Plaintiff Janine Ball was injured while walking into a Rite Aid store when struck by defendant Charles Reese, who had fallen asleep at the wheel. She sued Reese based upon negligence in operating his vehicle and Rite Aid based upon a premises liability theory. Plaintiff also informed her own automobile insurance company that she intended to pursue an underinsured motorist claim (“UIM”) against her policy. In Ball v. Reese, 2018 N.J. Super. Unpub. LEXIS 1136 (App. Div. May 15, 2018), the limited issue on appeal was whether a credit should be applied against her UIM coverage for the settlement she received from the self-insured Rite Aid defendant.
The Reese vehicle apparently ran over a curb, hit plaintiff, and crashed through the Rite Aid’s glass entrance doors. Plaintiff suffered several injuries, including a partial finger amputation. She sued Reese, who deposited his $50,000 auto liability insurance policy limits with the Clerk of the Superior Court. Rite Aid, who was self-insured for claims up to $2 million, agreed to settle for $50,000. Ultimately, her claim was settled for a total of $100,000 – $50,000 from Reese and $50,000 from Rite Aid.
Plaintiff made a claim against her automobile UIM policy (“Travelers”) which provided coverage of $100,000 per person and $300,000 per accident. The policy language stated that the insurer would “subtract the amount of damages paid by or on behalf of anyone responsible for the insured’s bodily injury or property damage from the amount otherwise payable under this coverage.” Hence, Travelers contended that both the Reese settlement and the Rite Aid settlement should be combined and offset against its $100,000 UIM limits, exhausting its coverage limits.
The trial court accepted that argument, finding that both the automobile policy payment, as well as the premises liability settlement, should be offset against the Travelers UIM limit as a credit. The Appellate Division affirmed.
Upon appeal, the plaintiff conceded that that the $50,000 settlement received from defendant Reese from his auto policy was an appropriate setoff. However, she argued that the other $50,000 settlement paid by Travelers out of Rite Aid’s self-insurance should not count as a set off against her UIM coverage.
However, the Court found that the Travelers’ language concerning the credit was broader than the statutory language. This policy language was approved by the Department of Banking and Insurance and is used by most of the insurers licensed to transact business in New Jersey. As such, the Court found it was entitled to deference.
Also, this offset would be harmonious with the policy objectives of the UIM statute which found that UIM coverage was intended as a gap filler. Here, the Rite Aid $50,000 settlement partially filled that gap in compensating her for her personal injury claim and the $100,000 UIM limit.
Finally, the Appellate Division found no difference between the car maker’s settlement in the products liability case of Vassiliu v. Daimler Chrysler Corp., 356 N.J. Super. 447 (App. Div.), affirmed in relevant part, 178 N.J. 296 (2002). In Vassiliu, the car manufacturer’s payment to the plaintiff was used as a setoff against the plaintiff’s UIM coverage. The Court stated that there was no reason to treat Rite Aid differently in this case, in applying a set off for the settlement it paid to offset the plaintiff’s UIM policy limits. Further, it discerned no reason to distinguish a settlement paid from self-insurance versus funds paid from an insurance policy.
Hence, for multiple reasons, the Appellate Division upheld the trial court’s decision in applying the $50,000 UIM setoff for the Rite Aid settlement, leaving plaintiff with having exhausted her UIM coverage.
