Clampit v. State Farm Mut. Auto. Ins. Co.

• Decision Date: 06 April 1992
• Docket Number: No. 91-285,91-285
• Citation: 309 Ark. 107,828 S.W.2d 593
• Parties: Lera CLAMPIT and Lila Mae Montgomery as Administrators of the estates of the Deceased, James Clampit, Jo Carolyn Clampit, and Jamie Jo Clampit, Appellants, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Appellee.
• Court: Arkansas Supreme Court

Page 593

828 S.W.2d 593

309 Ark. 107

Lera CLAMPIT and Lila Mae Montgomery as Administrators of

the estates of the Deceased, James Clampit, Jo

Carolyn Clampit, and Jamie Jo Clampit, Appellants, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Appellee.

No. 91-285.

Supreme Court of Arkansas.

April 6, 1992.

C.C. Gibson III, Gibson & Hashem, Monticello, for appellants.

Huckabay, Munson, Rowlett & Tilley, P.A., Beverly A. Rowlett, Little Rock, for appellee.

HAYS, Justice.

This dispute over insurance coverage arises from a motor vehicle collision between members of the Clampit family and an underinsured motorist. The question is whether a provision of the Clampits' insurance policy excluding a vehicle owned by the Clampits but not insured under that policy violates either Ark.Code Ann. § 23-89-209 (1987) or the public policy of this state. The trial court held the exclusion valid and unambiguous. We affirm.

James Clampit and Jo Carolyn Clampit, his wife, owned two motor vehicles--a 1989 Pontiac automobile and a 1989 Dodge truck. Both vehicles were insured under separate insurance policies issued by State Farm Mutual Automobile Insurance Company. In August 1990 the Clampits and their daughter, Jamie Jo, were killed in a collision involving their 1989 Pontiac. The other motorist was underinsured.

The two Clampit policies provided underinsured motorist coverage and each policy had an "owned-but-not-insured" exclusion which precluded recovery under the respective policy for accidents in a vehicle owned by the named insured but not insured under that particular policy.

Appellants, as personal representatives of the Clampits, brought this action for wrongful deaths against the underinsured motorist and joined State Farm as a defendant, seeking to recover the limits of the underinsured motorist benefits under both State Farm policies. State Farm paid its limits under the policy issued on the Pontiac, but refused to pay any sum under the other policy covering the Dodge truck, citing the owned-but-not-insured exclusion.

State Farm moved for summary judgment based on its policy exclusion. Appellants responded asserting the exclusion was contrary to the underinsured motorist statute, Ark.Code Ann. § 23-89-209 (1987), and contrary to public policy. The trial court upheld the exclusion and granted summary judgment to State Farm. Subsequently, appellants reached a settlement with the tortfeasor and the trial court entered a final order in the case. Appellants appeal from the summary judgment.

The exclusion at issue reads as follows:

Exclusions for Underinsured Motor Vehicle Coverage:

There is no coverage for bodily injury to an insured while occupying a motor vehicle owned by you, your spouse or any relative if it is not insured for this coverage under this policy.

In Crawford v. Emasco Ins. Co., 294 Ark. 569, 745 S.W.2d 132 (1988), we upheld a similar exclusion in uninsured motorist coverage. Only one policy was involved in Crawford and the exclusion resulted in no coverage for the insureds. We acknowledged that our holding in Crawford was a minority position, but we cited an earlier decision validating this exclusion, Holcomb v. Farmers Insurance Exchange, 254 Ark. 514, 495 S.W.2d 155 (1973), and a subsequent refusal to reconsider that view in Lucky v. Equity Mutual Insurance Co., 259 Ark. 846, 537 S.W.2d 160 (1976). We noted that the appellants in Crawford had advanced the same arguments rejected in Holcomb, and that the minority rule had gained wider acceptance following Holcomb. We thought our position sound, citing the reasoning in Dullenty v. Rocky Mountain Fire & Casualty Co., 111 Idaho 98, 721 P.2d 198 (1986), overruled on other grounds, Colonial Penn Franklin Insurance Co. v. Welch, 119 Idaho 913, 811 P.2d 838 (1991):

If an insurer is required to insure against a risk of an undesignated but owned vehicle, or a different and more dangerous vehicle of which it has no knowledge, it is thereby required to insure against risks of which it is unaware unable to underwrite and unable to charge a premium therefor.

Appellants in this case suggest alternative reasons why we should change our position in Crawford: first, the exclusion is for under insured coverage rather than un insured coverage and, second, the minority position has lost ground since Crawford was decided. We find these arguments unpersuasive.

