Burch v. Allstate Ins. Co., 88,546

• Decision Date: 22 December 1998
• Docket Number: No. 88,546,88,546
• Citation: 1998 OK 129,977 P.2d 1057
• Parties: Linda J. BURCH, Plaintiff-Appellant, v. ALLSTATE INSURANCE COMPANY, Defendant-Appellee.
• Court: Oklahoma Supreme Court

Page 1057

977 P.2d 1057

1998 OK 129

Linda J. BURCH, Plaintiff-Appellant, v. ALLSTATE INSURANCE COMPANY, Defendant-Appellee.

No. 88,546.

Supreme Court of Oklahoma.

Dec. 22, 1998.

Dissenting Opinion Corrected Jan. 5, 1999.

Rehearing Denied May 19, 1999.

Certified Question from a Federal Court.

¶0 Linda Burch ("Linda" or "plaintiff") brought an action in the United States District Court for the Western District of Oklahoma against her uninsured motorist carrier, Allstate Insurance Company ("Allstate" or "defendant"), to recover all damages sustained in an automobile accident in which her husband was at fault. Following the accident, she elected not to sue her husband; the statute of limitations on her claim against him expired on or about the day she filed suit against the defendant. Defendant refused to pay the full amount of damages, arguing that its obligation was limited to that portion of the claim which exceeded the tortfeasor's liability coverage limit. The district court entered judgment in defendant's favor, and plaintiff appealed. The United States Court of Appeals for the Tenth Circuit certified to this court a question of law regarding the extent of insurer's obligation under Oklahoma's uninsured motorist statute.

CERTIFIED QUESTION ANSWERED.

Tye H. Smith, Oklahoma City, Oklahoma, and Sidney A. Martin II, Tulsa, Oklahoma, Carr & Carr, for appellant.

George D. Davis, McKinney, Stringer & Webster, P.C., Oklahoma City, Oklahoma, for appellee.

Rex K. Travis, Oklahoma City, and Renee Williams, Tulsa, for Oklahoma Trial Lawyers Association, amicus curiae.

OPALA, J.

¶1 The United States Court of Appeals for the Tenth Circuit ("certifying court") certified the following question pursuant to the Uniform Certification of Questions of Law Act, 20 O.S.1991 §§ 1601 et seq. ¹ :

"When an insured's damages in an automobile accident exceed a tortfeasor's liability limits and the insured seeks payment for damages directly from its underinsured motorist (UIM) carrier, is the UIM carrier liable for the entire amount of the insured's claim when the liability and UIM coverage are provided by the same carrier but the statute of limitations period has expired on the liability claim?

¶2 We answer in the affirmative. Under the provisions of 36 O.S.1991 § 3636, ² uninsured motorist ("UM") coverage is primary, ³ meaning that an uninsured motorist carrier is liable for the entire amount of its insured's loss from the first dollar up to the UM policy limits without regard to the presence of any other insurance. At first blush this answer may appear to go beyond the parameters of the question asked, but in fact we answer no more than that which is sought. The question posed can be adequately addressed only ¶3 Having determined that UM coverage is primary, we answer the precise question posed by holding that under the unique facts of this case (in which both the liability and the uninsured motorist coverage are provided by the same carrier and the statute of limitations has run on the insured's tort claim against the negligent party), the UM carrier's statutorily mandated obligation as a provider of primary insurance coverage is not altered. Except where the insured affirmatively destroys the insurer's subrogation rights, a UM carrier is directly and primarily liable to its insured for the entire loss to be indemnified; it must seek recovery of paid indemnity through an exercise of its right to subrogation.

by exploring the more fundamental issues raised with respect to the obligation imposed upon UM carriers in general under Oklahoma's statutory scheme for uninsured motorist coverage. In order to answer the certified question, we must first determine whether, in enacting 3636, the Oklahoma legislature intended UM coverage to be primary. Only by doing so can we then decide how to answer the precise question posed by the certifying court, which presents a somewhat unique factual pattern.

I THE ANATOMY OF FEDERAL LITIGATION ⁴

¶4 On April 14, 1992, Linda Burch was riding as a passenger in her own automobile, which was being driven by her husband, Herbert. Herbert rear-ended another vehicle, and Linda was injured. At the time of the accident, Linda's car was covered with respect to both liability and uninsured motorist claims under a single policy of automobile insurance issued by Allstate Insurance Company. The policy's liability limits were $100,000/$300,000, but those limits "stepped down" to $10,000/$20,000 when the injured party was a named insured under the policy, as Linda was in this case. The UM limits were also $100,000/$300,0000 with no step-down provision. ⁵ Linda's injuries exceeded the stepped-down $10,000 liability policy limit. Linda notified Allstate of her claim. Allstate contends that for more than two years, she did not provide sufficient documentation for Allstate to evaluate and settle her claim under either the liability or UM coverage.

