken case of Gallagher v. Ohio Casualty Insurance, No. 13-0168 (E.D. Pa. 2014), U.S. District Judge Nitza I. Quinones Alejandro of the Eastern District of Pennsylvania found that while a nonbinding ADR award did not technically implicate the collateral estoppel doctrine, the award nevertheless served to preclude a UIM claim.

According to the opinion, the third-party portion of this case settled after a nonbinding ADR proceeding was held and the arbitrator entered a settlement value that was approximately $59,000 less than the third-party liability limit.

The insured plaintiff initially declined to accept the evaluation issued by the arbitrator and proceeded with the litigation of the third-party case. However, after the completion of some further discovery, the third-party case settled for the same amount as the nonbinding 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 claim even existed given the nonbinding arbitration value placed upon the case was below the tortfeasor's liability limits.

The carrier argued that the UIM case could not proceed because the third party could not be considered to be underinsured, because the third-party coverage was not exhausted and because the claim was allegedly barred by the collateral estoppel doctrine.

The court in Gallagher noted that the UIM claim would not be barred by the collateral estoppel doctrine because the nonbinding arbitration did not result in a final judgment as required for that doctrine to apply.

However, the court found that the defendant driver was not a UIM motorist as defined by the policy or Pennsylvania law. The only evidence to consider of the other driver being underinsured were the policy limits, the arbitrator's evaluation and the eventual settlement amount. Under that evidence, the court found that the third-party defendant could not be considered to be underinsured and that, therefore, the injured plaintiff could not present a UIM claim.

In light of the above string of cases, both sides of the bar should activate their high beams to keep a cautious eye out for roadblocks in the road to a UIM recovery. 

Daniel E. Cummins is a partner and civil litigator with the Scranton, Pa., law firm of Foley Comerford & Cummins. His civil litigation blog, Tort Talk, can be viewed at

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