The nutshell: State Farm paid its $100,000 liability policy in a serious injury car accident case. Plaintiff sought payment under his $250,000 uninsured/underinsured motorist policy with Erie Insurance. Erie claimed that it was entitled to a workers’ compensation setoff of $246,305.66, representing the workers’ compensation benefits the car accident victim received because he was working at the time of the accident. The Plaintiff claimed the setoff should be $27,396.28 because this was the amount of the workers’ compensation lien.
Most of the Maryland Court of Special Appeals found that under the workers’ compensation setoff for uninsured motorist carriers under Maryland Insurance Article, § 19-513(e), Erie could escape its contractual obligations to pay for underinsured motorist coverage for the auto accident even though the workers’ compensation lien holder only took a little over 10% of the full value of its lien.
In another well-reasoned dissent, Judge Timothy E. Meredith argues that it is an unreasonable windfall for Erie to get the benefit of the workers’ compensation lien beyond the $27,396.28 paid, because the victim may be placed in as good a financial position as if the negligent driver had a $250,000 policy; that is the point of modern UM coverage.
This result does not place the insured in as good a position as he would have occupied if the tortfeasor had maintained similar policy limits of $250,000. Under a scenario in which the negligent driver maintained policy limits of $250,000, Blackburn would have received $246,305.66 from the workers’ compensation provider, and he would have received the $250,000 policy limits from the tortfeasor’s insurance carrier, out of which he would have had to reimburse the workers’ compensation provider $27,396.28 to satisfy its lien.1 The net
recovery to Blackburn would have been $468,909.38 (i.e., $246,305.66 plus $250,000 minus $27,396.28). That is $150,000 more than the amount the majority opinion holds that Blackburn is entitled to (which was $318,909, based upon $246,305.66 from the workers’ compensation carrier, plus $100,000 from the tortfeasor’s insurance carrier, minus the $27,396.28 paid to satisfy the lien of the workers’ compensation carrier).
The Maryland Court of Appeals will see this case, but I’m not expecting that the Maryland high court will see things as Judge Meredith does. What would make more sense would be for the Maryland legislature to step in and revise the dated §19-513(e) language for something more consistent with the purpose of the UM statute and the premiums paid for uninsured/underinsured motorist coverage.