Alexander v. State Auto. Mut. Ins. Co.

• Decision Date: 20 March 1992
• Docket Number: No. 20630,20630
• Citation: 415 S.E.2d 618,187 W.Va. 72
• Parties: Lena ALEXANDER, Plaintiff Below, v. STATE AUTOMOBILE MUTUAL INSURANCE COMPANY, an Ohio Corporation and State Farm Mutual Automobile Insurance Company, an Illinois Corporation, Defendant Below.
• Court: West Virginia Supreme Court

Page 618

415 S.E.2d 618

187 W.Va. 72

Lena ALEXANDER, Plaintiff Below, v. STATE AUTOMOBILE MUTUAL INSURANCE COMPANY, an Ohio

Corporation and State Farm Mutual Automobile

Insurance Company, an Illinois

Corporation, Defendant Below.

No. 20630.

Supreme Court of Appeals of West Virginia.

Submitted Jan. 15, 1992.

Decided March 20, 1992.

Syllabus by the Court

1. " W.Va.Code, 33-6-31(b), as amended, on uninsured and underinsured motorist coverage, contemplates recovery, up to coverage limits, from one's own insurer, of full compensation for damages not compensated by a negligent tortfeasor who at the time of the accident was an owner or operator of an uninsured or underinsured motor vehicle. Accordingly, the amount of such tortfeasor's motor vehicle liability insurance coverage actually available to the injured person in question is to be deducted from the total amount of damages sustained by the injured person, and the insurer providing underinsured motorist coverage is liable for the remainder of the damages, but not to exceed the coverage limits." Syllabus point 4, State Automobile Mutual Insurance Company v. Youler, 183 W.Va. 556, 396 S.E.2d 737 (1990).

2. "Insurers may incorporate such terms, conditions and exclusions in an automobile insurance policy as may be consistent with the premium charged, so long as any such exclusions do not conflict with the spirit and intent of the uninsured and underinsured motorists statutes." Syllabus point 3, Deel v. Sweeney, 181 W.Va. 460, 383 S.E.2d 92 (1989).

3. Underinsured motorist coverage is not available to a guest passenger unless the statute or policy language specifically provides for such coverage.

4. Where an insurance policy specifically excludes any motor vehicle owned by the policy holder from the definition of an "underinsured motor vehicle," then the underinsured motorist coverage was intended to protect the insured against losses caused by the negligence of another motorist who is underinsured. Liability insurance is intended to compensate an injured guest passenger for any negligence on the part of the driver/insured.

James C. West, Jr., Kathryn K. Allen, West & Jones, Clarksburg, for plaintiff.

Catherine D. Munster, McNeer, Highland & McMunn, Clarksburg, for defendant, State Auto. Mut. Ins. Co.

BROTHERTON, Justice:

This case involves certified questions from the United States District Court for the Northern District of West Virginia. The questions certified read as follows:

1. Whether the owned-underinsured motor vehicle exclusion of the insurance policy issued to the automobile owner, Louise Lowther, excludes underinsured motorist coverage of the guest passenger, Lena Alexander, where the owner's liability limits have been paid to the guest passenger under the policy?

2. Whether the insurance policy requirements that the tortfeasor's liability for damages arise from the ownership, maintenance, or use of an underinsured vehicle precludes underinsured motorist coverage for a guest passenger injured in an automobile owned by the insured?

3. Whether a guest passenger is entitled to maintain a direct action for damages against an insurance carrier under the underinsured motorist provision of an insurance policy where the guest passenger has settled with the tortfeasor's insurance carrier expressly reserving the right to pursue a claim for applicable underinsured motorist coverage, if any?

4. Whether an underinsured motorist insurance carrier is liable to a guest passenger for prejudgment interest, attorneys' fees, and for additional damages in addition to the carrier's stated underinsured motorist policy limits?

On October 6, 1989, Lena Alexander was injured in an automobile accident in Harrison County, West Virginia. The vehicle in which Mrs. Alexander was riding was owned by her sister, Louise Lowther and was being driven by another sister, Verna Elbon. The accident occurred when Mrs. Elbon turned left across an oncoming lane of traffic and was struck by another vehicle. The driver of the vehicle which struck the car in which Mrs. Alexander was riding was not sued and is not party to this suit. Mrs. Alexander was not a member of the Lowther household nor was the vehicle in which she was riding furnished or available for her regular use. The vehicle was insured at the time of the accident by State Automobile Mutual Insurance Company (State Auto). Mrs. Elbon, the driver of the car, was covered by an insurance policy issued by State Farm Mutual Automobile Insurance Company (State Farm). Mrs. Alexander did not have underinsured motorist coverage.

