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Can UIM Benefits Be Excluded for Those Eligible for Workers' Comp?
The Pennsylvania Supreme Court will soon review a case that will have significant repercussions for injured workers throughout the state.
August 28, 2009 /Human Resources PR News/ -- Can UIM Benefits Be Excluded for Those Eligible for Workers' Comp?
Article provided by Hal Waldman & Associates
Visit us at www.waldmaninc.com
The Pennsylvania Supreme Court recently agreed to review the question of whether an exclusion that prevents people eligible for workers' compensation benefits from receiving uninsured/underinsured motorist (UIM) coverage violates public policy. The Court's ruling in the case, Heller vs. Pennsylvania League of Cities and Municipalities, will have significant repercussions for injured individuals throughout the state.
Case History
Frank Heller, a police officer for Sugarcreek Borough, was injured in a car accident in the course of his duties. Heller received $25,000 from the insurance company of the driver of the other vehicle. Heller also received workers' compensation benefits, which paid two-thirds of his salary as well as medical benefits. Heller also sought to recover UIM benefits from Sugarcreek Borough. The Borough's insurer, the Pennsylvania League of Cities and Municipalities (doing business as Penn PRIME), denied coverage. In support of the denial of coverage, Penn PRIME referred to an exclusion in the policy that denied coverage of "any claim by anyone eligible for workers' compensation benefits that are the statutory obligation of the Member".
Heller sued Penn PRIME, seeking a declarative judgment that the exclusion violates public policy. The trial court agreed and set the exclusion aside. Penn PRIME appealed the courts ruling. In a 2-1 opinion, the Pennsylvania Commonwealth Court reversed the trial court.
Heller's Arguments
Heller argued that excluding UIM coverage when someone receives workers' compensation benefits would prevent an injured person from recovering all applicable damages. In Pennsylvania, workers' compensation benefits provide people injured on the job with two-thirds of their average weekly wage and medical benefits. In cases where an employee loses the use of a limb, hand, foot, finger, thumb or toe -- or loses their sight or hearing -- an additional payment may be made, known as a "specific loss award." Workers' compensation, however, does not pay an injured worker their full wages. Nor does workers' compensation compensate an injured worker for his or her pain and suffering. Due to the exclusion, Heller is unable to recover damages other than medical expenses and two thirds of his lost wages.
Additionally, the workers' compensation carrier will have a subrogation lien on any UIM benefits paid under the UIM policy. However, the exclusion shifts the burden from UIM carriers to workers' compensation carriers in cases where an uninsured or underinsured third party causes a work-related injury.
Penn PRIME's Arguments
Penn PRIME argued that the Pennsylvania Motor Vehicle Financial Responsibility Law (MVFRL) does not require the purchase of UIM benefits. Penn PRIME also argued that the exclusion did not violate public policy because the policy of cost containment outweighed providing injured employees with the ability to seek benefits through both UIM and workers' compensation.
As noted by Penn PRIME, the MVFRL does not require the purchase of UIM insurance. Additionally, the MVRFL allows purchasers of UIM insurance to reduce the amount of coverage below the insured's bodily injury limits. According to Penn PRIME, the Borough could have elected to have no UIM coverage whatsoever. Instead, the Borough chose to make UIM coverage available to those who were not eligible for workers' compensation.
As to Penn PRIME's policy argument, it noted that courts typically do not strike down insurance provisions on policy grounds unless the provision in question conflicts with specific language in the MVFRL. Neither the MVFRL nor the Workers' Compensation Act prohibit the exclusionary language Penn PRIME relied upon in denying Heller's claim. The Commonwealth Court found these arguments to be persuasive, stating that "a Court should not act as a super-legislature in redrafting contract documents on the sole basis of outcomes that may be desired for the general good, and as the courts have also expressed a distaste for such action when a contracting party will be required to bear the loss of an unanticipated risk, and in the case of insurers, loss of premiums, we believe that the conflicting policy consideration falls on the side of the insurer under the present circumstances."
This case, now before the Pennsylvania Supreme Court, contains competing policy interests. On one hand, the UIM exclusion bars a full recovery for individuals who are injured by uninsured or underinsured motorists in the course of their employment. However, insurers would argue that nothing in Pennsylvania's current laws prohibit the exclusion at issue. Ultimately, the Court must make certain that those injured at work are able to make a full financial recovery for their injuries.
Article provided by Hal Waldman & Associates
Visit us at www.waldmaninc.com
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