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Erickson v Citizens Insurance Company; (COA-PUB, 5/31/1996; RB #1858)


Michigan Court of Appeals; Docket No. 177308; Published  
Judges Doctoroff, Neff, and Fitzgerald; Unanimous; Opinion by Judge Doctoroff  
Official Michigan Reporter Citation:  217 Mich App 52; Link to Opinion alt    

Not Applicable

Underinsured Motorist Coverage: Underinsured Motorist Coverage in General 
Underinsured Motorist Coverage: Setoffs Applicable to Underinsured Motorist Cases 
Private Contract (Meaning and Intent)    

In this unanimous published Opinion written by Judge Doctoroff, the Court of Appeals rendered a significant opinion regarding setoff clauses and underinsured motorists claims. The setoff clause in this case was contained in a policy issued by defendant Citizens Insurance Company and appeared in the "limit of liability" clause. That clause stated that "any amounts otherwise payable for damages under this coverage shall be reduced by all sums. . .paid because of the bodily injury by or on behalf of persons or organizations who may be legally responsible." (emphasis added)  

The plaintiff in this case was a passenger in a motor vehicle. His injury was the sole result of the negligence of the driver of another vehicle who inappropriately installed a wheel on that vehicle which came off while the vehicle was operated and struck the vehicle in which plaintiff was a passenger. Plaintiff received the $100,000 in uninsured motorist benefits under an insurance policy covering the vehicle in which plaintiff was a passenger. Plaintiff also recovered approximately $ 16,000 in damages from the insurer of the negligent driver. Plaintiff was insured with uninsured/underinsured motorist benefits with defendant Citizens in the amount of $100,000. Defendant Citizens argued that it could reduce those benefits by the $100,000 uninsured motorist recovery plaintiff obtained from the insurer of the vehicle occupied, as well as the $16,000 plaintiff obtained from the tortfeasor's insurer.

The Court of Appeals held that Citizens was only entitled to offset the $16,000 plaintiff received from the tortfeasor's insurer. The court specifically held that the $100,000 paid to plaintiff in uninsured motorist benefits from the insurer of the vehicle occupied was not subject to the setoff because that compensation was not paid by or on behalf of persons or organizations "who may be legally responsible." In so holding, the court distinguished the earlier Court of Appeals decision in Mead v Aetna Casualty & Surety Company (Item No. 1650) which permitted a setoff against underinsured motorist benefits of amounts recovered by the plaintiff from the tortfeasor. In the case at bar, the court stated, "We find Mead distinguishable from this case because USAA's payment to plaintiff was not a payment 'by or on behalf of persons or organizations who may be legally responsible.'" USAA provided uninsured motorist benefits for [the vehicle owner]. The parties stipulated that [the driver of the other car] was solely responsible for the accident. Therefore, the $16,666 payment by [the tortfeasor's insurer] constituted a payment on behalf of a person who may be legally responsible. The uninsured motorist payment by USAA did not

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