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AAA Mid-Atlantic Ins. Co. v. Ryan

Supreme Court of Pennsylvania

January 21, 2014

AAA MID-ATLANTIC INSURANCE COMPANY, Appellant
v.
Mary Suzanne RYAN and Edward J. Ryan, Husband and Wife, Appellees.

Argued Sept. 10, 2013.

Appeal from the Order of the Superior Court dated October 12, 2011 at No. 3273 EDA 2010 which Reversed/Vacated/Remanded the Order of the Montgomery County Court of Common Pleas, Civil Division, dated January 25, 2011 at No. 2010-20911. Trial Court Judge: Wendy Demchick-Alloy, Judge; Intermediate Court Judges: Christine Donohue, Sallie Mundy, Gene Strassburger, Judges.

Page 627

James C. Haggerty, Esq., Haggerty, Goldberg, Schleifer & Kupersmith, P.C., Philadelphia, for Pennsylvania Association for Justice.

Andrew Lee Riemenschneider, Esq., Moore & Riemenschneider, L.L.C., Abington, for AAA Mid-Atlantic Insurance Co.

Gregory Buchwald Heller, Esq., Young Ricchiuti Caldwell & Heller, L.L.C., Philadelphia,

Page 628

for Ryan, Mary Suzanne & Edward J.

BEFORE: CASTILLE, C.J., SAYLOR, EAKIN, BAER, TODD, McCAFFERY, STEVENS, JJ.

OPINION

TODD, Justice.

In this discretionary appeal, we consider whether, under an insurance policy for underinsured motorist (" UIM" ) coverage, the amount of an insured's recovery may be offset by the amount of all damages paid in satisfaction of the underlying judgment, or by only the amount of compensation paid under the auto insurance policy of the underinsured driver/tortfeasor. For the reasons set forth below, we hold that the amount of damages which may be offset against recovery under a UIM policy includes damages recovered fro all tortfeasors. Accordingly, we reverse the order of the Superior Court.

In September 2003, Mary Ryan was driving through an intersection in Philadelphia when another vehicle, driven by Charlotte Eckel, struck Ryan's vehicle, resulting in bodily injury to Ryan. Thereafter, Ryan and her husband, residents of Montgomery County, filed in the Montgomery County Court of Common Pleas two separate lawsuits, the first against Eckel and the other against the City of Philadelphia (" City" ) and the Pennsylvania Department of Transportation (" PennDOT" ), wherein the Ryans alleged the highway was defectively designed. The claim against PennDOT was dismissed by stipulation, and the remaining parties agreed to transfer the actions against the City and Eckel to binding arbitration.

Prior to arbitration, Eckel settled with the Ryans by tendering the $25,000 limit of her motor vehicle liability insurance policy. With the City as the sole remaining defendant, the parties proceeded to arbitration. On May 6, 2008, following a hearing, the arbitrator apportioned liability as follows: Eckel, 50%; Mary Ryan, 35%; and the City, 15%. The arbitrator awarded the Ryans damages in the amount of $500,000, less $175,000 based on Ryan's comparative negligence of 35%, for a net award of $325,000. Pursuant to the doctrine of joint and several liability,[1] the City paid the Ryans $300,000, and, as noted above, the remaining $25,000 was paid by Eckel's insurance company.

While their actions against Eckel and the City were pending, the Ryans filed a claim under their motor vehicle insurance policy (the " Policy" ) with AAA Mid-Atlantic Insurance Company (" AAA" ), which included optional coverage for compensatory damages resulting from bodily injuries caused by the owner or operator of an underinsured motor vehicle.[2] The Policy contained a " Limit of Liability" clause, which provided, in relevant part:

B. The limit of liability shall be reduced [ ] by all sums paid because of the " bodily injury" by or on behalf of persons or organizations who may be legally responsible. This includes all sums paid for an " insured's" ...

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