Stacking Underinsured Policies

Underinsured Stacking
The first District Court of Appeals decided an interesting case about stacking as applies to uninsured and underinsured policies. In Allstate vs Trujillo 2014 Il.App (1st) 123419, the court decided that parties can stack there underinsured (UDIM) policies.
Allstate filed suit for declaratory judgment against plaintiff. The plaintiff was a passenger in a car insured by a person named Delgado. Delgado had a liability policy through Allstate which had limits of $100,000 per person, and $300,000 per accident. The same policy had $100,000 in UDIM coverage. The other driver had a $20,000 policy with American Access insurance. American Access tendered their $20,000 policy. Allstate tendered their $100,000 in liability coverage. Plaintiff took the position that Allstate also owed another $80,000 in UDIM coverage. Allstate claimed that under the policy there is no stacking.
The policy read as follows:
“If the accident involves the use of an underinsured motor vehicle, the limits for this coverage will be reduced by all amounts paid by or on behalf of the owner or operator of the underinsured auto or anyone else responsible. This includes all sums paid under the bodily injury or property damage liability coverage of this or any other auto insurance policy.”
Allstate filed suit for declaratory judgment claiming it should not have to pay the $80,000. The trial court ruled in favor of Allstate.
The appellate court reversed the trial court. It ruled that the injured party is entitled to the $80,000. They decision is a little unusual. At the trial court level the injured party only argued that the policy was void against public policy. He did not argue that the policy is ambiguous. Nevertheless, the appellate court found a “latent ambiguity” in the policy because there was a bodily injury limit of 100/300 and a UDIM limit of 100/300. Accordingly, the policy offered no additional coverage so it was ambiguous.
The court went to great lengths to distinguish other cases cited by Allstate where there were cases involving first party claims and cases involving uninsured motorist claims. It held these are different than underinsured claims with multiple tortfeasors.
The court cited the statute concerning limits of liability, which provides as follows: “The limits of liability for an insurer providing underinsured motorist coverage shall be the limits of such coverage, less those amounts actually recovered under the applicable bodily injury insurance policies, bonds or other security maintained on the motor vehicle.” However, the court did not rely on this statute, instead finding the policy ambiguous.
It based its decision on a number of similar cases, including Hoglund v State Farm 148 Ill.2d 272 (1992) and Gibbs v Madison Mutual 242 Ill.App3d. 147 (1993). Both held that the setoff provisions cannot be read in isolation, but must be considered in conjunction with the claimant’s reasonable expectation of recovery under the policy and the public policy. Accordingly, the court in Trullio held that absent a claimant getting a double recovery, the claimant should be able to exhaust the policy.
At Ackerman Law Office we routinely handle uninsured and underinsured claims. If you would like help, give us a call. We do handle these cases on a contingent fee.