Long standing Georgia law requires a claimant to exhaust the tortfeasor’s underlying liability insurance limits before looking to uninsured motorist insurance for coverage. Daniels v. Johnson, 270 Ga. 289, 290 (1998). Additionally, Georgia public policy prohibits the recovery of punitive damages from an uninsured motorist insurer. State Farm Ins. Co. v. Weathers, 260 Ga. 123, 392 S.E.2d 1 (1990); Bonamico v. Kisella, 290 Ga.App. 211, 213, 659 S.E.2d 666 (2008); Roman v. Terrell, 195 Ga.App. 219, 219–222(2), (3), 393 S.E.2d 83 (1990).
So what is the effect on UM coverage when a claimant allocates the liability settlement payment between punitive damages and compensatory damages? According to the Georgia Supreme Court, in Carter v. Progressive Mountain Insurance Company, 2014 WL 3396496 (Ga., July 14, 2014), while allocation is not prohibited, any allocation will not increase the UM carrier’s coverages.
In Carter, the plaintiff was injured in an automobile collision with a driver allegedly driving under the influence of alcohol. Carter settled her claim with the liability carrier, pursuant to a limited liability release; but, within the terms and conditions of the release specifically allocated $29,000.00 of the $30,000.00 policy limits as payment of punitive damages and only $1,000.00 toward compensatory damages. Carter then pursued recovery of compensatory damages from her UM carrier, Progressive.
Arguing that the inclusion of such an allocation within the terms and conditions of the limited liability release effectively shifted payment of punitive damages to the UM carrier, Progressive moved for summary judgment. The trial court granted the motion, and the Court of Appeals affirmed. But, the Georgia Supreme Court reversed. The Supreme Court held that although Carter had exhausted the underlying liability limits, any additional recovery from her UM carrier remained subject to the statutory limitations of O.C.G.A. §§33–24–41.1(d)(2) and 33-7-11.
Writing for the Court, Justice Hines explained
Under OCGA § 33–24–41.1(d)(2), “the amount paid under a limited release shall be admissible as provided by law as evidence of the offset against the liability of an uninsured motorist carrier and as evidence of the offset against any verdict of the trier of fact.” And, by the plain language of the statute, it is “the amount paid” that is admissible, not merely the amount attributed to compensatory damages. Further, … [u]nder O.C.G.A. § 33-7-11(b)(1)(D)(ii)(I), recovery under the UM policy will be limited to “the insured’s losses in addition to the amounts payable under any available [liability] coverages” and, “the insured’s combined recovery from the insured’s uninsured motorist coverages and the available [liability] coverages … shall not exceed the sum of all economic and noneconomic losses sustained by the insured.” (Emphasis in original.)
Id. at *3.
Finally, the Supreme Court noted that “punitive damages do not represent ‘losses’ by the insured, and regardless of any designation of such payments in the release, when the UM policy is brought into play, the combined recovery will not exceed the insured’s economic and noneconomic losses.” Id. Unfortunately, however, resolution of Carter type cases requires a jury trial to determine the amount of recoverable compensatory damages, and thus determine the amount of UM coverage available to the plaintiff. But the message to claimants is clear: allocate the liability settlement any way you choose; the UM carrier still gets credit for every penny.