Nicholas Ortiz was injured while in the course and scope of his employment when a vehicle driven by Choi Seok Hwan collided with his vehicle. Hwan’s insurance policy had an available per person policy limit of $15,000 and Ortiz settled his liability claim for that amount. Ortiz also received approximately $107,000 in workers’ compensation benefits.

Ortiz then made a claim for underinsured motorist benefits under a State Farm automobile policy. This policy has underinsured motorist limits of $100,000. State Farm denied his claim based on the offset language in the policy’s underinsured motorist coverage section which provided that “Any amount payable under this coverage shall be reduced by any amount paid or payable to or for the insured : a.for bodily injury under the liability coverage; or b.under any workers’ compensation, disability benefits, or similar law.”

Ortiz filed a complaint in Superior Court for declaratory relief claiming that, when compared to the statutory requirements, this offset provision is overly broad and therefore is void. The trial court disagreed with Ortiz and concluded that the policy was to be read and enforced as if it did comply with the law and that the $107,000 Ortiz received in workers’ compensation benefits reduced the available underinsured motorist benefits to “$0.” Accordingly, the trial court granted State Farm’s motion for summary judgment.

The Court of Appeal agreed with the dismissal and reasoning of the trial court in the unpublished case of Nicholas Ortiz v State Farm Mutual Automobile Insurance Company.

Insurance Code section 11580.2, subdivision (h), provides that any loss payable under the terms of the uninsured motorist endorsement or coverage to or for any person may be reduced by the amount paid under any workers’ compensation law, exclusive of nonoccupational disability benefits. Although this setoff provision specifically applies to uninsured motorist coverage, it permits such a setoff against underinsured motorist coverage as well. (Rudd v. California Casualty Gen. Ins. Co. (1990) 219 Cal.App.3d 948, 953-954.)

State Farm was statutorily authorized to offset these workers’ compensation benefits against the underinsured motorist coverage. By authorizing such a reduction, the Legislature intended to prevent the insured from recovering twice for the same injury. The Legislature’s purpose in enacting section 11580.2 was to shift the cost of an industrial injury sustained by an employee, as the result of the negligence of an uninsured motorist, from the motoring public (who pay the premium for uninsured motorist coverage) to the employer or workers’s compensation carrier. Thus, as applied to appellant, the offset provision in the State Farm policy promotes public policy.