Goodrich v. Lumbermens Mut. Cas. Co.

• Decision Date: 10 December 1976
• Docket Number: Civ. A. No. 76-30.
• Parties: Lynn E. GOODRICH v. LUMBERMENS MUTUAL CASUALTY COMPANY.
• Court: U.S. District Court — District of Vermont

423 F. Supp. 838

Lynn E. GOODRICH v. LUMBERMENS MUTUAL CASUALTY COMPANY.

Civ. A. No. 76-30.

United States District Court, D. Vermont.

December 10, 1976.

Thomas W. Costello, Webber & Costello, Rutland, Vt., for plaintiff.

Glen L. Yates, Jr., Pierson, Affolter & Amidon, Burlington, Vt., for defendant.

MEMORANDUM AND ORDER

HOLDEN, Chief Judge.

The plaintiff, Lynn E. Goodrich, brings this action, in the nature of a declaratory judgment action, to establish the maximum coverage to which she is entitled under the uninsured motorist clauses of two automobile liability insurance policies issued by the defendant Lumbermens Mutual Casualty Company. The plaintiff claims that she is entitled to recover up to the full amounts provided for uninsured motorist coverage in each policy. The defendant maintains that under the language contained in the policies the maximum coverage to which the plaintiff is entitled is the limit provided by one policy. The case is presently before the court on the motion of the plaintiff, under Fed.R.Civ.P. 56, for summary judgment on the question of the defendant's maximum potential liability under the policies of insurance. Pursuant to a stipulation entered into by the parties, the material facts are undisputed.

On August 4, 1975, the plaintiff was injured when an uninsured motorist drove his car into her parents' home where she resided. The plaintiff and her father, Earle A. Goodrich, each owned an automobile covered by separate insurance policies issued by the defendant insurer. Both policies were in effect on the date of the accident. The plaintiff's policy provided coverage by way of an uninsured motorist endorsement. Her father's policy, designated as a Family Automobile Insurance policy, also undertook to insure the plaintiff against losses inflicted by uninsured motorists. Each policy provides for the minimum amount of uninsured motorist coverage required under Vermont law — up to $10,000 for each person and up to $20,000 for each accident. See 23 V.S.A. §§ 941 and 801. For the purposes of this motion, the parties have stipulated that the plaintiff's damages may exceed $10,000. Pursuant to this stipulation, the medical payments provisions of the two policies are not in issue.

Each policy contains language substantially identical to the following:

With respect to bodily injury to an insured while occupying an automobile not owned by the named insured, the insurance, under the uninsured motorists coverage shall apply only as excess insurance over any other similar insurance available to such insured and applicable to such automobile as primary insurance, and this insurance shall then apply only in the amount by which the limit of liability for this coverage exceeds the applicable limit of liability of such other insurance. Hereinafter referred to as the "excess-escape" clause.

Except as provided in the foregoing paragraph, if the insured has other similar insurance available to him and applicable to the accident, the damages shall be deemed not to exceed the higher of the applicable limits of liability of this insurance and such other insurance, and the company shall not be liable for a greater proportion of any loss to which this uninsured motorists coverage applies than the limit of liability hereunder bears to the sum of the applicable limits of liability of this insurance and such other insurance. Hereinafter referred to as the "pro-rata" clause. Both clauses together will be referred to hereinafter as the "other insurance" clauses.

The defendant asserts that under these provisions its maximum potential liability to the plaintiff is $10,000 — $5,000 under each policy. The defendant has paid the plaintiff $10,000 and therefore asserts that it has no further obligation under the policies.

The plaintiff contends that the defendant's potential liability is not limited to $10,000; rather it is the sum of the maximum figures provided in the two policies in the total amount of $20,000. Her argument rests upon the assertion that under the language of 23 V.S.A. § 941,¹ each of the two policies must provide the plaintiff with up to the minimum coverage of $10,000 required by law. Since application of the "other insurance" clauses quoted above would diminish total recovery to $10,000, the plaintiff asserts that these contractual provisions should not be enforced because they are contrary to the language and purpose of the statute.

