Allstate Ins. Co. v. Dejbod

• Decision Date: 30 October 1991
• Docket Number: No. 12952-3-II,12952-3-II
• Parties: ALLSTATE INSURANCE COMPANY, Respondent, v. Bahman DEJBOD, Appellant.
• Court: Washington Court of Appeals

Page 278

63 Wn.App. 278

818 P.2d 608

ALLSTATE INSURANCE COMPANY, Respondent, v. Bahman DEJBOD, Appellant.

No. 12952-3-II.

Court of Appeals of Washington,

Division 2.

Oct. 30, 1991.

Philip H. DeTurk, Puyallup, for appellant.

W. Wallace Cavanagh, Kendall H. Moore, Gordon Thomas Honeywell Malanca Peterson & Daheim, Tacoma, for respondent.

MORGAN, Judge.

Bahman Dejbod appeals from a declaratory judgment in favor of Allstate Insurance Company. We modify the judgment entered below.

On the morning of February 14, 1986, vehicles driven by Dejbod and Gilven were proceeding in opposite directions when they collided. A third vehicle, driven by Church, then collided with the other two.

Gilven was insured by PEMCO, with liability limits of $25,000. Coincidentally, Church was also insured by PEMCO, but with liability limits of $100,000. Dejbod was insured through Allstate. His policy included underinsured motorist (UMI) coverage and provided that any dispute between him and Allstate would be resolved by arbitration.

Dejbod sued Gilven and Church. Before trial, he settled with Gilven for $25,000, her policy limits. On the first day of trial, he settled with Church for $11,000. He then made a UIM claim against Allstate and demanded that it arbitrate. Allstate agreed, but only on condition that its liability be limited to that amount by which Dejbod's compensable damages exceeded $125,000. Allstate reasoned that both Gilven's and Church's policies were "applicable" within the meaning of RCW 48.22.030(1), and that it was therefore entitled to subtract the sum of the limits of the two policies from whatever amount of damages Dejbod proved at the arbitration.

Dejbod disputed Allstate's proposed condition and asserted that Allstate was liable for his damages in excess of $36,000. He reasoned that Allstate was only entitled to subtract the sum of the payments that he had actually received from the carriers for Gilven and Church.

Allstate then filed this declaratory judgment action to determine what amount should be offset against any arbitration award that might be made. Crossmotions for summary judgment were made, and the trial court granted Allstate's while denying Dejbod's. Dejbod appealed.

RCW 48.22.030(2) mandates UIM insurance, subject to certain exceptions. It provides in part:

No new policy or renewal of an existing policy insuring against loss resulting from liability imposed by law for bodily injury, death, or property damage, suffered by any person arising out of the ownership, maintenance, or use of a motor vehicle shall be issued with respect to any motor vehicle registered or principally garaged in this state unless coverage is provided therein or supplemental thereto for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of underinsured motor vehicles, ... because of bodily injury, death, or property damage, resulting therefrom....

RCW 48.22.030(1) defines when a motor vehicle will be considered underinsured. It provides:

"Underinsured motor vehicle" means a motor vehicle with respect to the ownership, maintenance, or use of which either no bodily injury or property damage liability bond or insurance policy applies at the time of an accident, or with respect to which the sum of the limits of liability under all bodily injury or property damage liability bonds and insurance policies applicable to a covered person after an accident is less than the applicable damages which the covered person is legally entitled to recover.

In this opinion, the "covered person" will be referred to as the claimant.

A fundamental policy underlying UIM is full compensation for those injured in automobile accidents. Hamilton v. Farmers Ins. Co. of Wash., 107 Wash.2d 721, 727, 731, 735, 733 P.2d 213 (1987); Elovich v. Nationwide Ins. Co., 104 Wash.2d 543, 550, 707 P.2d 1319 (1985); Britton v. Safeco Ins. Co. of America, 104 Wash.2d 518, 530-31, 707 P.2d 125 (1985); Tissell v. Liberty Mut. Ins. Co., 115 Wash.2d 107, 111, 795 P.2d 126 (1990) (Dore, J., speaking for two members of the Court). This statement, however, is ambiguous. It might mean that the purpose is full compensation for all injuries, or it might mean that the purpose is full compensation for all amounts that a claimant is legally entitled to collect from others.

The two meanings are significantly different. Suppose, for example, a case in which a tortfeasor's negligence proximately causes 60 percent of the claimant's damages, and the claimant's own negligence proximately causes 40 percent of the damages. If the purpose of UIM insurance is to compensate for the claimant's injuries, the UIM carrier should pay 100 percent less applicable liability insurance; but if the purpose is to fully compensate for amounts that the claimant is legally entitled to recover from others, the UIM carrier should pay 60 percent less applicable liability insurance.

