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McShane v. New Jersey Manufactures Insurance Co.

February 24, 2005

MARTIN MCSHANE, PLAINTIFF-RESPONDENT/CROSS-APPELLANT,
v.
NEW JERSEY MANUFACTURERS INSURANCE COMPANY, DEFENDANT-APPELLANT/CROSS-RESPONDENT.



On appeal from Superior Court of New Jersey, Law Division, Middlesex County, L-6606-03.

Before Judges Wefing, Payne, and C.S. Fisher.

The opinion of the court was delivered by: Payne, J.A.D.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued January 26, 2005

This appeal raises the issue of whether a tortfeasor's policy limits of $100,000 or those limits as reduced to $90,831.60 through recovery by the injured claimant's insurer on its subrogated claim for property damage payments must be credited against the claimant's underinsured motorist (UIM) coverage for purposes of calculating the UIM benefits available to a claimant whose bodily injury claim exceeds all available insurance recovery. We hold under the contract at issue in this case that only the amount paid to the insured as damages for bodily injury can be credited against his own UIM policy benefits.

The issue arises from the following facts: Plaintiff Martin McShane was seriously injured in a motor vehicle accident when he was rear-ended by a truck driven by Gerald Dealmedia and owned by Rainbow General Construction Co. Rainbow had purchased combined single-limit liability insurance from Progressive Insurance Company providing $100,000 in coverage. McShane was covered as a spouse by a policy that his wife had purchased from defendant New Jersey Manufacturers Insurance Company (NJM) that included UIM coverage with limits of $300,000 combined single limit, as well as property damage coverage. Separate premiums were paid for the two coverages.

Because his car had been totaled, McShane sought benefits under the collision coverage provided by NJM. Payments in the amount of $7,607.48 were made to Ford Motor Credit Co. as lessor and in the amount of $3,287.52 to McShane's wife as lessee. NJM then recovered $9,168.40 through inter-company subrogation from Rainbow's carrier, Progressive. Five hundred dollars of that amount was paid to Carol McShane as reimbursement for the policy deductible. Because NJM had received the salvage value of the car as well as the subrogation recovery, it actually received $423.40 in excess of its loss from the transactions.

Following institution of suit, the remainder of Progressive's $100,000 policy coverage ($90,831.60) was paid by it to McShane, with the authorization of NJM,*fn1 in settlement of McShane's bodily injury claim. Thereafter, in a separate action, McShane settled with NJM for the"limits of his UIM coverage." However, a dispute arose as to the treatment of the $9,168.40 paid by Progressive to NJM as a property damage subrogation recovery. NJM's counsel contended:"Your client received $100,000.00 from the tortfeasor, therefore, there is $200,000.00 available to your client." McShane's counsel took the position that McShane had only received $90,831.60 and that NJM had received the remainder.

McShane, claiming $209,168.40 to be due him because of the lesser credit against his UIM policy limits that he claimed to be proper, moved against NJM to enforce a settlement in that amount. NJM opposed the motion, arguing that it only owed $200,000. The trial judge ruled in favor of McShane, finding that he reasonably expected and was entitled to recovery of the amount by which NJM's UIM coverage limits exceeded his settlement. The court therefore entered a judgment enforcing a settlement between NJM and McShane in the amount of $209,168.40. NJM has appealed, and we affirm. McShane has cross-appealed from the trial court's denial of counsel fees. However, at oral argument before us, McShane's counsel elected not to pursue the counsel fee claim, which we now dismiss.

I.

The UIM provisions of NJM's policy provided:

We will pay compensatory damages which an insured is legally entitled to recover from the owner or operator of an... underinsured motor vehicle because of:

1. Bodily injury sustained by an insured and caused by ...


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