Johnson v. Safeco Ins. Co. of Ill.

• Decision Date: 18 December 2020
• Docket Number: No. 19-2227,19-2227
• Citation: 983 F.3d 323
• Parties: Maureen JOHNSON, Plaintiff - Appellant v. SAFECO INSURANCE COMPANY OF ILLINOIS, Defendant - Appellee
• Court: U.S. Court of Appeals — Eighth Circuit

983 F.3d 323

Maureen JOHNSON, Plaintiff - Appellant

v.SAFECO INSURANCE COMPANY OF ILLINOIS, Defendant - Appellee

No. 19-2227

United States Court of Appeals, Eighth Circuit.

Submitted: September 23, 2020

Filed: December 18, 2020

Brett J. Coppage, Edelman & Thompson, Kansas City, MO, for Plaintiff-Appellant.

Deena B. Jenab, Bruce A. Moothart, Seyferth & Blumenthal, Kansas City, MO, for Defendant-Appellee.

Before SMITH, Chief Judge, BENTON and KOBES, Circuit Judges.

SMITH, Chief Judge.

Maureen Johnson sued Safeco Insurance Company of Illinois ("Safeco") after Safeco denied her underinsured motorist insurance (UIM) coverage. Safeco denied coverage because Johnson had already received the maximum UIM coverage available from another insurer. The district court¹ granted summary judgment to Safeco after concluding Safeco had satisfied its contractual obligation because Johnson had already received the highest applicable limit of UIM coverage to which she was entitled. We affirm.

I. Background

Johnson was severely injured in a vehicle collision in September 2016. At the time of the accident, she was driving her then-employer's 2005 Ford E150 Econoline Van. The employer, TestAmerica Environmental Services, LLC, insured the van through Travelers Insurance Company ("Travelers"). Among other coverages, the Travelers auto policy provided $1,000,000 in UIM coverage. The other driver in the collision, Alma Xiloj, had auto insurance coverage through Trader's Insurance Company ("Trader's"). The Trader's policy had a bodily injury liability limit of only $25,000.

Johnson and her husband had automobile insurance coverage for their personal vehicles through Safeco. Safeco's policy provided coverage for three vehicles: a 2013 Ford F150, a 2005 Ford Focus, and a 2015 Ford Explorer. For each insured vehicle, the policy provided coverage of $250,000 per person in UIM coverage. None of these three vehicles were involved in the accident.

The Safeco policy section titled "Additional Coverages," states, in relevant part:

INSURING AGREEMENT

A. We will pay compensatory damages which an insured is legally entitled to recover from the owner or operator of an underinsured motor vehicle because of bodily injury:

1. Sustained by that insured; and

2. Caused by an accident.

The owner's or operator's liability for these damages must arise out of the ownership, maintenance or use of the underinsured motor vehicle.

Any judgment for damages arising out of a suit brought without our written consent is not binding on us.

We will pay under this coverage only if 1. or 2. below applies:

1. The limits of liability under any applicable bodily injury liability bonds or policies have been exhausted by payment of judgments or settlements ....

...

LIMIT OF LIABILITY

A. The limit of liability shown in the Declarations for "each person" for Underinsured Motorists Coverage is our maximum limit of liability for all damages, including damages for care, loss of services or death (including loss of consortium and wrongful death), arising out of bodily Injury sustained by any one person in any one accident.

Subject to this limit for "each person", the limit of liability shown in the Declarations for "each accident" for Underinsured Motorists Coverage is our maximum limit of liability for all damages for bodily injury resulting from any one accident.

This is the most we will pay regardless of the number of:

1. Insureds;

2. Claims made;

3. Vehicles or premiums shown in the Declarations; or

4. Vehicles involved in the accident.

...

OTHER INSURANCE

If there is other applicable insurance available under one or more policies or provisions of coverage:

1. Any recovery for damages under all such policies or provisions of underinsured motorist coverage may equal but not exceed the highest applicable limit for any one vehicle under any insurance providing underinsured motorist coverage on either a primary or excess basis.

2. Any underinsurance motorist coverage we provide with respect to a vehicle you do not own shall be excess over any collectible underinsured motorist insurance providing coverage on a primary basis. However, the maximum limit of our liability shall not exceed the highest limit applicable to any one auto.

3. If the underinsured motorist coverage under this policy is provided:

a. On a primary basis, we will pay only our share of the loss that must be paid under insurance providing underinsured motorist coverage on a primary basis. Our share is the proportion that our underinsured motorist limit of liability bears to the total of all applicable underinsured motorist limits of liability for coverage provided on a primary basis.

b. On an excess basis, we will pay only our share of the loss that must be paid under underinsured motorists insurance providing coverage on an excess basis. Our share is the proportion that our limit of liability for underinsured motorists coverage bears to the total of all applicable limits of liability for underinsured motorist coverage provided on an excess basis.

