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Hartford Accident and Indemnity Co. v. Lin

Words & Phrases

Underinsured Motorist Coverage: Arbitration

Trial Judge

Matthew F. Kennelly

Appellate Judge

Doris L. Pryor


UIM arbitration clause did not apply to plaintiffs bad faith claim for insurer's purported failure to settle claim within set time frame.

Fact Summary

Underinsured Motorist Coverage:  Setoff                   

Policy limit was properly reduced by workers' compensation benefits and settlement amount received by the policyholder in his state-court action against underlying tortfeasor.


Zhen Feng Lin was in a car accident while working as a food delivery driver for Win Win Seafood Wholesale, LLC in 2017. Lin sustained serious injuries in the collision, but the at-fault driver, Katherine Chickey, was underinsured. Lin—along with his wife, Li Chen, who brought a loss of consortium claim—settled with Chickey in a state-court suit for her insurance policy limits of $100,000. Lin also received workers' compensation benefits from his employer's workers' compensation insurance carrier, Hartford Fire Insurance Company ("Hartford Fire"). Lin then sought to recoup his additional losses under his employer's underinsured motorist policy, provided by Hartford Accident and Indemnity Company ("Hartford Accident").

Hartford Accident's underinsured motorist policy is meant to cover the difference between what an insured employee is legally entitled to recover from the at-fault driver for bodily injuries sustained in an accident, and what the at-fault driver is able to pay, up to $1 million. Unless the parties  reach a "settlement agreement," as defined by the policy, the amount recovered by the insured shall be reduced by any sums "paid or payable" by anyone legally responsible for the insured's injuries or under any workers' compensation.

Lin submitted a demand of $900,000 to Hartford Accident, for what he believed to be a "policy-limits demand," subtracting the $100,000 that he had already received from Chickey in the settlement. Hartford Accident rejected the demand. It contended that the policy limit should be further reduced to account for the money Lin had received in workers' compensation. With that calculation in mind, Hartford Accident counteroffered to settle at $100,000.

Lin declined the counteroffer, which he said was so low that it had to have been made in bad faith. Lin also argued that Hartford Accident's reduction of the policy limits was incorrect because there had been a settlement agreement between the parties. Moreover, Lin maintained that Hartford Accident did the math wrong. He argued that the amount he paid to resolve the workers' compensation lien—$73,320.72—should be credited to him, and not deducted from the policy limits.

Because of this impasse, Hartford Accident filed a complaint seeking a declaratory judgment in the Northern District of Illinois to resolve the extent of its liability to Lin. Before filing an answer, Lin asked the district court to stay or dismiss the lawsuit in favor of arbitration. In support, he pointed to the arbitration clause in Hartford Accident's insurance policy:

  • If we and an "insured" disagree whether the "insured" is legally entitled to recover damages from the owner or driver of an "underinsured motor vehicle" or do not agree as to the amount of damages that are recoverable by that "insured", then the matter may be arbitrated. However, disputes concerning coverage under this endorsement may not be arbitrated.

Under this provision, Lin argued, the parties agreed to arbitrate not only the subject of Hartford Accident's complaint—the extent of the workers' compensation setoff—but also whether Hartford Accident acted in bad faith in dealing with his claim. The district court denied the motion.

Following the court's ruling on the motion to stay, Lin filed his answer asserting various counterclaims, including one for bad faith. Hartford Accident then moved for summary judgment arguing that because there was no "settlement agreement" between Lin and Hartford Accident, the policy limits in this case should be offset by both the Chickey settlement and Lin's total workers' compensation award.

Under the terms of Hartford Accident's underinsured motorist policy, the district court determined, both the $100,000 settlement and Lin's $301,259.90 workers' compensation award should be deducted from the policy limits. Next, the district court ordered the parties to arbitrate the issue of Lin's damages.

Lin was not done with the lawsuit, though. In May 2022, Lin filed an amended counterclaim alleging that Hartford Accident breached its contract and acted in bad faith in unreasonably drawing out the process of paying out his claim.