Blackburn v. Safeco Ins. Co., 54534-1

• Citation: 794 P.2d 1259,115 Wn.2d 82
• Decision Date: 02 August 1990
• Docket Number: No. 54534-1,54534-1
• Parties: Bret BLACKBURN and Penny Blackburn, husband and wife, Petitioners, v. SAFECO INSURANCE COMPANY, Respondent. En Banc
• Court: United States State Supreme Court of Washington

Page 82

115 Wn.2d 82

794 P.2d 1259

Bret BLACKBURN and Penny Blackburn, husband and wife, Petitioners, v. SAFECO INSURANCE COMPANY, Respondent.

No. 54534-1.

Supreme Court of Washington,

En Banc.

Aug. 2, 1990.

Reconsideration Denied Oct. 5, 1990.

Sam Pemberton, Tacoma, Wash., for petitioners.

Burgess, Kennedy, Fitzer & Strombom, P.S., F. Ross Burgess, Timothy R. Gosselin, Tacoma, for respondent.

Bryan P. Harnetiaux, Spokane, Harbaugh & Bloom, Gary N. Bloom, and Robert H. Whaley, Spokane, amici curiae for petitioners on behalf of Washington Trial Lawyers Ass'n.

Bertha B. Fitzer, Tacoma, amicus curiae for respondent on behalf of Washington Defense Trial Lawyers.

CALLOW, Chief Justice.

Petitioners Bret and Penny Blackburn seek review of a decision of the Court of Appeals that reversed a trial court judgment in their favor. The issue is whether an exclusion in the underinsured motorist (UIM) policy is valid, under Washington's UIM statute, in a 1-car accident when the claimant, a passenger, does not achieve full recovery under the vehicle driver's liability policy and did not recover under the vehicle owner's liability policy.

We reexamine Millers Cas. Ins. Co. v. Briggs, 100 Wash.2d 1, 665 P.2d 891 (1983), and hold that, as in Millers, the

                UIM insurance policy provision excluding covered autos under the policy's liability coverage from the definition of an underinsured motor vehicle is valid.   Hence, the policy exclusion, as applied to "other insureds," is valid under the specific facts of this case
                

I

On January 11, 1985, petitioner Bret Blackburn (Blackburn) was seriously injured while riding as a passenger in a car owned by Evergreen Chrysler Plymouth, Inc. (Evergreen). Evergreen insured the car with respondent Safeco Insurance Company of America (Safeco). The car's driver, Don Lougee (Lougee), had the permission of Evergreen to drive the car. He failed to negotiate a curve and the car struck a power pole. Lougee was at fault.

Blackburn collected $25,000 from Lougee's liability policy. The costs of Blackburn's injuries exceeded Lougee's liability policy. Lougee was not covered under Evergreen's Safeco policy because of a policy exclusion. The record does not reflect that Blackburn had his own UIM insurance policy.

In a separate suit, Blackburn brought an action to recover additional benefits directly against Evergreen and Lougee. The Superior Court dismissed Blackburn's claims, determining that Evergreen was not liable to Blackburn because Lougee was not acting as Evergreen's agent at the time of the accident. The Court of Appeals affirmed. Blackburn v. Evergreen Chrysler Plymouth, 53 Wash.App. 146, 765 P.2d 922, review denied, 112 Wash.2d 1015 (1989).

Before the agency issue was resolved, Blackburn also made a claim to Safeco for UIM benefits under Evergreen's Safeco policy. This policy described who is insured for underinsured motorist coverage as:

1. You or any family member

2. Anyone else occupying a covered auto or a temporary substitute for a covered auto. The covered auto must be out of service because of its breakdown, repair, servicing, loss or destruction.

3. Anyone for damages he is entitled to recover because of bodily injury sustained by another insured.

Although Blackburn was occupying a covered auto that appeared to be underinsured according to the policy, Safeco denied UIM coverage to Blackburn. The UIM coverage was denied because the policy excluded from the definition of underinsured motor vehicle:

Any vehicle [w]hich is a covered auto for LIABILITY INSURANCE.

Blackburn sought a declaratory judgment to settle his rights under the Safeco policy. The Superior Court entered judgment for Blackburn on the grounds that Safeco's exclusion violated public policy. ¹ The Court of Appeals reversed. Blackburn v. Safeco Ins. Co., 49 Wash.App. 423, 744 P.2d 347 (1987). This appeal follows. Blackburn argues that Millers only prohibits double recovery, which he has not received. Safeco argues that as in Millers, the UIM policy exclusion does not violate the UIM statute or public policy.

