Miller v. State Farm Mut. Auto. Ins. Co., 993 A.2d 1049 (Del. 2010) (Jacobs, J.)

As a matter of first impression, the Delaware Supreme Court held that the collateral source rules applies in the underinsured motorist context and that plaintiffs' paid insurance premiums entitled plaintiffs to double recovery.

The plaintiff, insured by codefendant State Farm, was injured while driving a car owned by his employer. He received the bodily injury liability coverage limit under the tortfeasor's insurance policy and settled with his workers' compensation carrier. The plaintiff brought an action in personal injury against his insurer for underinsured motorist benefits. The Delaware Superior Court denied the plaintiff's motions to exclude evidence of his workers' compensation benefits. During the trial, the defendant-insurer repeatedly mentioned the plaintiff's settlement with the workers' compensation carrier before the jury. The jury awarded no damages to the insured-plaintiff. On appeal, the Delaware Supreme Court addressed the collateral source rule, which provides that a tortfeasor has no right to any mitigation of damages because of payments or compensation received by the injured person from an independent source. The court held that restricting a double recovery in underinsured motorist cases would frustrate the reasonable expectations of the insured, created by the payment of insurance premiums, to recover under the policy. Furthermore, the restriction would defeat the purpose of Del. Code Ann. tit. 18, § 3902, which governs underinsured motorist coverage and has no legislative provision that eliminates or modifies the collateral source rule. The court held that because the insurer did not contribute to the fund that created the collateral source – the workers' compensation benefits – and had no interest in that fund, it should not have been allowed to benefit from it. Accordingly, the trial court's erroneous admission of the collateral source evidence materially prejudiced the insureds and was not harmless. The Supreme Court reversed and remanded the case to the Superior Court for a new trial.

Case Law Alert - 3rd Qtr 2010