We concede the distinction between un insured and under insured coverage. Uninsured motorist coverage applies when a tortfeasor either has no insurance or has less than the amount required by law. Coverage is designed to guarantee a minimum recovery equal to that amount. Under insured coverage applies when the tortfeasor has at least the amount of insurance required by law, but not enough to fully compensate the victim. This coverage is designed to provide compensation to the extent of the injury, subject to the policy limit. See Kluiter v. State Farm Mutual Automobile Insurance, 417 N.W.2d 74 (Iowa 1987). ¹

Conceivably, there are situations where the difference between uninsured and underinsured motorist coverage could affect recovery, but we fail to see how the distinction would change the result in Crawford, nor does appellant suggest how it would. The reasoning in Crawford was not concerned with the amount or extent of coverage, but with whether any coverage existed under the facts and the express exclusion in that case. See discussion on this point, infra.

In Kluiter v. State, supra, the Iowa Supreme Court addressed the question of underinsurance in a case factually similar to the case at bar. The insured had four policies with the defendant insurance company, each policy covering a different vehicle owned by the insured, and each policy containing an owned-but-not-insured clause. None of the four vehicles were covered under any but its own policy. The insured collided with an underinsured driver and the insurance company paid the insured the policy limits for the vehicle involved in the collision. Claims by the insured under the other policies were refused because the other policies expressly excluded other vehicles owned by the insured and the vehicle involved in the collision was not covered under the other policies. The court in Kluiter held the exclusions valid, relying on earlier cases interpreting uninsured exclusions, and drawing no distinction between uninsured and underinsured motorist coverage.

The dissenting opinion characterizes the Kluiter case as upholding the exclusionary clause "on the sole basis of an Iowa statute...." We believe that is a misconception of the opinion. While Iowa does have a statute which authorizes such exclusions, that was not the basis for the decision. The statutory authorization was merely a threshold observation and not part of the court's analysis. Rather, the Kluiter court looked at whether the exclusion was within that authorization, and then to whether it was violative of it or the public policy it reflected. In fact, the opinion points out previous Iowa cases where other exclusions were considered but found to be invalid because they were violative of the statute and public policy.

As to the appellant's argument that the minority view has waned, the reasoning of the Idaho court in Dullenty, supra, is pertinent:

Sheer numbers of decisions of other jurisdictions one way or the other on any given question are of course not controlling on this Court, and the decisions are persuasive only as they contain analysis and reasoning which recommends itself to this Court.

Unfortunately, few of the opinions of other courts which have addressed the issue, regardless of the result reached, contain what we perceive as any in-depth analysis or reasoning. Most of the opinions which hold that exclusionary clauses to otherwise uninsured motorist coverage are void as against a statutory public policy, merely state that as a fact, i.e., "everyone knows" that the legislature in enacting uninsured motorist statutes intended that an insured is covered when injured by an uninsured motorist in all circumstances, whether the insured be riding in the named vehicle, in an unnamed but owned vehicle, while occupying a vehicle not owned by the household, while a pedestrian, while sitting on his front porch, while riding a camel or horse, or while bouncing on a pogo stick.

On the other hand, opinions holding such exclusionary clauses to be valid most often refer to the inequity of allowing a person who insures one vehicle with an insurance carrier to obtain a "free ride" by thereby obtaining coverage by that same carrier on one, two, or a fleet of vehicles upon which he has paid no premium to the carrier. Some courts upholding the validity of such exclusionary clauses opine that rewarding a plaintiff who himself is operating an uninsured vehicle is contrary to legislative policy.

In Dullenty there were separate carriers, whereas here both vehicles were insured by the same carrier. But that is not controlling, as explained in Dullenty:

... a person is more likely to be occupying an owned vehicle than he is to be occupying a vehicle owned by someone else. Hence, an insurance carrier may be willing to assume risks which it perceives as relatively slight, i.e., being damaged by an uninsured motorist while occupying a non-owned vehicle, without an increase in premium. It might be unwilling to insure against a risk it perceives as substantial without an increase in premium. If an insurer is required to insure against a risk of an undesignated but owned vehicle ... it is thereby required to insure against risks of which it is unaware, unable to underwrite, and unable to charge a premium therefor.

The Dullenty court reasoned further that if appropriate exclusions are not upheld, the substantially increased risk of an owned-but-not-insured vehicle becomes a "free ride" by the insured because the insurer would be paying benefits on the second vehicle for which it received no...