The question for decision by the court is whether, under the facts of this case, application of the "other insurance" clauses would contravene the language and purpose of 23 V.S.A. § 941. Although this question has been considered and decided by courts in numerous other jurisdictions,² it apparently has not been answered in Vermont. Since the Supreme Court of Vermont has not resolved the question, this court is called upon to forecast the probable direction of the state courts on the present question.

Clearly the "other insurance" clauses in these contracts must comport with the requirements of 23 V.S.A. § 941 or they cannot stand. In Rhault v. Tsagarakos, 361 F.Supp. 202, 205 (D.Vt.1973), the court stated:

It is established beyond question that contracts of liability insurance are subject to statutory provisions and are deemed to include the statutory requirements whether they are contained in the insuring agreement or not. The terms of the policy are without force to detract from the requirements of the statute.

The defendant maintains that the statutory language of § 941 establishes that the public policy of this state "is to afford a total fund of $10,000 to the victim of an uninsured motorist." The defendant further contends that, in light of the clear and unambiguous language of the clauses in question and in the absence of any indication that the legislature intended to restrict the use of such clauses, the court should not undertake to "make a new contract for the parties to an insurance agreement." See Utica Mut. Ins. Co. v. Central Vt. Ry., 133 Vt. 292, 294-95, 336 A.2d 200 (1975).

The defendant's position finds support in a minority of the jurisdictions which have considered the effect of "other insurance" clauses in similar contexts.³ The rationale most frequently stated in support of this position is that in setting minimum amounts of coverage for uninsured motorist insurance policies legislatures have confined their concepts of "public policy" to such amounts. Once motorists and their insurers arranged for the minimum coverage, they would be free to contract for greater insurance or to restrict coverage to the minimum amounts. See McCarthy v. Preferred Risk Mut. Ins. Co., 454 F.2d 393, 395-96 (9th Cir. 1972); Maryland Cas. Co. v. Howe, 106 N.H. 422, 213 A.2d 420, 422 (1965) (Kenison, C. J.); but see Raitt v. National Grange Mut. Ins. Co., 111 N.H. 397, 285 A.2d 799, 802 (1971).

A majority of jurisdictions, however, have rejected the concept that the public policy underlying uninsured motorist statutes is to give the injured party the same, but no better protection than he would have if he had been injured by a motorist with the minimum statutory coverage.⁴ As stated by the New Jersey Supreme Court,

the most frequently iterated reasons advanced in the majority-rule opinions are: (a) the respective statutes read in terms of prohibition of the issuance of a policy not containing the specified UM uninsured motorist coverage, not in terms of how much UM coverage an injured UM claimant may recover; (b) statutory UM limits are minimums, not maximums; (c) effectuation of the other insurance exclusion permits the company to obtain a windfall or unjust enrichment by accepting a premium for UM coverage and then denying the coverage paid for; and (d) the UM statutes are designed for the protection of injured motorists and ought to be interpreted liberally in favor of the broadest indemnification of such motorists short of exceeding the damages sustained.

Motor Club of America Ins. Co. v. Phillips, 66 N.J. 277, 330 A.2d 360, 367-68 (1974) (emphasis in original).

For the reasons stated above, the court is persuaded that the Supreme Court of Vermont would apply the majority rule.

The language of 23 V.S.A. § 941 is clear; it provides that "no policy" may be issued in this state without making provision for uninsured motorist coverage. The statute also states that "every policy" of insurance against liability arising from ownership or use of a motor vehicle must provide coverage for any liability imposed by law. Furthermore, the section states that this coverage "shall be not less than the minimum limits of coverage required under the provisions of section 801." The amounts required under § 801 of Title 23 are "at least $10,000.00 for one person and $20,000.00 for two or more persons killed or injured." There is no indication anywhere in the statutory scheme that the legislature had any other purpose in mind than to require each and every policy to afford no less than the coverage specified in §§ 941 and 801. It would be contrary to the language and purpose of the statute to permit the defendant insurer to escape its statutory obligation by arguing that each of the two policies it issued may provide half the coverage it is required to furnish. See Johnson v. Travelers...