The second meaning is the true one. Subject to certain modifications that have occurred over the years, see, e.g., R. Keeton & A. Widiss, Insurance Law §§ 4.8(b) (1988), both liability and UIM insurance are contracts of indemnity. Blackburn v. Safeco Ins. Co., 115 Wash.2d 82, 87, 794 P.2d 1259 (1990) ("UIM insurance provides a source of indemnification"); Tissell v. Liberty Mut. Ins. Co., 115 Wash.2d at 120, 795 P.2d 126 (majority opinion by Callow, C.J.) (same); R. Keeton and A. Widiss, Supra, §§ 4.8(b), 4.9(e)(3) (liability insurance); 2 A. Widiss, Uninsured and Underinsured Motorist Insurance § 41.1 (2d ed. 1990) (injured person "may be entitled to indemnification" from liability and UIM insurance). Generally, automobile liability insurance is a contract by which the liability insurer, as indemnitor, agrees to indemnify its insured, the potential tortfeasor/indemnitee, against liability to third party claimants. Black's Law Dictionary 915 (6th ed. 1990). Generally, UIM insurance is a contract in which the UIM insurer, as indemnitor, agrees to indemnify its insured, the claimant/indemnitee, against loss which the insured is legally entitled to recover from third party tortfeasors. See Blackburn v. Safeco Ins. Co., 115 Wash.2d at 87, 794 P.2d 1259 (purpose of UIM coverage is to allow injured person to recover from responsible party). Although the two types of insurance are dissimilar with respect to the identity of the indemnitor-- in the one case, the liability insurer, in the other, the UIM insurer--they are similar in that each indemnitor, subject to various exceptions, undertakes a duty to pay that extends no farther than the legal liability of the involved tortfeasors, if any. Thus, when it is said that the purpose of liability and UIM insurance is "full compensation for the victims of auto accidents," what is meant is that liability and UIM insurance, working together, are intended to fully compensate claimants for those amounts that they are legally entitled to recover from liable tortfeasors, up to the sum of applicable liability and UIM limits. See Tissell v. Liberty Mut. Ins. Co., 115 Wash.2d at 120, 795 P.2d 126 (majority opinion by Callow, C.J.); Britton v. Safeco Ins. Co. of America, 104 Wash.2d at 531, 707 P.2d 125.

That the second meaning is the true one is confirmed by both statutes and case law. In RCW 48.22.030(2), the Legislature mandated UIM coverage for the protection of persons "who are legally entitled to recover damages from owners or operators of underinsured motor vehicles." In RCW 48.22.030(1), the Legislature defined a UIM claimant's "applicable damages" as those that he or she "is legally entitled to recover." And in Blackburn v. Safeco Ins. Co., 115 Wash.2d at 87, 794 P.2d 1259, the Supreme Court said:

We have construed the purpose of the [UIM] statute

as allowing an injured party to recover those damages which the injured party would have received had the responsible party been insured with liability limits as broad as the injured party's statutorily mandated underinsured motorist coverage limits.

Hamilton v. Farmers Ins. Co. of Wash., 107 Wash.2d at 727, 733 P.2d 213 (quoting Britton v. Safeco Ins. Co., 104 Wash.2d at 531, 707 P.2d 125); see also Britton v. Safeco Ins. Co. of America, 104 Wash.2d at 522-23, 707 P.2d 125 (UIM insurance); Romanick v. Aetna Casualty & Sur. Co., 59 Wash.App. 53, 58, 795 P.2d 728 (1990); Gaddis v. Safeco Ins. Co., 58 Wash.App. 537, 541, 794 P.2d 533, review denied, 115 Wash.2d 1029, 803 P.2d 324 (1990); 8C J. Appleman, Insurance Law & Practice 307-317 (1981).

A second fundamental policy underlying UIM is that liability insurance is primary, while UIM insurance is secondary. Tissell v. Liberty Mutual Ins. Co., 115 Wash.2d at 120, 795 P.2d 126 (majority opinion by Callow, C.J.) (UIM insurance is "second" layer of coverage); Blackburn v. Safeco Ins. Co., 115 Wash.2d at 88, 794 P.2d 1259 (UIM insurance is layer of "excess" coverage). The intent is that UIM insurance supplement but not supplant liability insurance.

With these statutes and policies in mind, we turn now to the two primary questions in this case. (1) After an accident, what liability policies are "applicable" to a UIM claimant within the meaning of RCW 48.22.030(1)? (2) When a liability policy is "applicable," to what extent is it applicable?

I.

RCW 48.22.030(1) obligates a UIM carrier to pay (1) a claimant's legally recoverable ("applicable") damages or UIM limits, whichever is less, minus (2) "the sum of the limits of liability under all bodily injury or property damage liability bonds and insurance policies applicable to a covered person after an accident." The dispute between Dejbod and Allstate concerns (2), the amount a UIM carrier is entitled to subtract from the claimant's legally recoverable damages.

Preliminarily, we note that it is unnecessary to consider how much a UIM carrier can subtract unless at least one tortfeasor is liable to the UIM claimant. If there is no liable tortfeasor, the UIM claimant has no...