On appeal from the Superior Court of New Jersey, Law Division, Atlantic County, L-7023-05.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Winkelstein, Fuentes and Chambers.
Plaintiff Michelle Layton appeals from a March 14, 2008, Law Division order dismissing her claim against defendant Allstate Insurance Company for underinsured motorist (UIM) benefits. The court also dismissed the consortium claim of plaintiff's husband David Layton.
The Allstate policy's limit for UIM benefits is $100,000. The policy also contains a provision that reduces available UIM benefits by the amount the injured party receives from the tortfeasor, and by the amount Allstate pays to the injured party for medical expense benefits (the setoff provision). Here, because plaintiff recovered $50,000 from the tortfeasor, and received over $100,000 in medical expense (personal injury protection (PIP)) benefits from Allstate, Allstate denied plaintiff's UIM claim. Relying on the policy language, the Law Division judge found that UIM benefits available to plaintiff had been fully exhausted.
On appeal, plaintiff's primary argument is that Allstate should be estopped from enforcing the setoff provision because she relied on the availability of the $100,000 UIM policy limits when she settled with the tortfeasor with Allstate's consent for the tortfeasor's $50,000 policy limits. See Longworth v. Van Houten, 223 N.J. Super. 174, 194 (App.Div. 1988)(insured who receives an acceptable settlement offer from tortfeasor should seek consent to settle from UIM carrier). Plaintiff claims that she would not have settled for that sum had she been aware of the setoff provision. In other words, plaintiff claims she is entitled to an additional $50,000 in UIM benefits, representing the full $100,000 UIM policy limit, less the $50,000 she recovered from the tortfeasor. We find merit to plaintiff's estoppel argument, and consequently, we reverse.*fn1
On November 28, 2003, plaintiff was a passenger in Regina Loomis's car. Loomis was a Connecticut resident and her Allstate policy was issued in that state. Plaintiff was injured when the car was struck from the rear by a vehicle driven by Sami Alkhatib and owned by Fathey Dewair (the tortfeasors).
Plaintiff sought damages from the tortfeasors, as well as PIP and UIM coverage from Allstate. Allstate initially paid approximately $23,000.00 on plaintiff's PIP claim, but disputed the rest, which was submitted to arbitration. On February 9, 2007, an arbitrator awarded plaintiff $76,312.50 on that claim.
Allstate made the payments between October 2007 and January 2008. Thus, Allstate paid approximately $100,000 in PIP benefits on plaintiff's behalf.
In April 2007, the tortfeasors offered to settle for their policy limit, $50,000. Plaintiff sent a letter to Allstate asking permission to settle pursuant to Longworth. Allstate replied in a letter that stated, in its entirety: "Please accept this letter as consent to settle the bodily injury claim with the tortfeasor's policy. . . . [T]his does not infer [sic] that Allstate Insurance Co. values the claim in excess of the tortfeasor's policy limits." Plaintiff then accepted the tortfeasors' settlement offer, and dismissed her complaint against them.
Plaintiff's claim against Allstate for UIM benefits was submitted to mandatory non-binding arbitration, where the arbitrators awarded plaintiff $135,000. Allstate rejected the award, and demanded a trial de novo.
The Allstate policy states: "[d]amages payable under this [UIM] coverage will be reduced by all amounts payable under any automobile medical payments coverage . . . ." Allstate claims that pursuant to this provision, the $100,000 UIM limit was reduced not only by the $50,000 the tortfeasors paid to plaintiff, but also by the $100,000 Allstate paid on plaintiff's ...