While the parties agreed that Craighead’s UIM coverage would be reduced to $50,000 by United Farm’s liability payment, Erie contended that its UIM obligation was further reduced to $40,000 because of the insurers’ combined $10,000 in medical payments. In an amended complaint filed in June 2020, Craighead alleged that Erie breached the insurance contract and also acted in bad faith by requiring her to sign a release of the disputed $10,000 before issuing a payment for UIM coverage.
The trial court in November 2021 granted partial summary judgment to Craighead on her claim for breach of contract, finding that the policy’s setoff clause was unenforceable and holding that an issue of fact existed on the bad faith claim. A three-judge panel affirmed the lower court’s ruling in July, concluding that the application ofthe setoff clause to further reduce Erie’s obligation violated the state’s UIM statutes. The panel also correctly held that an issue of fact existed on Craighead’s bad faith claim.
