A person injured in an automobile accident is entitled to recover compensatory damages from the at-fault driver, also known as, the tortfeasor. Compensatory damages generally include the cost of the injured person’s medical treatment as well as pain and suffering. In some cases, however, the tortfeasor has no insurance at all or has insurance which is insufficient to fully compensate the injured person. Under those circumstances, the injured person can make a claim for uninsured/underinsured (UM/UIM) motorist coverage against his or her own insurance company. The purpose of UM/UIM coverage is to place the injured person in the same position as if the tortfeasor had been sufficiently insured.

Section 541(c) of the Maryland Insurance Code requires every motor vehicle liability insurance policy issued in Maryland to have UM/UIM motorist coverage in the minimum amount of $30,000 per person and $60,000 per occurrence. An insured also has the option to purchase UM/UIM coverage above the minimum limits, but such coverage cannot exceed the amount of the underlying liability policy – this is known as “enhanced” coverage.

Maryland law places certain limits on the recovery of UM/UIM benefits. In most cases, the limit of liability for an insurer that provides UM/UIM coverage is the amount of that coverage less the amount paid to the injured person on behalf of the tortfeasor. However, if the insured purchased “enhanced” UM/UIM coverage, the claim is not reduced by the amount recovered from the tortfeasor.

EXAMPLE:

Injured Person’s UM/UIM Coverage = $100,000
Tortfeasor’s Policy Limits = $30,000 per person
Maximum Liablity of the UM/UIM Insurer = $70,000

Injured Person’s UM/UIM Coverage – Enhanced = $100,000
Tortfeasor’s Policy Limits = $30,000 per person
Maximum Liability of the UM/UIM Insurer = $100,000

In cases where the accident occurred in the course of employment, UM/UIM benefits are also reduced to the extent that the injured person has recovered workers’ compensation benefits and the provider of the workers’ compensation benefits has not been reimbursed. The purpose of this reduction is to avoid a double recovery by the employee from the workers’ compensation insurer and the UM/UIM insurer.

This reduction, or setoff, is illustrated and further explained in the recent case of Westfield Insurance Co. v. Michael Gilliam, 477 Md. 346 (2022) decided by the Maryland Court of Appeals. Mr. Gilliam was injured in an automobile accident while driving in the course of his employment. Mr. Gilliam received compensation in the amount of $30,000 from the tortfeasor’s liability policy. Mr. Gilliam also received workers compensation benefits which included wage replacement and medical treatment for a total of $628,685.62. The workers’ compensation insurer was reimbursed $10,000 as a result of its’ lien on Mr. Gilliam’s recovery against the tortfeasor.

The vehicle operated by Mr. Gilliam at the time of the accident was covered by his employer’s UM/UIM insurance policy with Westfield Insurance Company in the amount of $1,000,000. As permitted by the policy and Maryland law, Mr. Gilliam also made a claim against his employer’s UM/UIM insurer for an amount by which the tortfeasor was underinsured.

Based on the above, the parties agreed that the UM/UIM insurer was entitled to a set off as follows:

UM/UIM Coverage $1,000,000.00
Less Tortfeasor’s Policy Limits ($30,000.00)
Less Unreimbursed Benefits Paid by WC ($618,685.62)
Maximum Liability of the UM/UIM Insurer $352,314.38

A dispute arose, however, as to whether the UM/UIM insurer was entitled to an additional set off in the amount of $125,030.18 which represents the difference between the total amount of Mr. Gilliam’s medical bills ($243,399.33) and the amount the workers’ compensation insurer actually paid pursuant to the health care providers pursuant to the Workers’ Compensation Fee Guide ($118,369.15).

To resolve the dispute, the Court of Appeals was tasked with interpreting the meaning of “workers’ compensation benefits.” The Court explained both parties’ positions: In Mr. Gilliam’s view, the phrase is limited to money paid to a worker’s compensation claimant or on the claimant’s behalf. In Westfield’s view, the phrase can include a discount of an expense when the claimant enjoys the discount as a result of the workers’ compensation law.

477 Md. at 366. The Court concluded that the UM/UIM insurer is not entitled to a reduction of the total amount billed by a health care provider. The offset is limited to the amount actually paid by the worker’s compensation insurer.