STATE OF MAINE CUMBERLAND, ss
ERIC PURCELL and TRACY PURCELL, Plaintiffs
v.
JAMES MEHLHORN, Defendant
and DECISION ON STIPULATED FACTS MAINE INSURANCE GUARANTY ASSOCIATION, Intervenor-Defendant
v. DONALD t, G,ARrj~FCHl RICHARD NEUTS and tAW ~,! r::;;,: i',} MAINE DEPARTNIENT OF TRANSPORTAnON, Third Party Defendants FEB 06 '2008
Before the Court are the parties' arguments on stipulated facts to
determine the extent of the Intervenor-Defendant Maine Insurance Guaranty
Association's obligation to pay Plaintiff Eric Purcell pursuant to 24-A M.R.S.A. §
4432 et seq.
STIPULATED FACTS
On November 17, 2000, Eric Purcell ("Purcell") was a passenger in a car
driven by Richard Neuts ("Neuts"), an employee of the Maine Department of
Transportation ("DOT"). The car in which Purcell and Neuts were driving
collided with a car driven by James Mehlhorn ("Mehlhorn"). Purcell sustained
damages resulting from the Collision in the amount of $137,059.51. Mehlhorn is
liable to Purcell for negligence as a result of the Collision and Purcell's damages. At all relevant times, Mehlhorn was insured for motor vehicle liability
with Reliance Insurance Company ("Reliance") with limits for bodily injury
coverage up to $50,000.00 per person and $100,000.00 per accident. Reliance was
deemed insolvent by the Commonwealth Court of Pennsylvania in October 2001.
At all relevant times, Purcell was insured for uninsured motorist coverage
with Allstate Indemnity Company (" Allstate") up to $50,000.00 per person.
Uninsured motorist coverage provides benefits for persons injured in an accident
where the vehicle responsible for the accident is insured by an insurer
determined to be insolvent. Purcell has recovered $50,000.00 from Allstate
pursuant to this uninsured motorist coverage due to Reliance's insolvency.
By reason of the insolvency of Reliance, the Maine Insurance Guaranty
Association ("MIGA") assumed the defense and handling of Purcell's claim
against Mehlhorn. The parties agree that the $50,000.00 Purcell recovered from
Allstate is to be applied as an offset, but disagree as to how that offset is to be
applied. MIGA maintains that the $50,000.00 Purcell has already recovered must
be subtracted from the $50,000.00 per person limit of the Reliance policy. Purcell
argues that the $50,000.00 he has already recovered should be subtracted from
his $137,059.51 in damages. The sole issue in this case is whether MIGA is
obligated to make an additional payment in the amount of $50,000.00 to Purcell
on account of Purcell's claim against Mehlhorn for negligence. The parties have
agreed that except for Purcell's claim against Mehlhorn for negligence in
connection with the accident and any rights Purcell may have against MIGA on
account of such claim, all claims, counterclaims, cross-claims and third party
claims in this action are dismissed with prejudice.
2 DISCUSSION
MICA was established by statute "to provide a mechanism for the
payment of covered claims under certain insurance policies to avoid excessive
delay in payment and to avoid financial loss to claimants or policyholders
because of the insolvency of an insurer..." 24-A M.R.S.A. § 4432 (2007). The
Legislature has stated that the provisions of the MICA Act are to be liberally
construed in accord with this purpose. 24-A M.R.S.A. § 4434 (2007). The term
"covered claims" is defined as "an unpaid claim ...arising under and within the
coverage and applicable limits of a policy" issued to a Maine resident or for
property located within the State of Maine. 24-A M.R.S.A. § 4435(4) (2007).
MICA is "obligated to pay covered claims," but is not obligated to pay a claimant
"an amount in excess of the obligation of the insolvent insurer under the policy
or coverage from which the claim arises." 24-A M.R.S.A. § 4438(1)(A) (2007).
MICA's potential obligations are capped at the lesser of $300,000.00 or the
amount "of the obligation of the insolvent insurer under the policy or coverage
from which the claim arises." Id.
The MICA Act places three limitations on MICA's obligations to pay
covered claims, all of which relate to nonduplication of recovery. 24-A M.R.S.A.
