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Benefits received from a self-paid disability policy do not duplicate underinsured motorist benefits, a three-judge Superior Court panel has ruled. The panel agreed with the trial court in Tannenbaum v. Nationwide Insurance Co. that an arbitration panel erred in using Alan Tannenbaum’s disability policy benefits as a setoff to his UIM benefits. The ruling follows several similar cases regarding setoff provisions that involved other types of self-paid policies, but Tannenbaum is the first to deal with disability benefits. In Tannenbaum, Nationwide Insurance Co., argued that it deserved a credit against Tannenbaum’s arbitration award for the benefits he was already paid by his disability insurer. Without the credit, the company said Tannenbaum would receive a “double recovery,” according to the opinion. Nationwide also argued that the issue of disability benefits was different than previous types of benefits deemed by the courts to be excess and not duplicate benefits. Judge John T.J. Kelly Jr. said the court was not persuaded by that argument. “[W]here the personal policies resorted to are both separate from UIM, or UM, coverage, and paid for exclusively by the claimant either directly, or through payroll deductions which result in lower wages, payments received from these coverages do not duplicate benefits under the [Motor Vehicle Financial Responsibility Law] as they are fundamentally different from those benefits,” Kelly said. In simplifying its ruling, the court pointed to an argument posed in the Pennsylvania Trial Lawyers Association’s amicus curiae that stated a policyholder is entitled to the benefits for which he paid. “Should [Nationwide's] argument prevail, insurance companies, not claimants, would receive a windfall, as premiums for excess coverage would have been paid to no avail,” Kelly said. “[N]o benefit could accrue since any recovery other than UIM payments would perforce be designated �double.’” Tannenbaum was a board certified pediatrician and assistant director at Einstein Medical Center when he was rendered permanently disabled in a car accident in December 2000, according to the opinion. After receiving an award from the tortfeasor, he sought recovery of UIM benefits from Nationwide, his insurer. The matter was submitted directly to arbitration under the terms of the policy, Kelly said. The arbitrators granted a motion in limine by Nationwide that stopped Tannenbaum from introducing evidence of how much he paid in and was paid from his disability policies. The arbitrators eventually awarded Tannenbaum $1.875 million and credited Nationwide with nearly $985,000, bringing Tannenbaum’s net award to $890,567, according to the opinion. He appealed that ruling to the Bucks County Common Pleas Court and Judge Rea B. Boylan vacated the award. Nationwide then appealed to the Superior Court, according to the opinion. Richard A. Wolfe of Saffren & Weinberg in Jenkintown was co-counsel for Tannenbaum along with Leonard A. Sloane of Eckell Sparks Levy Auerbach Monte Rainer & Sloane in Media. Wolfe said that given “how vigorous” Nationwide has fought its position, the case is not likely to end here. If the case does make it back to the arbitrator under Kelly’s interpretation, Wolfe said Tannenbaum would receive much more than the $1.875 million given the estimates by economic experts for both sides. “Nationwide really has seemed to be taking the forefront in this effort to obtain a credit,” Wolfe said. The company was involved in a 2005 Superior Court case cited often by Kelly in the Tannenbaum opinion, Ricks v. Nationwide Insurance Co. That was the latest in the line of cases that ruled self-paid policies are excess coverage for a policyholder and not duplicate to the policyholder’s UIM coverage, Wolfe said. Ricks involved benefits received from an employer’s workers’ compensation coverage, according to the opinion. James C. Haggerty of Swartz Campbell represented Nationwide at the appellate level along with trial counsel Allan D. Goulding Jr. of Curtin & Heefner in Morrisville. Haggerty said Nationwide wasn’t trying to be at the “forefront” of the credit issue. “All Nationwide is doing is asking the court to apply the Financial Responsibility Law as originally intended by the Legislature,” he said. The Supreme Court first ruled on these issues in 1996 in Panchelli v. Liberty Mutual Insurance Group when it ruled that sick pay and Social Security benefits were not deductible when it came to calculating benefits under Motor Vehicle Financial Responsibility Law, according to the opinion. The Superior Court in Tannenbaum ruled that the appellee’s disability policies went a step further � as is required by MVFRL � to state that the benefits are “in excess” of first party benefits under MVFRL. “The Superior Court recognized the important public policy, which is that the motor vehicle code was designed to encourage people to obtain insurance and to get adequate protection,” Wolfe said. Haggerty said Nationwide was not only arguing that Tannenbaum was distinctive from previous cases on similar issues, but that those previous cases misapplied the law as intended by MVFRL. He said the earlier rulings effectively reinstated the No-Fault Motor Vehicle Insurance Act’s collateral source rule, which allowed policyholders to collect on both their UIM benefits and other policies they paid into. Nationwide is still considering whether to appeal the court’s decision, Haggerty said. Kelly also said the arbitrators erred in granting the motion in limine and refusing to look at certain information regarding Tannenbaum’s disability policies. Judges Correale F. Stevens and Seamus P. McCaffery joined Kelly on the panel. The amicus curiae was written by Scott B. Cooper of Schmidt Kramer in Harrisburg. (Copies of the 10-page opinion in Tannenbaum v. Nationwide Insurance Co. , PICS No. 07-0314, are available from The Legal Intelligencer . Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information. Some cases are not available until 1 p.m.) •

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