Clark v. Regent Ins. Co.

• Decision Date: 06 September 1978
• Docket Number: No. 12207,12207
• Citation: 270 N.W.2d 26
• Parties: Joni M. CLARK, Plaintiff and Appellant, v. REGENT INSURANCE COMPANY, and Milbank Mutual Insurance Company, and John Doe, an unidentified driver of an unidentified motor vehicle, Defendants and Respondents.
• Court: South Dakota Supreme Court

Page 26

270 N.W.2d 26

Joni M. CLARK, Plaintiff and Appellant, v. REGENT INSURANCE COMPANY, and Milbank Mutual Insurance Company, and John Doe, an unidentified driver of an unidentified motor vehicle Defendants and Respondents.

No. 12207.

Supreme Court of South Dakota.

Argued March 10, 1978.

Decided Sept. 6, 1978.

Ronald G. Schmidt of Schmidt, Schroyer & Colwill, Pierre, for plaintiff and appellant.

Robert D. Hofer of Riter, Mayer, Hofer & Riter, Pierre, for defendant and respondent Milbank Mut. Ins. Co.

Timothy J. Nimick of Woods, Fuller, Shultz & Smith, Sioux Falls, for defendant and respondent Regent Ins. Co.

ZASTROW, Justice (on reassignment).

This is an appeal from the circuit court granting a declaratory judgment to the defendants. Originally, the plaintiff served upon the defendants a summons and complaint and brought this action against the defendant insurers under the uninsured motorist provisions of certain automobile insurance policies of the defendants. Upon the plaintiff's application, the trial court entered its order for service by publication on John Doe, defendant, the unidentified driver of an unidentified motor vehicle. The insurance companies served and duly filed answers to the complaint. The parties entered into and filed a stipulation of facts, including the default of the unidentified driver, praying that the trial court issue a declaratory judgment, pursuant to SDCL 21-24, declaring the rights and status of the parties under the insurance contracts at issue. The trial court issued a declaratory judgment in favor of the defendants, from which the plaintiff appeals. We reverse.

According to the stipulation of facts, on June 27, 1975, the plaintiff, Joni M. Clark, was a passenger in a vehicle owned and operated by Connie Peterson. The Peterson vehicle was travelling in a westerly direction on U. S. Highway 14-A in Lawrence County, South Dakota, between the cities of Sturgis and Deadwood. The Peterson vehicle was travelling in the right lane of traffic and was forced to swerve to the right in order to avoid a head-on collision with an unidentified motor vehicle driven by an unidentified driver, travelling in the opposite direction.

The incident occurred in close proximity to a curve in the highway, and Peterson's evasive action caused her vehicle to leave the highway and roll. The plaintiff was seriously injured; the proximate cause of her injuries being the negligence of the unidentified driver in failing to keep his vehicle in the proper lane of travel on the highway, according to the stipulation.

The plaintiff was a named insured under the Regent Insurance Company (Regent) policy issued to John Clark, and was likewise covered by the Milbank Mutual Insurance Company (Milbank) policy issued to Connie Peterson. As required by SDCL 58-11-9, ¹ each policy provided uninsured motorist coverage which is applicable to "hit-and-run motor vehicles." However, each policy contains a definition of a hit-and-run vehicle which is not contained in the statute.

The Regent policy provides the definition:

'(H)it-and-run automobile' means an automobile which causes bodily injury to an insured arising out of physical contact of such automobile with the insured or with an automobile which the insured is occupying at the time of the accident, * * * .

The Milbank policy provides a similar definition:

'(H)it-and-run vehicle' means a highway vehicle which causes bodily injury to an insured arising out of physical contact of such vehicle with the insured or with an automobile which the insured is occupying at the time of the accident, * * * .

All fifty states require insurance carriers to provide uninsured motorist coverage with every automobile liability insurance policy either as an option or a mandatory provision. However, there are three different types of uninsured motorist statutes. The first and most prevalent variety requires coverage for only "uninsured motorists", but does not define the term. The second type includes coverage for "hit-and-run vehicles" in the uninsured motorist statutes, but does not define the term, e. g., SDCL 58-11-9. Finally, there are those states which statutorily define a "hit-and-run vehicle" to require a physical contact between the insured vehicle and the unidentified vehicle. ²

The rationale for the physical contact requirement in automobile insurance policies is to prevent fraudulent claims, ostensibly by providing objective evidence that a vanishing motorist had in fact been involved in the accident. This theory has been upheld in twenty states as a reasonable requirement and a proper contract provision under the uninsured motorist statutes. ³ See 7 Am.Jur.2d, Automobile Insurance § 136.5 (Supp.); Anno. 25 A.L.R.3d 1299.

