Tuesday, April 19, 2016

Western Federal District Court Reviews Whether UIM Carrier Allowed an Offset on Wage Loss Claim by Social Security Benefits Paid to Plaintiff

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.

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