Recovering Money Damages From Multiple Policies or Parties 

Set off clauses allow auto insurers to avoid paying full benefits under the policy coverage where an insured has already recovered other benefits for the same loss, such as workers compensation coverage or PIP.  Set offs are generally included in the language of the policy and serve as self-protection for insurers to aid in limiting liability.  They also keep the insured from recovering a “wind fall” extending beyond the scope of his or damages.  Through South Carolina case law, the precedent has developed upholding set off clauses that would affect voluntary coverage, and striking down those that affect mandatory coverage. 

Williams v. US Fire Ins. Co. (314 SC 215) involved a car dealership employer who purchased automobile insurance through United States Fire Ins. Co. to include coverage for his employees.  The policy included underinsured motorist (UIM) coverage, which is not mandatory under State law (unlike uninsured motorist, or UM, coverage that is required under § 38-77-150).  An employee, Williams, was injured during his ordinary course of business while operating a vehicle owned by the employer.  Williams received worker’s compensation benefits in addition to policy limits paid by the at fault party’s insurer.  When the Williams tried to also receive the limits of the UIM coverage under his employer’s policy, he was denied.  US Fire claimed that in accordance with the set off clause of the policy, they were not required to pay the UIM coverage limit where Williams already received workers compensation benefits, and payment of the UIM coverage limits would exceed the actual damages incurred by Williams.  The Court agreed, holding that where the UIM coverage was included in a policy purchased by the employer voluntarily to include coverage for his employees, the set off clause was not unlawful and would be upheld.

The case of Ferguson v. State Farm (261 SC 96) presents a slightly different set of facts to further define the role of set off benefits.  In Ferguson, an employee held his own automobile insurance policy through State Farm to include the mandatory UM coverage.  The insurance policy included a set off provisions for workers compensation benefits against UM recovery.  The employee was subsequently injured by an uninsured driver during the ordinary course of business while operating his vehicle, and he received workers compensation benefits.  The injured employee then sought full recovery of the UM coverage limits, but was refused by State Farm.  State Farm used the set off clause in the policy to claim that UM benefits would not be paid in full where workers compensation was already received and payment of the full limit of UM benefits would exceed the total damages.  The Court, however, disagreed and struck down the set off provision in the policy.  The Court found that the statue mandates insurers to cover the loss caused by uninsured drivers and any limiting language in the policy that would effectively provide less protection than required by statute has no force or effect.  Therefore, the set off provision that would limit an insurer’s liability under mandatory UM coverage was struck down.

If you have been invovled in an accident, and you have questions regarding insurance coverage and/or worker's compensation, please feel free to contact us for a free consultation. 

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