However, twelve jurisdictions have rejected the physical contact requirement contained in the standard form policy definition of a "hit-and-run vehicle." ⁴ These decisions are based upon the premise that physical contact is not a statutory requirement and such provisions are a violation of the public policy and general purpose of the uninsured motorist statutes. We find these recent decisions a more persuasive and logical approach to the "phantom vehicle" problem.

The purpose of the uninsured motorist statutes is to provide the same insurance protection to the insured party who is injured by an Uninsured or unknown motorist that would have been available to him had he been injured as a result of the negligence of a motorist covered by the minimum amount of liability insurance. ⁵ To accomplish that purpose, the provisions of the uninsured motorist statutes are construed liberally in favor of coverage. ⁶

The respondents argue that the physical contact requirement is necessary to prevent fraudulent claims. The decisions of the other courts have adequately dealt with fallacy of such reasoning. In Webb v. United Services Automobile Ass'n, 1974, 227 Pa.Super. 508, 520, 323 A.2d 737, 743, the court explained:

While it would certainly eliminate the possibility of fraud to hold the physical contact clause valid, it would also eliminate any hope of recovery in cases clearly involving another negligent motorist who has avoided liability by getting away. This latter situation is surely within the contemplation of the Uninsured Motorist Coverage Act, and the possibility of fraud can be mitigated by the burden of proof placed on the claimant.

The Hawaii Supreme Court in DeMello v. First Insurance Company of Hawaii, Ltd. (1974) 55 Haw. 519, 523 P.2d 304, 308, found the adversary process sufficient to eliminate fraudulent claims, stating:

This court has held that the fear of a flood of fraudulent claims cannot justify the judicial deprivation of a plaintiff's right to bring an independent action in tort, because the genuineness of the claim can be adequately tested by the mechanisms of our adversary process. (citation omitted) (I)t is not to be forgotten that Plaintiff carries the burden of proof. * * * (W)e here hold that the physical impact requirement cannot be used by defendant-insurer to defeat an insured's otherwise valid claim. For us to enforce insurer's physical impact contractual prerequisite would, in effect, amount to our propping up of an arbitrary barricade erected to eliminate all claims for damages resulting from one car accidents. Since it is clear that one car accidents can be caused by the negligent operation of a second 'uninsured' vehicle (as here) any contractual prerequisite of physical contact between automobiles undermines the statutory purposes of HRS § 431-448.

In the words of the Florida Supreme Court:

The argument that the policy requirement of physical contact is reasonable is fallacious. The only reason for such a requirement is to prove that the accident actually did occur as a claimant may say it did. This is a question of fact to be determined by the jury, or the judge if demand for jury trial is not made. If the injured party can sustain the burden of proof that an accident did occur, he should be entitled to recover regardless of the actuality of physical contact. If twenty witnesses will swear they saw the accident happen, their testimony should not be deemed worthless, as it would be under the decision here for review. Brown v. Progressive Mutual Insurance Company, 1971 Fla., 249 So.2d 429;

and the Oklahoma Supreme Court:

Since the purpose of our uninsured motorist statute is to afford the same protection to a person injured by an uninsured motorist as he would have had if the negligent motorist had carried liability insurance, it would defeat the purpose of the statute to allow insurance contracts to require impact before coverage would be extended to their insured. Admittedly, the burden of proof will be upon the insured to show that the accident was in fact caused by an unidentified driver, but this opportunity cannot be denied just because there was no 'impact' with the offending car. Biggs v. State Farm Mut. Auto. Ins. Co., 1977 Okl., 569 P.2d 430, 433-434.

The contention that the physical contact requirement prevents fraudulent claims appears to be of dubious merit. We have not found any signs of a flood of "phantom vehicle" claims in the states rejecting the requirement, nor have the legislatures of those states found it necessary to enact a physical contact requirement to their uninsured motorist statutes. We perceive no sound reason to deprive an injured insured of recompense for a valid claim to prevent the "flood of fraudulent claims" which has not materialized in other states.

The defendant's contention that the term "hit" ⁷ presumes a physical contact is adequately explained by Justice Griffith of the New Hampshire Supreme Court in Soule v. Stuyvesant Insurance Company (1976 N.H.) 364 A.2d 883, 884-885:

The defendant urges us to adopt an interpretation of the statute that ascribes to the phrase 'hit-and-run' an intention to limit required statutory coverage to accidents involving physical...