Compl., Ex. A at 39–41, Johnson v. Safeco Ins. Co. of Ill. , 390 F.Supp.3d 988 (W.D. Mo. 2019), ECF No. 1-1 (emphasis omitted).

Johnson sued Xiloj and entered a covenant not to execute in May 2018. Safeco and Travelers both consented to Johnson accepting $25,000 from Xiloj. It is undisputed that Travelers, the insurer for the vehicle Johnson was driving at the time of the accident, served as Johnson's primary UIM coverage.² After a bench trial, the state court entered a judgment of $5,000,000 against Xiloj. Trader's paid Johnson $25,000, the applicable limit under Xiloj's policy.

Johnson then contacted Safeco and Travelers, asking for $1,000,000 from each company. Travelers sent Johnson $1,000,000. Safeco, however, declined to pay. It determined that its UIM coverage applied to Johnson only on an excess basis. Safeco noted that Travelers provided primary coverage. Consequently, Johnson had already received the highest applicable limit of UIM coverage from Travelers and was not entitled to more from Safeco. Johnson sued in federal court to determine Safeco's obligations under the policy. Both parties moved for summary judgment. Johnson argued that she was entitled to at least $250,000 from Safeco and, further, that she should be able to recover the limits for each of the three vehicles covered under Safeco's policy for a total of $750,000.³ Safeco argued that its policy precluded Johnson from receiving more than the highest applicable limit of UIM coverage—an amount she had already recovered from Travelers.

The district court granted summary judgment to Safeco. It concluded that Safeco's policy unambiguously precluded Johnson from recovering more than the maximum limit of UIM coverage from either Safeco or Travelers.⁴ It determined that Johnson could receive no more than $1,000,000 in total UIM coverage because that was the "highest applicable limit." As a result, Safeco owed her no additional funds in excess of that amount because she had already recovered the maximum limit of UIM coverage from Travelers. The district court also explained that this did not render Johnson's UIM coverage from Safeco illusory because it would have provided coverage had Travelers not already provided Johnson with the highest applicable limit of UIM coverage.

II. Discussion

Johnson appeals, arguing that the district court erred in granting summary judgment to Safeco because its policy contains an impermissible set-off of coverage and is ambiguous.

"We review both the district court's grant of summary judgment and its interpretation of the insurance policies de novo. " Gohagan v. Cincinnati Ins. Co. , 809 F.3d 1012, 1015 (8th Cir. 2016). Summary judgment is appropriate only when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Id. We view the record most favorably to the nonmoving party and draw all reasonable inferences in that party's favor. Daughhetee v. State Farm Mut. Auto. Ins. Co. , 743 F.3d 1128, 1131 (8th Cir. 2014). Interpretation of an insurance policy is a matter of state law, and we review the district court's interpretation of state law de novo. Id. The parties agree that Missouri law applies.

A. "Set-off" versus "Stacking"

We begin by addressing Johnson's argument that this case involves a "set-off" of coverage as opposed to "stacking."

"Stacking" refers to an insured's ability to obtain multiple insurance coverage benefits for an injury either from more than one policy, as where the insured has two or more separate vehicles under separate policies, or from multiple coverages provided for within a single policy, as when an insured has one policy which covers more than one vehicle.

Id. (quoting Niswonger v. Farm Bureau Town & Country Ins. Co. of Mo. , 992 S.W.2d 308, 313 (Mo. Ct. App. 1999) ). A "set-off," on the other hand, generally occurs when an insurance company reduces the amount it owes by another amount—usually the amount owed by the tortfeasor. See Owners Ins. Co. v. Craig , 514 S.W.3d 614, 616 (Mo. 2017) (en banc); see also 12 Steven Plitt et al., Couch on Insurance § 169:10 (3d ed. 2020). Missouri courts particularly scrutinize set-offs if the effect of the provision is to offer coverage at one point and then take it away or reduce it elsewhere in the policy. Nationwide Ins. Co. of Am. v. Thomas , 487 S.W.3d 9, 12–13 (Mo. Ct. App. 2016).

Johnson claims that Safeco's policy creates a set-off by reducing its UIM coverage by the amount she received from Travelers. We disagree. Safeco did not reduce the amount it owed Johnson by the amount she received from Travelers or from Xiloj. Rather, the Safeco policy states that where multiple UIM policies apply, as in Johnson's case, recovery "may equal but not exceed the highest applicable limit for any one vehicle under any insurance providing underinsured motorist coverage on either a primary or excess basis." Compl., Ex. A at 41. This means that excess coverage (here, from Safeco) can combine with primary...