In PA, an Insurers’s Election to Subrogation PI Claim Warrants Severance of UIM Claim.

In Wutz v. Smith, Wutz was injured in a car accident with Smith. Smith was covered by a minimal $15,000 Progressive Insurance liability policy. Progressive offered to tender the policy to Wutz to settle the claim. Wutz also filed a UIM and bad faith claim against his insurer, State Farm. Pursuant to a consent to settle clause in the UIM policy, Wutz sought State Farm’s consent to accept a $15,000 settlement from Progressive. State Farm elected to pay the settlement offer to Wutz and pursue a subrogation claim against Smith. Wutz then moved to sever the personal injury claims and the UIM and bad faith claims. The court held there was a sufficient basis to grant severance noting that State Farm had created a conflict of interest for itself, since as a subrogee, State Farm would have to show both that Smith was negligent and the damages were as high as possible. In contrast, as a UIM defendant, State Farm would have to show the opposite. However, in a case of bad news for State Farm (and isn’t there always bad news when it comes to State Farm and bad faith claims), the Court held that since there was no longer any dispute between Wutz and Smith, Wutz should first proceed on the UIM and bad faith claims before State Farm got its bite at the proverbial apple.

Special thanks to Ed Lomema for his contributions to this post. If you have any questions, please contact Bob Cosgrove at rcosgrove@wcmlaw.com

http://pdf.wcmlaw.com/pdf/PAUIMBF.pdf