The Supreme Court of Appeals of West Virginia (“WVSCA”) recently ruled that when an insurer makes an advance payment to a tort-claimant upon condition that the advance payment will be credited against a future judgment or determination of damages, the damages recovered by the claimant on a subsequent judgment shall be reduced by the amount of the advance payment. The Court concluded that to permit the claimant to accept the advance payment and recover on a judgment without deduction would contravene the strong public policy of the State against the claimant recovering more than one complete satisfaction. Rather, the Court determined that allowing a credit for advance payments protects both the insurer from having to pay twice for the same damages, as well as the claimant by encouraging expedited payments during the litigation process. The WVSCA’s affirmation of the credit for advance payments provides insurers with another potential tool in negotiations prior to trial.
Doe v. Pak, No. 15-0013, arose out of a November 23, 2009 motor vehicle accident, in which an unknown hit-and-run driver allegedly crossed into Ms. Pak’s lane and collided with her vehicle. As a result of the accident, Ms. Pak sustained bodily injuries and further alleged that her injuries prevented her from completing her housework. Ms. Pak’s State Farm policy provided her with uninsured motorists’ bodily injuries (“UMBI”) coverage in the amount of $100,000.00. State Farm offered to settle Ms. Pak’s UMBI claim for $30,628.15. Ms. Pak refused this offer.
However, before trial, State Farm’s counsel sent a letter to Ms. Pak’s counsel with an advance payment of $30,628.15, noting that “[t]his payment will also be credited against any final determination of damages.” Ms. Pak’s counsel deposited State Farm’s check, and the case proceeded to trial. The jury returned a verdict of $101,000.00, exclusive of prejudgment interest. During the post-judgment proceedings, the trial court entered an order that failed to credit State Farm for its advance payment to Ms. Pak equating the payment to a “gift.” State Farm appealed the order.
The WVSCA scrutinized the letter between counsel enclosing the advance payment, noting in particular the statement that the payment would be “credited against any final determination of damages…” In light of this language, the WVSCA concluded that the trial court, in essence, permitted Ms. Pak to recover twice from State Farm for the same injury. The Court noted that the primary goal of the State’s UM/UIM statute is to provide “full compensation, without duplication of benefits…” and concluded that the trial court committed error by allowing a double recovery. For these reasons, the WVSCA reversed the trial court’s decision and remanded the case, instructing the trial court to credit State Farm for the advance payment.
This decision gives insurers an important tool when considering settlement negotiations with an insured. Contact any member of our First Party Team with questions regarding the application of this decision or advance payments prior to judgment.