§ 4443 (2007). The first limitation is that a claimant having a claim against a
solvent insurer must first exhaust his right under that insurance policy before
seeking recovery under the MICA Act. 24-A M.R.S.A. § 4443(1). The second
limitation is that a claimant having a claim that may be recovered under any
governmental insurance must exhaust his right under that insurance before
seeking recovery from MICA. 24-A M.R.S.A. § 4443(2). The third limitation is
that a claimant having a claim that may be recovered from more than one
3 insurance guaranty association or its equivalent must first seek recovery from the
association of the insured's residence before seeking recovery under the :rvrrCA
Act. 24-A M.R.S.A. § 4443(3). If one of these limitations applies, the claimant's
recovery from MICA on a covered claim is reduced by the amount of any
recovery under the solvent insurer or association. 24-A M.R.S.A. § 4443.
The only limitation relevant to this case is the first, which requires Purcell
to seek and exhaust any remedies he may have on his claim for damages from
any solvent insurer before seeking recovery from MICA. There is no question
that Purcell did in fact exhaust solvent coverage. In fact, Purcell received the
maximum recovery ($50,000.00) that he could have received from Allstate under
its uninsured motorist coverage.
Purcell argues that because he has exhausted solvent coverage and yet still
has unsatisfied damages, he may proceed against MICA for the remainder of his
unsatisfied damages up to what would have been the policy limit had Reliance
not been deemed insolvent (namely, $50,000.00). MICA argues that the
$50,000.00 Purcell received from Allstate pursuant to his uninsured motorist
coverage must be offset against the $50,000.00 limit of the insolvent Reliance
policy, thus leaving :rvilCA with no obligation to pay Purcell. This Court agrees
with MICA's position.
The MICA Act states that "any amount otherwise payable on a covered
claim under this subchapter shall be reduced by the amount of any recovery
under the insurance policy." 24-A M.R.S.A. § 4443(1). In this case, the amount
"otherwise payable" is $50,000.00 because it is the lesser of $300,000.00 or the
obligation pursuant to the Reliance policy. Purcell received $50,000.00 from
Allstate pursuant to his uninsured motorist coverage; when the $50,000.00
4 "otherwise payable" by MICA on account of the Reliance policy is reduced by
the $50,000.00 Purcell received from Allstate, MICA is left with no obligation to
pay any additional amount to Purcell.
Such an outcome is in accord with the Law Court's decisions interpreting
the NHCA Act. For example, in Pinkham v. Morrill, the Law Court stated, "Any
amount recovered from the uninsured motorist carrier is excepted from the claim
against the MICA" and cited to 24-A M.R.S.A. § 4443(1). Pinkham v. Morrill, 622
A.2d 90, 93 (Me. 1993). Similarly, in Ventulett v. Maine Insurance Guaranty
Association, the Law Court stated, "MICA's obligation to the claimant is reduced
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STATE OF MAINE CUMBERLAND, ss
ERIC PURCELL and TRACY PURCELL, Plaintiffs
v.
JAMES MEHLHORN, Defendant
and DECISION ON STIPULATED FACTS MAINE INSURANCE GUARANTY ASSOCIATION, Intervenor-Defendant
v. DONALD t, G,ARrj~FCHl RICHARD NEUTS and tAW ~,! r::;;,: i',} MAINE DEPARTNIENT OF TRANSPORTAnON, Third Party Defendants FEB 06 '2008
Before the Court are the parties' arguments on stipulated facts to
determine the extent of the Intervenor-Defendant Maine Insurance Guaranty
Association's obligation to pay Plaintiff Eric Purcell pursuant to 24-A M.R.S.A. §
4432 et seq.
STIPULATED FACTS
On November 17, 2000, Eric Purcell ("Purcell") was a passenger in a car
driven by Richard Neuts ("Neuts"), an employee of the Maine Department of
Transportation ("DOT"). The car in which Purcell and Neuts were driving
collided with a car driven by James Mehlhorn ("Mehlhorn"). Purcell sustained
damages resulting from the Collision in the amount of $137,059.51. Mehlhorn is
liable to Purcell for negligence as a result of the Collision and Purcell's damages. At all relevant times, Mehlhorn was insured for motor vehicle liability
with Reliance Insurance Company ("Reliance") with limits for bodily injury
coverage up to $50,000.00 per person and $100,000.00 per accident. Reliance was
deemed insolvent by the Commonwealth Court of Pennsylvania in October 2001.
