In a recent decision out of the U.S. District Court for the
Western District of Pennsylvania, the court denied a UIM carrier’s Motion for
Partial Summary Judgment in a breach of contract and bad faith case in which
the carrier was seeking an offset under 75 Pa. C.S.A. §1722 of the Motor
Vehicle Financial Responsibility Law for Social Security Disability benefits
received by the Plaintiff.
In the case
of
Smith v. Progressive Specialty
Insurance, No. 2:15-CV-528 (W.D. Pa. Feb. 17, 2016 McVerry), the court rejected the
UIM carrier’s “novel theory that, under
Tannenbaum,
any award to Plaintiff for lost wages must be reduced to the extent that she
received Social Security disability benefits.
The
Smith v.
Progressive case arose out of an incident during which a pedestrian
Plaintiff was struck by a motorist in a supermarket parking lot.
The Plaintiff alleged serious injuries and
an inability to work.
The Plaintiff
applied for and received Social Security Disability Benefits that totaled
$1,174.00 per month.
With respect to this litigation, the Plaintiff brought an
underinsured motorist claim against Progressive Insurance for damages,
including lost wages.
With its Motion for Partial Summary Judgment, Progressive
argued that the Plaintiff was precluded from recovering UIM benefits for lost
wages in the amount of the Social Security benefits that the Plaintiff was
receiving.
The Plaintiff countered with
an argument that the disability benefits were a collateral source that could
not be utilized to reduce the UIM benefits that she was owed under the
policy.
In his decision, Judge McVerry reminded the reader that, in
Tannenbaum v. Nationwide Ins., 992 A.2d 859 (Pa.
2010), Pennsylvania Supreme Court ruled that income loss benefits are subject
to an offset if they fall under §1722’s definition of “‘any program, group
contract or any other arrangement for payment of benefits.’”
Judge McVerry noted that, in
Tannenbaum, the court was faced with the
issue of whether Social Security Disability benefits qualify as a group, program,
or arrangement under §1722.
Judge McVerry noted that, in the
Tannenbaum decision, the Pennsylvania Supreme Court reviewed the
previous Pennsylvania Superior Court decision in the case of
Browne v. Nationwide Mutual Insurance,
674 A.2d 1127 (Pa. Super. 1996) in which that court held that Social Security Disability Benefits
did not fall within the purview of §1720 and 1722 of the Motor Vehicle
Financial Responsibility Law because such Social Security Disability Benefits
were never subject to subrogation.
It
was also noted that the
Browne court
explained that the Pennsylvania legislature could have specifically named
disability benefits as falling within the §1722 preclusion.
McVerry noted that, instead, as the Superior
Court indicated in
Browne, §1722 was
designed to refer only to benefits that are specifically recoverable as
first-party benefits under the MVFRL.
Judge McVerry went on to note in this
Smith v. Progressive case that
Tannenbaum
did not expressly diavow this rationale.
Moreover, Judge McVerry indicated that the
Tannenbaum court otherwise disapproved
of the
Browne court’s holding that,
where benefits were paid for or earned by an insured through his employment,
there should be no offset.
Based upon this review of the law, Judge McVerry denied the
UIM carrier’s Motion for Partial Summary Judgment and rejected the UIM
carrier’s novel theory that, under
Tannenbaum,
any award to the Plaintiff for lost wages must be reduced to the extent that a
Plaintiff received Social Security Disability Benefits.
Anyone wishing to review a copy of this decision may click
this
LINK.
Source: Pennsylvania and New Jersey Insurance Bad Faith Case Law Blog which can be viewed HERE.