¶5 Without ever filing suit against Herbert, and within one day of the expiration of the statute limiting the time to bring her tort claim against him, Linda brought suit against Allstate in the United States District Court for the Western District of Oklahoma, alleging bad faith and indemnifiable loss under the UM policy. ⁶ Although Linda and Allstate eventually agreed that her loss from bodily injuries amounted to $50,000, Allstate refused to pay more than $40,000, the value of Linda's claim less Herbert's $10,000 liability coverage limit. Linda pressed for the entire $50,000. Unable to agree on the extent of Allstate's obligation, the parties submitted to the federal district court the following agreed question of law:

In an auto accident case when the tort-feasor has collectible liability insurance coverage with stated limits, and the statute of limitations on plaintiff's claim against the tort-feasor has expired, is the UM carrier obligated to pay those amounts of plaintiff's damages that would have been covered by the tort-feasor's liability coverage limits?

¶6 Relying upon this court's decision in Buzzard v. Farmers Insurance Co. ("Buzzard"), ⁷ the district court answered the question in the negative. Judgment was for Allstate, and Linda appealed. Not convinced that Buzzard was dispositive, the United States Court of Appeals for the Tenth Circuit submitted to this court the certified question of law which we answer today.

II

AN UNINSURED MOTORIST CARRIER IS OBLIGATED FOR ALL OF ITS

INSURED'S LOSS FROM THE FIRST DOLLAR UP TO THE

POLICY LIMITS.

¶7 Allstate contends Buzzard v. Farmers Insurance Co. ⁸ provides the answer to the certified question by limiting a UM carrier's obligation to the amount of the claim which exceeds the tortfeasor's liability coverage limits. Its contention is that this limitation is a rule of general applicability, and neither the running of the statute of limitations nor the fact that Allstate is both the liability and UM carrier under the same policy of insurance may alter this rule. ⁹

¶8 Linda argues ¹⁰ that: (1) a UM carrier has a statutory duty to pay first-dollar damages to an insured where, at the time the UM claim is resolved, no liability insurance is available to the claimant even if liability insurance was available at an earlier time, provided the claimant does nothing affirmatively to cause the liability insurance to become unavailable; ¹¹ (2) Buzzard is not dispositive because in that case the court's discussion of the scope of a UM carrier's obligation, if understood as a blanket limitation on that ¶9 In Buzzard, the plaintiffs' son was killed when his automobile was struck by a City of Norman truck. The City of Norman carried liability insurance in the amount of $50,000 per claimant. The plaintiffs' damages exceeded the liability insurance limits, and the City was hence underinsured with respect to the plaintiffs' damages. Plaintiffs presented their UM claim to their insurer, Farmers Insurance Co. ("Farmers"), within a month of the accident. Farmers took the position that it did not have to pay anything on the UM claim until the liability insurance benefits had been "exhausted" by settlement or judgment. Plaintiffs then settled the claim with the City of Norman for $50,500 and signed a covenant not to sue. Farmers now refused to pay on the UM policy because the plaintiffs' covenant not to sue had destroyed their subrogation rights against the City. The court held that a UM carrier cannot withhold payment on the UM policy until liability benefits have been exhausted. The UM carrier must promptly investigate, place a value on the damage claim and pay UM benefits without regard to whether liability benefits have been paid. The court then went on to describe what damages a UM carrier is obligated to pay, stating that its obligation is to pay "that amount of injury or damage which exceeds the liability limits of the tortfeasor." ¹⁵

obligation, was gratuitous (obiter dictum ) and should not now be elevated as ratio decidendi for resolution of the issue in this case, ¹² and (3) if Buzzard were to be found dispositive here, it should be construed as expressly limiting a UM carrier's liability to "the amount of the claim which exceeds that available from the liability carrier" (emphasis added), ¹³ and the court should now make clear that availability is the crucial factor, and is to be determined at the time the UM claim is resolved, not at the time of the accident. ¹⁴

¶10 Two decisions by the Oklahoma Court of Civil Appeals ¹⁶ have applied Buzzard in cases involving an issue similar to that which is presented in this case. ¹⁷ In the first, Kavanaugh v. Maryland Insurance Co., Inc., ¹⁸ the injured party brought suit against the tortfeasor within the limitations period, but dismissed the suit without prejudice approximately three years later. After dismissing her suit against the tortfeasor, the insured sued her UM carrier, seeking recovery of her total damages. The insurer interposed Buzzard. The insured argued that...