Matthew J. Wallace v. State Farm Mutual Automobile Insurance Company
2017 ME 141
| Me. | 2017Background
- On Sept. 29, 2011, Matthew Wallace (driver) and Freja Folce (passenger) were injured when Corey Hill (driving for Twin Pines Construction) negligently crossed the centerline and collided with them.
- Twin Pines’ primary liability insurer (Safety) paid its limits: $50,000 per person / $100,000 per accident. Twin Pines also had an Alterra excess policy with $2,000,000 limits, but that policy required Twin Pines to maintain $1,000,000 of primary coverage; Alterra was liable only to the extent Twin Pines met that requirement (effectively a $1,000,000 deductible). Alterra paid $1,000,000 to each plaintiff (total $2,000,000) after settlement.
- Plaintiffs held two State Farm policies providing underinsured motorist (UM) coverage of $100,000 per person / $300,000 per accident (one policy each).
- Plaintiffs settled with Twin Pines and its insurers (Safety and Alterra) and then sued State Farm seeking UM benefits for the gap between tortfeasor coverage and their UM limits. Parties stipulated plaintiffs’ aggregate damages exceeded Safety’s $100,000 per-accident primary limit.
- The Superior Court granted summary judgment for State Farm, finding Hill was not an underinsured driver because plaintiffs received $2.1 million from Twin Pines insurers—exceeding State Farm’s UM limits. Plaintiffs appealed; the Maine Supreme Judicial Court affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the tortfeasor was an "underinsured motor vehicle" under Maine UM statute such that State Farm must pay UM benefits | Wallace/Folce: Because Twin Pines’ primary coverage ($50,000/person) was less than plaintiffs’ UM limits ($100,000/person), Hill was underinsured for the first $1,000,000 (the donut hole created by Alterra’s $1,000,000 deductible), so State Farm must cover the gap (at least $50,000 per plaintiff) | State Farm: Plaintiffs’ UM limits are less than the total amount plaintiffs received from Twin Pines’ insurers ($2.1M). Under Maine precedent, compensatory payments received from the tortfeasor or its insurers offset the injured party’s UM recovery, so no gap exists and State Farm owes nothing | Court: Affirmed State Farm—because plaintiffs received $2.1M from Twin Pines’ insurers (Safety + Alterra), that amount offsets available UM coverage; there is no coverage gap and State Farm is not required to pay |
| Whether payments by an excess insurer (Alterra), which was subject to an underlying-coverage requirement/deductible, must be offset against UM coverage | Plaintiffs: Alterra’s liability was contingent on Twin Pines maintaining $1M underlying coverage; because Twin Pines did not purchase that underlying coverage, plaintiffs contend Alterra’s payment should not eliminate the UM gap that exists between Safety’s $50K and State Farm’s $100K | State Farm: Any compensatory payments plaintiffs received from the tortfeasor’s insurers—including excess-insurer settlements—reduce or eliminate the UM gap under 24-A M.R.S. § 2902(4) and controlling Maine decisions | Court: Payments by the excess carrier are compensatory and must be offset; accordingly the combined payments exceed State Farm’s UM limits and eliminate any UM gap |
Key Cases Cited
- Tibbetts v. Dairyland Ins. Co., 999 A.2d 930 (Me. 2010) (sets forth the ‘‘what would have been recovered’’ method and mandates offsetting compensatory payments against UM gap)
- Farthing v. Allstate Ins. Co., 10 A.3d 667 (Me. 2010) (applies Tibbetts formula to calculate UM carrier liability by subtracting tortfeasor payments from the recovery that would exist if tortfeasor had UM-equal limits)
- Graf v. State Farm Mut. Auto. Ins. Co., 149 A.3d 529 (Me. 2016) (reaffirmed that insurers must offset amounts actually paid by the tortfeasor against available UM coverage)
- Jipson v. Liberty Mut. Fire Ins. Co., 942 A.2d 1213 (Me. 2008) (recognizes reduction of UM recovery by amounts received from tortfeasor’s insurer)
- Cobb v. Allstate Ins. Co., 663 A.2d 38 (Me. 1995) (discusses the inapplicability of excess-only coverage until primary coverage is exhausted)