The details of car coverage can at times be hard to parse, with some technical parts of a policy leaving consumers uncovered for damages they thought they’d be protected for. And a case recently decided by a federal appeals court serves as an example of that fact, according to OnlineAutoInsurance.com.
In Lowe v. State Farm Mutual Automobile Insurance Company, decided by the 5th U.S. Circuit Court of Appeals, the main question was whether the laws governing the application of a Tennessee car insurance policy should be those of the state where the policy was issued or those of the state where the accident that sparked the case took place.
Lowe originally took State Farm to court over its refusal to pay her any of the $100,000 worth of underinsured motorist benefits that were included in her Tennessee policy after getting injured in an accident in Mississippi.
According to court documents, the reason State Farm refused to pay out on the claim is that Lowe had already received a total of upwards of $119,000 for the accident from the at-fault party’s insurance company and through workers’ compensation. State Farm said this exempted the insurer from having to pay because the policy contained a clause saying that it would not have to provide duplicate benefits for any damages that had already been paid for by the person at fault or through "any workers’ compensation law, disability benefits law or similar law."
Further, State Farm argued that Tennessee law allowed the company to offset its benefits by any compensation already paid by other parties to the insured party.
So, for instance, if a policyholder had $150,000 worth of damages, $25,000 of which had already been paid by the at-fault party, and $100,000 worth of underinsured motorist coverage, the policyholder would likely be able to collect $75,000 through the policy-the difference between the policy limit and the amount already paid.
And since Lowe had already collected compensation in excess of her policy limits, State Farm argued-and the court decided, ultimately-that State Farm did not owe Lowe any further compensation.
As for the decision of whether Mississippi or Tennessee law should be applied in the case, that depended on the choice-of-law principles in place in Mississippi, which ended up saying that the laws governing the case should be those of Tennessee, according to the "center of gravity" test. That was because Lowe was from Tennessee, her insured vehicle was registered in Tennessee, and the policy was issued in Tennessee. Those facts made Tennessee the state which "has the most substantial contacts with the parties and the subject matter of the action," according to court documents.