A setoff is a defense to a legal judgment for damages. A setoff can be either partial or total. When an insured party is making a claim against their insurance company for an Uninsured/Underinsured Motorist claim (UM/UIM claim) for an auto accident, bike accident, or pedestrian accident, the amount awarded in the claim may be reduced or “setoff” by any amount already covered from the at-fault motorist. A setoff is used to prevent double recovery, as compensatory damages are designed to make a person whole, not to punish the other party or provide a windfall for the insured.
A setoff often applies in an underinsured motorist claim. Recovery from the underinsured motorist is deducted from an arbitration award against the underinsured motorist carrier to prevent double recovery. For a setoff to be considered, the insurance company must submit the claim to the arbitrator. Unlike issues involving coverage, which are the domain of the courts, any disputes over damages must be presented to the arbitrator or they are considered waived.
A setoff also applies when the insured’s policy has multiple provisions from which compensation may be obtained. This type of setoff is applied because of a provision in the insurance contract. However, contractual setoffs will only be enforced if the total amount of proven or undisputed damages is less than the total compensation which the insurance company could pay under the policy. Medical bills paid from medical payments coverage will be setoff from the amount received from uninsured benefits, unless the provable damages exceed both.
In an arbitration to determine the amount of damages payable to the insured, the carrier must include an assertion and proof of the setoff. The carrier must also produce evidence of the setoff at the hearing. If an arbitrator’s decision does not specify whether the amount includes a setoff from an underinsured motorist’s policy, the insurance company is not entitled to a setoff against the award.
Setoffs can also become an issue when the at-fault driver’s insurance company becomes insolvent, and their claims are handled by the Illinois Guaranty Fund. If the plaintiff fails to exhaust any other insurance policies before making a claim against the Fund, any amount awarded to the plaintiff will be setoff by the maximum amount of uninsured motorist coverage.
Determining the best strategy for preparing and presenting UM/UIM claims is very important. If you have an uninsured or underinsured motorist claim, contact an experienced attorney to ensure the insurance company complies with the rules and you get the compensation that you deserve.