Superior Court describes formula to apportion insufficient insurance limit among multiple claimants

I frequently write about the importance of having adequate insurance coverage, to protect the personal assets of the insured and to protect victims of mistakes -- or worse -- that the insured might make.

There are times, however, when even what seems to be adequate coverage is not enough to compensate injured people. The Superior Court described such a situation in Providence Mut. Fire Ins. Co. v. Morancy, 2010 WL 2763255.

Morancy involved a a teenager who got drunk at a party at Morancy's house and then crashed his car into a tree, injuring his four passengers. He had auto insurance with limits of $100,000 per person and $300,000 per accident. Those insurance funds were distributed among the passengers. The insurance did not come close to compensating the passengers for their injuries, one of whose medical bills alone exceeded $900,000.

The passengers then turned to Morancy's homeowner's insurance for additional compensation. The homeowner's policy had a limit of $500,000. That limit, in addition to the auto policy limit, was insufficient to fully compensate the passengers for their injuries. The insurer requested that the court allocate the limit among them.

There was little evidence presented to the court of the passengers' future medical cost or future lost earnings. The court chose to disregard pain and suffering damages. It used only the medical costs incurred by each passenger to determine the proper allocation.

The court subtracted from the medical costs the amount each claimant had received in settlement from the auto policy. It totalled those uncompensated damages and computed each passenger's percentage share in that total by dividing the individual uncompensated damages by the total uncompensated damages. It then distributed the $500,000 limit according to those percentages.

The public service portion of this post:

The passenger who was most severely injured was a tenth grade honor roll student. She worked part-time after school and was a cheerleader. Now she has serious mental impairments that affect her cognitive skills; she has lost vision in one eye; she cannot drive and has difficulty reading and using a computer; she is currently repeating twelfth grade in an attempt to pass the MCAS; it is unlikely that she will ever be able to work; and she cannot be left home alone.

The takeaway:

1. Don't drive drunk.
2. Don't get into a car with someone who is driving drunk.
3. Don't serve alcohol or let your kid serve alcohol to someone who will drive.
4. Tell your teenagers that if they can't get home safely you will come and get them, no questions asked.