At all relevant times, Purcell was insured for uninsured motorist coverage
with Allstate Indemnity Company (" Allstate") up to $50,000.00 per person.
Uninsured motorist coverage provides benefits for persons injured in an accident
where the vehicle responsible for the accident is insured by an insurer
determined to be insolvent. Purcell has recovered $50,000.00 from Allstate
pursuant to this uninsured motorist coverage due to Reliance's insolvency.
By reason of the insolvency of Reliance, the Maine Insurance Guaranty
Association ("MIGA") assumed the defense and handling of Purcell's claim
against Mehlhorn. The parties agree that the $50,000.00 Purcell recovered from
Allstate is to be applied as an offset, but disagree as to how that offset is to be
applied. MIGA maintains that the $50,000.00 Purcell has already recovered must
be subtracted from the $50,000.00 per person limit of the Reliance policy. Purcell
argues that the $50,000.00 he has already recovered should be subtracted from
his $137,059.51 in damages. The sole issue in this case is whether MIGA is
obligated to make an additional payment in the amount of $50,000.00 to Purcell
on account of Purcell's claim against Mehlhorn for negligence. The parties have
agreed that except for Purcell's claim against Mehlhorn for negligence in
connection with the accident and any rights Purcell may have against MIGA on
account of such claim, all claims, counterclaims, cross-claims and third party
claims in this action are dismissed with prejudice.
2 DISCUSSION
MICA was established by statute "to provide a mechanism for the
payment of covered claims under certain insurance policies to avoid excessive
delay in payment and to avoid financial loss to claimants or policyholders
because of the insolvency of an insurer..." 24-A M.R.S.A. § 4432 (2007). The
Legislature has stated that the provisions of the MICA Act are to be liberally
construed in accord with this purpose. 24-A M.R.S.A. § 4434 (2007). The term
"covered claims" is defined as "an unpaid claim ...arising under and within the
coverage and applicable limits of a policy" issued to a Maine resident or for
property located within the State of Maine. 24-A M.R.S.A. § 4435(4) (2007).
MICA is "obligated to pay covered claims," but is not obligated to pay a claimant
"an amount in excess of the obligation of the insolvent insurer under the policy
or coverage from which the claim arises." 24-A M.R.S.A. § 4438(1)(A) (2007).
MICA's potential obligations are capped at the lesser of $300,000.00 or the
amount "of the obligation of the insolvent insurer under the policy or coverage
from which the claim arises." Id.
The MICA Act places three limitations on MICA's obligations to pay
covered claims, all of which relate to nonduplication of recovery. 24-A M.R.S.A.
§ 4443 (2007). The first limitation is that a claimant having a claim against a
solvent insurer must first exhaust his right under that insurance policy before
seeking recovery under the MICA Act. 24-A M.R.S.A. § 4443(1). The second
limitation is that a claimant having a claim that may be recovered under any
governmental insurance must exhaust his right under that insurance before
seeking recovery from MICA. 24-A M.R.S.A. § 4443(2). The third limitation is
that a claimant having a claim that may be recovered from more than one
3 insurance guaranty association or its equivalent must first seek recovery from the
association of the insured's residence before seeking recovery under the :rvrrCA
Act. 24-A M.R.S.A. § 4443(3). If one of these limitations applies, the claimant's
recovery from MICA on a covered claim is reduced by the amount of any
recovery under the solvent insurer or association. 24-A M.R.S.A. § 4443.
The only limitation relevant to this case is the first, which requires Purcell
to seek and exhaust any remedies he may have on his claim for damages from
any solvent insurer before seeking recovery from MICA. There is no question
that Purcell did in fact exhaust solvent coverage. In fact, Purcell received the
maximum recovery ($50,000.00) that he could have received from Allstate under
its uninsured motorist coverage.