II

An insurance regulatory statute becomes part of the insurance policy. Britton v. Safeco Ins. of Am., 104 Wash.2d 518, 526, 707 P.2d 125 (1985) (citing Touchette v 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 ... 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 ...

                Northwestern Mut. Ins. Co., 80 Wash.2d 327, 332, 494 P.2d 479 (1972)).   To be entitled to UIM benefits, the terms and conditions of the insured's contract with the UIM carrier must be consistent with the statute and cases construing it.   Washington's underinsured motorist statute mandates that
                

RCW 48.22.030(2).

The appellant argues that Safeco's UIM policy provision that excludes vehicles covered under the liability insurance policy from the definition of underinsured motor vehicle violates the mandates of the UIM statute. That statute defines an underinsured motor vehicle as

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.

RCW 48.22.030(1). ²

As noted, this definition of an underinsured motor vehicle becomes part of the Safeco insurance policy. To decide whether Safeco's UIM policy exclusion violates the statute, the extent of the coverage mandated by the Legislature must be determined by analyzing the intent and purpose of the statute, the rulings of this court, and the contract between the insurance company and the party asserting coverage.

The legislative intent and the extent of coverage mandated by the UIM statute have been difficult to determine. ³ The UIM statute does not specify the extent of the coverage mandated. ⁴ Moreover, the statute does not define the legislative intent or purpose behind the UIM statute. We have construed the purpose of the 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., 107 Wash.2d 721, 727, 733 P.2d 213 (1987) (quoting Britton, 104 Wash.2d at 531, 707 P.2d 125). The strong public policy of protecting the innocent victim of an auto accident from the uninsured motorist is carried over to the underinsured motorist. See Mutual of Enumclaw Ins. Co. v. Wiscomb, 97 Wash.2d 203, 208, 643 P.2d 441 (1982) (citing Touchette v. Northwestern Mut. Ins. Co., 80 Wash.2d 327, 332, 494 P.2d 479 (1972)).

In protecting the innocent victim of an auto accident, UIM insurance provides a source of indemnification when the tortfeasor does not provide adequate protection. We have stated that the legislative purpose behind the UIM statute is to ensure the availability of this added source of recovery. See Elovich v. Nationwide Ins. Co., 104 Wash.2d 543, 549, 707 P.2d 1319 (1985). Washington's UIM coverage has been described as a layer of excess coverage that "floats" on the top of recovery from other sources. Elovich, 104 Wash.2d at 549, 707 P.2d 1319. Thus, UIM coverage is a second layer of coverage for the injured party. Because parties contract In establishing specific insurance coverage, parties enter into a contract with an insurance company. The specific contract terms of the policy must be read along with the statute to see if the terms are void and unenforceable. We have invalidated insurance policy provisions that deny UIM coverage to the extent mandated by the UIM statute. ⁵ In Millers Cas. Ins. Co. v. Briggs, 100 Wash.2d 1, 665 P.2d 891 (1983), we held that a policy exclusion, similar to the one at issue in the instant case, neither violated the UIM statute nor public policy. In Millers, as in the instant case, the exclusion at issue was applied to "other insureds." The distinction between "named insureds and family members" and "other insured" is critical in our analysis.

                with UIM insurers to provide an additional layer of compensation, the contractual relationship between the insurer and the insured must be considered.   Although the public is served by maximizing the extent of the protection afforded by the coverage, the insurance company is not required to provide the coverage for free.   In providing this coverage, insurance companies should charge and the insured should pay an appropriate premium.   See 2 A. Widiss, Uninsured and Underinsured Motorist Insurance § 35.2, at 47 (2d ed. 1987)
                

In insurance contracts, UIM endorsements prescribe who is entitled to seek indemnification by specifically defining the term "insured" or "covered person." See Widiss, at § 33.1, page 19. In many UIM policies, "covered persons" are divided into three classes:

1. You or any family members (named insured);

2. Any other person while occupying your covered vehicle (other insured); and

3. Any person for damages that person is entitled to recover because of bodily injury to which this coverage The underinsured motorist policy affords those "named insureds" under class 1 with first-party coverage that applies at all times, whatever may be the insured's activity at the time of the accident. See Kowal v. Grange Ins. Ass'n., 110 Wash.2d 239, 245, 751 P.2d 306 (1988). Persons, covered under...