UM/UIM Coverage Limits and Tortfeasor Settlement Agreements Are Not Admissible in PA UM/UIM Claims
In the case of Schmerling v. Liberty Mutual Insurance Company, the United States District Court for the Middle District of Pennsylvania held that underinsured motorists benefit limits and 3rd party tortfeasor settlement negotiations are irrelevant, and therefore, inadmissible in an uninsured motorists claim.
Schmerling sustained serious injuries as a result of being struck by a motor vehicle while walking in a parking lot. She asserted a personal injury claim against the driver of the vehicle, who had $300,000 in insurance coverage, and consented to a settlement of $275,000.
At the time of the accident, Schmerling possessed $100,000 in underinsured motorists benefits by Liberty Mutual, and she commenced this action to recover those benefits. The only issue remaining was the extent of Ms. Schmerling's injuries; there was no claim for “bad faith.” In order to recover under the policy, Schmerling needed to show that the value of her damages exceeded the underlying tortfeasor's $300,000 insurance coverage.
At the Final Pretrial Conference, the parties disagreed over the evidence to be submitted to the jury. More specifically, Liberty Mutual argued that the Court must prohibit evidence of the amount of Schmerling's underinsured motorist coverage and her settlement negotiations and agreement with the underlying tortfeasor because they are irrelevant and, if admitted, would be unfairly prejudicial. Schmerling claimed that both the underinsured motorist policy and the underlying settlement amount are relevant, would assist the jury in reaching a verdict, and are not unfairly prejudicial.
The US District Court for the Middle District noted that evidence must be relevant to be admissible. Forrest v. Beloit Corp., 424 F.3d 344, 355 (3d Cir. 2005). "Evidence is relevant if: (a) it has any tendency to make a fact more or less probable than it would be without the evidence; and (b) the fact is of consequence in determining the action." Fed. R. Evid. 401. Nonetheless, relevance alone does not ensure admissibility. Coleman v. Home Depot Inc., 306 F.3d 1333, 1343 (3d Cir. 2002). Alternatively, the court noted that relevant evidence may be ruled inadmissible "if its probative value is substantially outweighed by a danger of one or more of the following: unfair prejudice, confusing the issues, misleading the jury, undue delay, wasting time, or needlessly presenting cumulative evidence." Fed. R. Evid. 403. "Unfair prejudice" is more than simply "damage to the opponent's cause" but rather is "prejudice of the sort which cloud[s] impartial scrutiny and reasoned evaluation of the facts, [and] which inhibit[s] neutral application of principles of law to the facts as found." Goodman v. Pa. Tpk. Comm'n, 293 F.3d 655, 670 (3d Cir. 2002)
Previously, Pennsylvania Courts have been divided as to the relevancy and potential for prejudice of admitting the amounts of underinsured motorists benefits available to the policy holder. See Ridolfi v. State Farm Mut. Auto. Ins. Co., No. 15-859, 2017 WL 3198062 (M.D. Pa. July 27, 2017) Here, Schmerling relaid onNoone v. Progressive Direct Ins. Co., No. 12-1675, 2013 WL 8367579,(M.D. Pa. May 28, 2013) wherein the court concluded that evidence of the underinsured motorist coverage, "even if it is merely background information, will assist the jury in completely understanding and evaluating the case" and that the evidence was "not overly prejudicial" to the defendant. Liberty Mutual, on the other hand, cited Lucca v. Geico Ins. Co., No. 15-4124, 2016 WL 3632717 (E.D. Pa. July 7, 2016), a case subsequent to Noone wherein the court determined that the underinsured motorist policy limit did not reach even the "low bar" of being relevant, because it presented no facts for the jury to decide (noting Noone failed to explain how an underinsured motorist policy "would be helpful to the jury or to what disputed issue in the case the information related"). The Lucca court further stated that the same evidence "may very well serve to prejudice [defendant] by giving the jury an anchor number that has no bearing on [plaintiff's] damages."
In this case, the plaintiffs argued that the policy limit is relevant in establishing defendant's contractual duties, but the Court determined that the defendant's contractual duties were not in dispute. Thus, the Court concluded that the amount of the policy limit was irrelevant to the sole issue for the jury to resolve: the extent and value of Ms. Schmerling's injuries. In assessing Ms. Schmerling's injuries, the jury is expected to focus on her symptoms, medical bills, and evidence of future medical needs. The Court concluded that the underinsured motorist policy limit does not assist the jury in making these determinations.
In addition, the the Court found that the relevance of this evidence is substantially outweighed by the danger of unfair prejudice in that it gives the jury an "anchor number" that does not reflect Ms. Schmerling's actual damages. For example, the Court was concerned that the policy limit might cause the jury to inflate its damages calculation based on an improper assumption that Ms. Schmerling's injuries exceed the policy amount. Thus, the Court ruled the evidence of the underinsured motorist policy limit must be excluded.
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