Elovich v. Nationwide Ins. Co.
| Decision Date | 10 October 1985 |
| Docket Number | No. 51131-4,51131-4 |
| Citation | 707 P.2d 1319,104 Wn.2d 543 |
| Parties | Robert ELOVICH, individually and as general guardian of Allessandra Elovich and Kimberly Elovich; Andrew Prounchick, individually and as administrator of the estate of Alyce Prounchick; Harold Beale as administrator of the estate of Genevive Beale; and Andrew Elovich, Respondents, v. NATIONWIDE INSURANCE COMPANY, Appellant. |
| Court | Washington Supreme Court |
Leavy, Schultz & Sweeney, P.S., John G. Schultz, George Fearing, Andrew C. Bohrnsen, Pasco, for appellant.
Critchlow & Williams, Robert D. Merriman, Rembert Ryals, Richland, for respondents.
The plaintiffs, Robert Elovich, et al, seek payment from Nationwide Insurance Co. under Elovich's Underinsured Motorist (UIM) coverage for injuries they sustained in an automobile accident. Nationwide appeals the entry of summary judgment against it and argues that the coverage does not apply because the plaintiffs improperly settled their case against some of the defendants in the tort action.
On July 12, 1981, six persons were riding in a Datsun automobile on Riverside Drive in West Richland, Washington. As they crossed Route 224, they collided with a pickup truck. That vehicle was driven by Jimmy Dale Sweeny, who was intoxicated, uninsured and had negligible financial assets. Two of the six persons died, two suffered serious injuries, and two were less seriously injured. The occupants of the automobile were:
OCCUPANTS OF DATSUN-AUTOMOBILE
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NAME ACTIVITY INJURY INSURANCE SETTLEMENT
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Robert Driver of Injured UIM Coverage with $50,000 for his
Elovich Datsun Nationwide Ins. Co. injuries and for loss
of wife's services
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Allessandra Wife of Injured * * * $250,000 plus 5,500 per
Ellovich Driver Brain mo for 5 yrs commencing
Damage 2 yrs after settlement
thereafter 6,000 per mo
for life
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Andrew Owner of Injured UIM Coverage with $50,000 for injuries
Prounchick Datsun Mutual of Enumclaw and death of wife
w/$100,000 limit to
1 occurrence. Mutual
paid full 100,000 to
plaintiffs
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Alyce Wife of Killed * * * Included in amount paid
Prounchick Owner husband Andrew
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Genevive Passenger Killed * * * $25,000 to Estate
Beale
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Kimberly Daughter Critical * * * $20,000 at settlement
Elovich of Robert Injuries plus 10,000 for 5 yrs
w/first part 1 yr from
date of settlement plus
20,000 at age 23
30,000 at age 27 &
40,000 at age 30
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The driver of the Datsun was Robert Elovich who had been permitted to drive it by the owner, Andrew Prounchick. Elovich carried an insurance policy with Nationwide Insurance Co. with UIM coverage. The Nationwide policy covering Elovich provided coverage if the car the insured (Elovich) was driving was involved in an accident with an underinsured motor vehicle. The limits of the underinsured motorist coverage were $100,000 for each individual and $300,000 for any one occurrence.
The injured parties sued for damages. They named as defendants: Sweeny, the City of West Richland and the State of Washington for hazardous road design, and Nissan Motors Corp. for automobile design defects. The plaintiffs subsequently settled their claims with the City, State, and Nissan, and took a voluntary nonsuit against Sweeny. All defendants except Sweeny received a release. Nationwide never received notice of the settlement negotiations or the settlement hearing held pursuant to RCW 4.22.060 which reads in part:
(1) A party prior to entering into a release, covenant not to sue, covenant not to enforce judgment, or similar agreement with a claimant shall give five days' written notice of such intent to all other parties and the court.... A determination by the court that the amount to be paid is reasonable must be secured....
(2) A release, covenant not to sue, covenant not to enforce judgment, or similar agreement entered into by a claimant and a person liable discharges that person from all liability for contribution, but it does not discharge any other persons liable upon the same claim unless it so provides. However, the claim of the releasing person against other persons is reduced by the amount paid pursuant to the agreement unless the amount paid was unreasonable at the time of the agreement in which case the claim shall be reduced by an amount determined by the court to be reasonable.
(3) A determination that the amount paid for a release, covenant not to sue, covenant not to enforce judgment, or similar agreement was unreasonable shall not affect the validity of the agreement between the released and releasing persons nor shall any adjustment be made in the amount paid between the parties to the agreement.
Elovich's policy with Nationwide specifically excluded UIM coverage if the insureds settled without Nationwide's written consent. The settlement in cash and future payments amounted to approximately $1.7 million, plus substantial attorney's fees. The settlement did not exhaust the liability coverage of the entities settling. The plaintiffs also collected $100,000 from the Datsun owner's insurance company.
The plaintiffs then moved for a summary judgment requiring Nationwide to submit to arbitration to determine the amount of recovery, if any, under Elovich's policy. Nationwide responded with its own motion for summary judgment. It contended that arbitration was unnecessary because the plaintiffs had no UIM coverage and improper because it had not been notified of the settlement hearing and given an opportunity to participate. The court held for the plaintiffs and Nationwide appeals.
The first issue is whether UIM coverage extends to plaintiffs who have settled with some of the defendant-tortfeasors' for less than the limits of their insurance coverage.
Nationwide argues that the defendant-tortfeasors were not "underinsured" under RCW 48.22.030. Nationwide reasons that the plaintiffs cannot recover under Elovich's UIM policy until they have exhausted all of the other insurance coverage.
We hold that recovery should be allowed pursuant to the statutory language and legislative history of RCW 48.22.030. The statute provides in part:
(1) "Underinsured motor vehicle " means 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.
(Italics ours.)
Nationwide focuses on the second part of RCW 48.22.030(1), which requires consideration of "the limits of liability under all ... insurance policies applicable to a covered person ..." The City, the State, and Nissan all possessed liability insurance in excess of the amounts contributed by their carriers to the settlement and therefore, they were not underinsured. Even if UIM coverage applies, Nationwide argues that the plaintiffs already have recovered more than the coverage limit and thus, no need exists for arbitration.
The plaintiffs argue that they are entitled to UIM coverage up to the policy limits or full compensation for their injuries. They contend that Nationwide must submit to arbitration to determine the amount the plaintiffs are "legally entitled to recover." RCW 48.22.030(1). They assert that the settlement figure is subtracted from that amount, and Nationwide must pay the difference, up to the policy limit.
These theories highlight an ambiguity in the statute: whether the UIM coverage is a "decreasing" layer of coverage that guarantees a minimum payment, or a "floating" layer of coverage that applies up to the total of the damages suffered. The distinction can be made through an illustration wherein "Driver X" carries $25,000 UIM coverage and while driving his own vehicle, he collides with "Driver Y", who carries $30,000 in liability coverage. In our illustration "Driver Y" is totally at fault but has no assets, X suffers $50,000 in injuries and settles with Y's insurer for $20,000.
A. Decreasing Layer: Under this theory X can collect only $5,000 from his insurer. The $25,000 UIM coverage is minimum protection for the insured. It decreases dollar-for-dollar by the amount Y's insurer pays, up to X's coverage limit. X recovered $20,000; his...
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