3.3.5 Victim Full Recovery Approach (Current View)

• Jurisdiction: Arizona

In Schultz v. Farmers Insurance Group,^[211] the Arizona Supreme Court abandoned the mandatory/non-mandatory coverage distinction used in Bacchus and Caballero to determine the enforceability of coverage offset provisions contained in automobile policies. The Farmers policy before the court in Schultz contained a "non-duplication of medical benefits" endorsement, which was enforced by the court because the victim was fully compensated for the injuries received in the automobile accident and the only question was whether the victim was entitled to a double recovery.

The material facts before the court in Schultz were not in dispute. The insured, Sandra Schultz, was involved in an automobile accident with an uninsured motorist. Schultz's Farmers policy provided uninsured motorist and medical payments coverage. The policy contained the following non-duplication of benefits endorsement:

Any amount paid under "medical payments coverage" will be applied against any other coverage applicable to the loss so that there is no duplication of "medical payments" benefits. In no event shall a coverage limit be reduced below any amount required by law.^[212]

Schultz argued that she was entitled to the full uninsured motorist benefits without any offset for medical payments paid by Farmers. The court rejected Schultz's argument and found that the non-duplication endorsement was valid where the enforcement of the endorsement would not prevent full recovery for the insured's loss.

The court in Schultz observed that while A.R.S. Sec. 20-259.01 was not directly applicable, the statute demonstrated that the public policy of Arizona permitted an...