Illinois Appellate Court Finds That Each Instance of Under-Insurance Must Be Considered Individually

In this case, the quarrel was over setoffs for settlements that totaled $395,000 paid by two under-insured motorists who were claimed to have caused a crash that seriously injured Erin Tufano. Tufano was insured under an Illinois Emcasco Insurance Co. policy that provided $500,000 in under-insured motorist coverage (UIM). A Cook County judge agreed with the insurance company’s argument that it owed only $105,000 based on the policy’s plain language.

The two insurance companies that insured the tortfeasors offered their policy limits ($100,000 and $295,000). The Emcasco policy said the limit of liability for the UIM coverage “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.”

By arguing that “all sums paid” provision of the insurance policy, Emcasco persuaded the trial judge that Tufano was entitled to receive only $105,000 in UIM benefits (a single $500,000 – $395,000).

Tufano appealed, contending that she would have obtained much more as compensatory damages had the case gone to trial. She also argued that she was entitled to a separate limit of $500,000 in UIM benefits for the harm caused by each of the two tortfeasors.

The Illinois Appellate Court reversed, concluding: “Emcasco may not collectively offset the sum total paid by the two drivers ($395,000 from its $500,000 underinsured motorist policy) and claim that it only owes Tufano $105,000. Rather, we agree with Tufano that each instance of underinsurance must be considered individually.”

Referring to the case of Sulser v. Country Mutual Insurance Co., 147 Ill.2d 548 (1992), this appellate panel concluded that the legislature’s purpose in enacting underinsured motorist coverage was to place the insured in the same position he or she would have occupied if injured by a motorist who carried liability insurance in the same amount as the policyholder.

In addition, the Illinois Supreme Court in Sulser stated that the under-insured motorist coverage was “designed to offer insurance to ‘fill the gap’ between the claim and the tortfeasor’s insurance” and, as such, it “was obviously not intended to allow the insured to recover amounts from the insurer over and above the coverage provided by the under-insured motorist policy.”

The facts of the Tufano case are different than the well-established fact setting where there is just one tortfeasor. But in this case, there are two tortfeasors and Tufano has a $500,000 UIM policy to put her in the same position as if both at-fault drivers had $500,000 in insurance coverage. In other words, Tufano could receive up to $1 million overall after receiving $395,000 from the drivers with Emcasco making up the remainder of $605,000. According to the appeals panel’s decision, one tortfeasor’s payment cannot be used to offset the under-insurance gap of another tortfeasor; each instance of under-insurance must be viewed distinctly.

But the amount of coverage the policyholder can receive from the under-insured motorist carrier is capped by the overall limit of the under-insured motorist policy, because the insurer should not be required to pay a policyholder more than it promised, or more than the amount for which the policyholder paid in premiums. Based on this precedent, the outcome of this case is clear.

Emcasco may not collectively offset the sum total paid by the two drivers, $395,000 from its $500,000 under-insured motorist policy and claim they only owe Tufano $105,000. Tufano is entitled to a separate consideration of each under-insured driver’s payment. She would theoretically be entitled then to receive $400,000 in under-insurance coverage for the first driver who was only insured for $100,000 and $205,000 in under-insurance coverage for the second driver who paid $295,000 for a total of $605,000.

However, because her under-insured motorist policy limit was $500,000, she cannot receive more than that limit. Tufano is thus entitled at most to the full limit of her underinsured motorist policy of $500,000.

Illinois Emcasco Insurance Co. v. Tufano, 2016 IL App (1^st) 151196 (Sept. 8, 2016).

Kreisman Law Offices has been handling intersection car crash cases, motorcycle accident cases, truck crash cases and pedestrian accident cases for individuals and families who have been injured or killed by the negligence of another for more than 40 years, in and around Chicago, Cook County and surrounding areas, including Lincolnshire, Lincolnwood, Elk Grove Village, Arlington Heights, Buffalo Grove, Vernon Hills, Northbrook, Northfield, Glencoe, Deerfield, Des Plaines, Burr Ridge, Palos Park, Oak Forest, Chicago (Lake View, Ravenswood Manor, Pulaski Park, Printer’s Row, Princeton Park, Wrigleyville, West Loop, Koreatown), Round Lake Beach, Schaumburg, Western Springs and Lockport, Ill.