Purcell argues that because he has exhausted solvent coverage and yet still
has unsatisfied damages, he may proceed against MICA for the remainder of his
unsatisfied damages up to what would have been the policy limit had Reliance
not been deemed insolvent (namely, $50,000.00). MICA argues that the
$50,000.00 Purcell received from Allstate pursuant to his uninsured motorist
coverage must be offset against the $50,000.00 limit of the insolvent Reliance
policy, thus leaving :rvilCA with no obligation to pay Purcell. This Court agrees
with MICA's position.
The MICA Act states that "any amount otherwise payable on a covered
claim under this subchapter shall be reduced by the amount of any recovery
under the insurance policy." 24-A M.R.S.A. § 4443(1). In this case, the amount
"otherwise payable" is $50,000.00 because it is the lesser of $300,000.00 or the
obligation pursuant to the Reliance policy. Purcell received $50,000.00 from
Allstate pursuant to his uninsured motorist coverage; when the $50,000.00
4 "otherwise payable" by MICA on account of the Reliance policy is reduced by
the $50,000.00 Purcell received from Allstate, MICA is left with no obligation to
pay any additional amount to Purcell.
Such an outcome is in accord with the Law Court's decisions interpreting
the NHCA Act. For example, in Pinkham v. Morrill, the Law Court stated, "Any
amount recovered from the uninsured motorist carrier is excepted from the claim
against the MICA" and cited to 24-A M.R.S.A. § 4443(1). Pinkham v. Morrill, 622
A.2d 90, 93 (Me. 1993). Similarly, in Ventulett v. Maine Insurance Guaranty
Association, the Law Court stated, "MICA's obligation to the claimant is reduced
by whatever amount the claimant recovers from any other insurance sources."
Ventulett v. Maine Insurance Guaranty Association, 583 A.2d 1022, 1024 (Me. 1990).
Contrary to Purcell's argument, there is nothing in the MICA Act that
requires MICA to make an injured party whole with respect to all of the injured
party's damages. Indeed, the express purpose of MICA is to "provide a
mechanism for the payment of covered claims under certain insurance policies."
24-A M.R.S.A. § 4432 (emphasis added). As set forth above, the MICA Act
defines a "covered claim" as "an unpaid claim ... arising ...within the applicable
limits of a policy." 24-A M.R.S.A. § 4435(4). In the instant case, Purcell's covered
claim is for $50,000.00, the limit of the Reliance policy. As both the MICA Act
and the Law Court make clear, NHCA's obligation to pay a covered claim is to be
reduced by the amount the claimant receives pursuant to uninsured motorist
coverage. 1
1 By way of example, the Court notes that if Allstate's uninsured motorist coverage had had a limit of $25,000.00, Purcell could have recovered an additional $25,000.00 from MIGA to arrive at the total $50,000.00 limit of the insolvent Reliance policy. Moreover, Purcell himself admits that this statement of MIGA's obligations is correct: "In its Brief,
5 The Court also notes that the offsetting of MIGA's obligation by the
amount Purcell recovered from Allstate is also the equitable and rational result in
this case. Indeed, if Reliance had not been insolvent and instead was liable to
pay Purcell, Purcell would have only been able to collect $50,000.00 from
Reliance pursuant to the limits of Mehlhorn's policy. However, because Reliance
was in fact insolvent, Purcell was able to collect $50,000.00 from Allstate under
his uninsured motorist coverage, coverage that would not have been available to
Purcell had Reliance been solvent. Purcell is seeking to use Reliance's insolvency
to recover twice the insurance benefits he would have been able to recover had
Mehlhorn's insurer been solvent. Such a result cannot be permitted.
Therefore, the entry is:
Judgment for the Intervenor- Defendant Maine Insurance Guaranty Association on the parties' stipulated facts
The clerk shall incorporate this Order into the docket by reference pursuant to M.R. Civ. P. 79(a).
Dated at Portland, Maine this .f"" day of -t-~--~--.J'2007.
Ro ert E. Crowley Justice, Superior Court
MIGA states that 'uninsured motorist coverage is to be offset against MIGA's statutory obligation.' MIGA Brief, p. 8. Plaintiffs do not dispute this fact." Plaintiffs' Reply Brief, page 2.
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