Amica Mut. Ins. Co. v. Morrison, 87-021

• Decision Date: 31 December 1987
• Docket Number: No. 87-021,87-021
• Citation: 536 A.2d 199,130 N.H. 250
• Parties: AMICA MUTUAL INSURANCE COMPANY v. Michael MORRISON, et al.
• Court: New Hampshire Supreme Court

Page 199

536 A.2d 199

130 N.H. 250

AMICA MUTUAL INSURANCE COMPANY v. Michael MORRISON, et al.

No. 87-021.

Supreme Court of New Hampshire.

Dec. 31, 1987.

Sulloway, Hollis & Soden, Concord (Robert J. Lanney on the brief and orally), for plaintiff.

Sheehan, Phinney, Bass & Green P.A., Manchester (W. Michael Dunn and Douglas G. Verge on the brief, and Douglas G. Verge orally), for defendants.

BATCHELDER, Justice.

This appeal involves rights under an underinsured motorist arbitration agreement in a motor vehicle liability insurance policy. The underinsured motorist insurance carrier, Amica Mutual Insurance Company (Amica), filed a petition for declaratory judgment after it had refused to pay the insureds, the Morrisons, arbitration awards that amounted to less than the tortfeasor's total liability insurance coverage. Finding that the plaintiff insurance carrier was not obligated to pay such awards, the Superior Court (Pappagianis, J.) granted the petition in favor of the insurance company, and the insureds appeal. For the reasons that follow, we affirm.

The declaratory judgment petition arises out of an automobile accident which is the subject of an agreed statement of facts. Mariane Morrison was driving an automobile with her daughter as a passenger when another automobile, driven by the tortfeasor, Michael Bolton, struck her car, causing injuries to both Mariane and her daughter. At the time of the accident, Mariane Morrison was insured by an Amica motor vehicle liability policy which provided at least $100,000 of uninsured/underinsured motorist coverage. Michael Bolton was insured through two separate policies which provided a total of $75,000 in liability insurance coverage.

After the Morrisons started negotiating with one of the tortfeasor's insurers, they initiated an arbitration claim against Amica for a payment of $200,000 under the uninsured/underinsured motorist provisions of their policy, without filing any lawsuits against the tortfeasor. The Morrisons believed, and Amica did not claim otherwise, that because their damages exceeded the tortfeasor's insurance coverage, the tortfeasor was an uninsured motorist under the insureds' policy, and the insureds were therefore entitled to proceed directly against Amica under the uninsured motorist arbitration agreement.

Although Amica agreed to arbitrate, it warned the Morrisons that it would not be obligated to pay under the policy if the arbitration award was less than the tortfeasor's total insurance coverage. The Morrisons disagreed, arguing that Amica would be obligated by its policy to pay the arbitration award, regardless of the amount. The final arbitration awards, totalling $50,025, were less than the tortfeasor's total insurance coverage of $75,000; hence, Amica refused to pay the awards.

The source of the parties' disagreement is their differing interpretations of the motor vehicle insurance policy's provisions relating to arbitration and to the requirement that the insured exhaust an underinsured's liability insurance coverage before being entitled to receive any uninsured motorist benefits. "The general rule is that the court will honor the reasonable expectations of the policyholder." Andrews v. Nationwide Mut. Ins. Co., 124 N.H. 148, 153, 467 A.2d 254, 258 (1983) (quoting Town of Epping v. St. Paul Fire & Marine Ins. Co., 122 N.H. 248, 252, 444 A.2d 496, 498 (1982)). Moreover, we will construe an insurance policy in favor of the insured and against the insurer when the policy is ambiguous. Trombly v. Blue Cross/Blue Shield, 120 N.H. 764, 771, 423 A.2d 980, 985 (1980). "[P]olicy terms can create ambiguity as to coverage only when the parties may reasonably differ about their interpretation." City of Manchester v. General Reinsurance Corp., 127 N.H. 806, 809, 508 A.2d 1063, 1065 (1986); Smith v. Liberty Mut. Ins. Co., 130 N.H. 117, 536 A.2d 164 (1987). "We determine what is reasonable by considering a policy as a whole and on the basis of a more than casual reading, evaluating any claimed ambiguity by reference to the context in which the relevant language occurs." Id. (Citations omitted.)

We begin our analysis with the arbitration provisions because that is where the parties' agreement on the meaning of the policy ends. The parties agree that the insureds may proceed directly against the insurance company, without filing any claims against the tortfeasor, but they disagree on the parties' obligations under such arbitration. Part IV of Amica's "Automobile Combination Policy" contains the two clauses dealing with arbitration. The first clause appears under the coverage section and provides that the insurance company will

"pay all sums which the insured or his legal representative shall be legally entitled to recover as damages from the owner or operator of an uninsured motor vehicle because of bodily injury ... sustained by the insured, caused by accident and arising out of the ownership, maintenance or use of such uninsured motor vehicle; provided, for the purposes of this coverage, determination as to whether the insured or such representative is legally entitled to recover such damages, and if so, the amount thereof, should be made by agreement between the insured or such representative and the company or, if they fail to agree, by arbitration."

The second clause appears under the arbitration section and explains the agreement as follows:

"If any person making claim hereunder and the company do not agree that such person is legally entitled to recover damages from the owner or operator of an uninsured motor vehicle because of bodily injury to the insured, or do not agree as to the amount of payment which may be owing under this Part, then, upon written demand of either, the matter or matters upon which such person and the company do not agree shall be settled by arbitration.... Such person and the company each agree to consider itself bound and to be bound by any award made by the arbitrators pursuant to this Part."

The arbitration provisions apply only when an automobile accident is caused by one driving an "uninsured motor vehicle." The definition of "uninsured motor vehicle" is amended to include "underinsured motor vehicle" under another part of the policy, labeled as the "New Hampshire Statutory Motor Vehicle Liability...