Both State Farm and State Auto paid the maximum limits of their medical liability coverage and their bodily injury liability coverage to Mrs. Alexander. Thus, State Auto paid $1,000 in medical expenses and $50,000 in bodily injury coverage, while State Farm paid $25,000 in medical expenses and $100,000 in bodily injury coverage.

Both the State Farm and State Auto policies had provisions for underinsured motorist coverage in the amount of $20,000 per person. Releases executed by Mrs. Alexander to State Farm and State Auto both claimed to preserve her right to pursue future claims for underinsured motorist coverage under both policies.

Thereafter, Mrs. Alexander made a demand for underinsured motorist coverage upon both insurance companies. Initially, both insurance companies refused to pay the claims. The plaintiff then filed an action against State Farm and State Auto for breach of contract for refusing to make payment under the underinsured motorist provisions. Shortly thereafter, Mrs. Alexander accepted $20,000 from State Farm as payment of the underinsured motorist claim for the coverage provided to Verna Elbon, along with a sum of $8,000 for fees and consequential damages.

However, State Auto moved to dismiss Mrs. Alexander's claim on the ground that the underinsured motorist coverage was not available because the Lowther vehicle was not an underinsured vehicle within the policy language. State Auto also contended that this action was not maintainable because judgment against the tortfeasor had not been obtained. Last, State Auto argued that the plaintiff may not recover prejudgment interest in excess of the available policy limits. On July 25, 1991, the United States District Court for the Northern District of West Virginia certified the four questions listed above to this Court. We agreed to hear these questions on November 5, 1991.

The State Auto underinsured motorist coverage policy provides, in part, as follows:

We will pay damages which an "insured" is legally entitled to recover from the owner or operator of an "uninsured motor vehicle" or "underinsured motor vehicle" ...

1. "Bodily injury" sustained by an "insured" and caused by the accident; ...

The owner's or operator's liability for these damages must arise out of the ownership, maintenance or use of the ... "underinsured motor vehicle." We will pay damages under this coverage caused by an accident with an "underinsured motor vehicle" only after the limits of liability under any applicable liability bonds or policies have been exhausted by payment of judgments or settlements.

* * * * * *

"Insured" as used in this endorsement means:

* * * * * *

2. Any person "occupying" "your covered auto."

* * * * * *

However, neither "uninsured motor vehicle" nor "underinsured motor vehicle" includes any vehicle or equipment:

1. Owned by or furnished or available for the regular use of you or any "family member."

Consequently, the issue before this Court is whether under this policy language, a guest passenger can obtain underinsured motorist coverage from the policy covering the car in which she was riding at the time of the injury, a policy separate and apart from her own insurance policy. It is uncontested that Mrs. Alexander sustained bodily injury while occupying Mrs. Lowther's insured automobile and while Mrs. Elbon was driving. However, Mrs. Alexander's status as an insured under the underinsured motorist vehicle policy is contingent on whether the vehicle in which she was riding at the time of the injury constitutes an underinsured motor vehicle under the policy language.

The public policy surrounding underinsured motorist coverage has been fully defined by this Court: "in uninsured or underinsured motorist cases ... the uninsured person [should] be fully compensated for his or her damages not compensated by a negligent tortfeasor, up to the limits of the uninsured or underinsured motorist coverage." State Automobile Mutual Ins. Co. v. Youler, 183 W.Va. 556, 396 S.E.2d 737, 745 (1990); see also syl. pt. 1, Pristavec v. Westfield Ins. Co., 184 W.Va. 331, 400 S.E.2d 575 (1990). However, the party's status as an insured under the policy must first be established before it can be determined that the underinsured coverage is available.

West Virginia Code § 33-6-31(b) (1992) defines an "underinsured motor vehicle":

"Underinsured motor vehicle" means a motor vehicle with respect to the ownership, operation, or use of which there is liability insurance applicable at the time of the accident, but the limits of that insurance are either (i) less than limits the insured carried for underinsured motorists' coverage, or (ii) has been reduced by payments to others injured in the accident to limits less than limits the insured carried for underinsured motorists' coverage.

Underinsured motorist coverage has been interpreted by this Court in recent years in two major cases. The first, State Automobile Mutual Ins. Co. v. Youler, 183 W.Va. 556, 396 S.E.2d 737 (1990), involved a plaintiff who was struck and injured by a car driven by Clifford Moore. The plaintiff sued Moore and sought $500,000 in compensatory damages, $5,000 in property damages, and $10,000 in consequential damages for loss of business property (for property damaged in the accident). Moore's automobile liability insurance carrier, Nationwide Mutual, offered Youler $50,000,...