Alaska Supreme Court Issues New Ruling on Underinsured Motorist (UIM) Coverage for Personal Injuries.

The insured received serious personal injuries while riding in a car that was struck by another motor vehicle. She settled with Safeco, the insurance company of the negligent driver, for the facial policy limits of $50,000, without payment of any add-ons for interest or attorney fees. She then made a claim for her uncompensated damages under the underinsured motorist (UIM) coverage of her own policies with Allstate. After hearing all the evidence, the arbitrators found her damages to be $118,432.

A primary issue on appeal was whether Allstate was entitled to an offset of the $50,000 paid by Safeco. The Supreme Court ruled that Allstate was entitled to such an offset even though Allstate had not pled or otherwise asserted the right to an offset to the arbitrators. The offset was deemed proper based on the language of the Alaska statutes, the purpose of UIM coverage, and the terms of the Allstate policy.

A second issue was whether Allstate had to pay interest and attorney fees on the entire $118, 432, which included $50,000 of the insured’s damages that had been paid by Safeco. The Court ruled that Allstate did not; because these amounts could have been recovered under the Safeco policy, the insured was not “underinsured” as to those amounts. The Court thus created a crucial distinction in underinsured motorist claims. It reaffirmed the rule of the earlier Coughlin case that if a person obtains the policy limits of the adverse driver, they have exhausted that policy for purposes of qualifying to bring a claim for underinsured motorist coverage against their own insurance company, even though they did not obtain the add-ons available under that policy. But because they could have pursued the add-ons under the first policy, their claim for add-ons to the amount paid under the first policy is not a proper element of the subsequent UIM claim. Sidney v. Allstate Insurance Company, Opinion 6220, January 11, 2008.