Lemrick v. Grinnell Mut. Reinsurance Co., 60317

• Decision Date: 22 March 1978
• Docket Number: No. 60317,60317
• Citation: 263 N.W.2d 714
• Parties: Paul Leroy LEMRICK, Appellee, v. GRINNELL MUTUAL REINSURANCE COMPANY, Appellant. Barton LEMRICK, Individually, and Barton Lemrick, Executor of the Estate of Laura Lemrick, Deceased, Appellees, v. GRINNELL MUTUAL REINSURANCE COMPANY, Appellant.
• Court: Iowa Supreme Court

Page 714

263 N.W.2d 714

Paul Leroy LEMRICK, Appellee, v. GRINNELL MUTUAL REINSURANCE COMPANY, Appellant.

Barton LEMRICK, Individually, and Barton Lemrick, Executor of the Estate of Laura Lemrick, Deceased, Appellees, v. GRINNELL MUTUAL REINSURANCE COMPANY, Appellant.

No. 60317.

Supreme Court of Iowa.

March 22, 1978.

Smith, Peterson, Beckman & Willson, Council Bluffs, for appellant.

Robert F. Leonard, Sidney, for appellees.

Considered by MOORE, C. J., and REES, UHLENHOPP, HARRIS, and McCORMICK, JJ.

UHLENHOPP, Justice.

This appeal involves several legal problems which arose in connection with uninsured motorist coverages in two automobile insurance policies.

Barton and Laura Lemrick, spouses, were "named insureds" in a policy on their Oldsmobile car, issued by Grinnell Mutual Reinsurance Company. Their son Paul Leroy Lemrick was an "insured" under that policy while occupying the Oldsmobile. Paul was also a "named insured" in a policy on his own Ford car, likewise issued by Grinnell Mutual. That policy covered him while occupying other cars, subject to certain provisions. Each policy contained an uninsured motorist clause with limits of $10,000 per person and $20,000 per accident, and the clauses were identical. Each policy also contained a medical payments clause. These were likewise identical except that the limit was $5000 per person in the Oldsmobile policy and $1000 per person in the Ford policy.

Barton, Laura, and Paul were occupants of the Oldsmobile in Idaho when an uninsured motorist negligently collided with it, causing bodily injuries to Barton and Paul and the death of Laura. The damages of Barton, Paul, and Laura's estate each exceed $10,000 exclusive of medical and burial expenses.

Under the medical payments clause in the Oldsmobile policy, Grinnell Mutual paid Barton $3,658.07, Paul $5000, and Laura's estate $2924.95. Under the corresponding clause in the Ford policy, Grinnell Mutual paid Paul $1000.

Within two years of the collision, Paul sued Grinnell Mutual under the uninsured motorist clause in the Ford policy. About two years and eight months after the collision, Barton and Laura's estate sued Grinnell Mutual under the uninsured motorist clause in the Oldsmobile policy.

The parties stipulated the facts in the two consolidated actions, and submitted the cases to the trial court on briefs. The court awarded Barton and Laura's estate $20,000 total principal and awarded Paul $10,000 principal, together with interest in each case from the date of the collision, and costs. Grinnell Mutual appealed and in this court presents four contentions.

I. Limitations. Grinnell Mutual first contends that the statute of limitations bars the action of Barton and Laura's estate. The question here is whether their action against Grinnell Mutual is based on the insurance policy (written contract), or the insured motorist's negligence (tort); if the former, the action is not barred as the applicable period is ten years, Code 1977, § 614.1(5), but if the latter, it is barred as the period is two years. § 614.1(2).

We recognize that some courts have held the applicable period is the one which applies to an action by the insured against the uninsured motorist (tort). The weight of authority, however, holds that the action is on contract and the longer period for contract actions applies. Transnational Ins. Co. v. Simmons, 19 Ariz.App. 354, 507 P.2d 693; Hartford Accident & Indem. Co. v. Mason, 210 So.2d 474 (Fla.App.); Burgo v. Illinois Farmers Ins. Co., 8 Ill.App.3d 259, 290 N.E.2d 371; Booth v. Fireman's Fund Ins. Co., 253 La. 521, 218 So.2d 580; Detroit Auto. Inter-Insurance Exch. v. Hafendorfer, 38 Mich.App. 709, 197 N.W.2d 155; Selected Risks Ins. Co. v. Dierolf, 138 N.J.Super. 287, 350 A.2d 526; In the Matter of the Arbitration between DeLuca and Motor Vehicle Accident Indemnification Corp., 17 N.Y.2d 76, 268 N.Y.S.2d 289, 215 N.E.2d 482; Schultz v. Allstate Ins. Co., 17 Ohio Misc. 83, 244 N.E.2d 546; Turlay v. Farmers Ins. Exch., 259 Or. 612, 488 P.2d 406; Pickering v. American Employers Ins. Co., 109 R.I. 143, 282 A.2d 584; Schleif v. Hardware Dealer's Mut. Fire Ins. Co., 218 Tenn. 489, 404 S.W.2d 490; Franco v. Allstate Ins. Co., 505 S.W.2d 789 (Tex.); Sahloff v. Western Cas. & Sur. Co., 45 Wis.2d 60, 171 N.W.2d 914; see Anno. 28 A.L.R.3d 580.

We have decided to follow the weight of authority, as we agree basically with the analysis in those decisions. True, to an extent the uninsured motorist clause puts the insured in a position he would occupy if the uninsured motorist had insurance and the insured sued him. Yet the insured is not in fact suing the uninsured motorist, and may never sue him. Indeed, the situation may involve a hit-and-run driver who is never identified. Actually, the insured has bought and paid for a contract by an insurer to pay him if he has the misfortune to be injured by a culpable uninsured motorist or hit-and-run driver. If the insured and insurer cannot agree and the insured is compelled to sue the insurer under the uninsured motorist clause, we think in reality the action is bottomed on the policy. To be sure, the circumstances of the uninsured motorist's culpability and of the insured's damages are propositions which the insured must prove in order to recover from the insurer, but these are really conditions of the insurer's contract. The action itself appears to us to be upon the uninsured motorist clause, without which the insurer would owe nothing irrespective of the flagrancy of the uninsured motorist's culpability and the extent of the insured's damage.

Grinnell Mutual argues with some persuasiveness, however, that if its insured does not sue it under the clause until two years have elapsed, then it can no longer successfully sue the uninsured motorist by way of subrogation, as two years on the tort action against him would have run out citing State Farm Mut. Auto. Ins. Co. v. Wharton, 88 Nev. 183, 495 P.2d 359, and Citizens Ins. Co. of N. J. v. Signal Ins. Co., 261 Or. 294, 493 P.2d 46. Lemricks do not deny that if Grinnell Mutual pays them, it will be subrogated pro tanto to their rights against the uninsured motorist. We do not pursue this argument, however, and make no pronouncement upon it, as we think the insured's action on the uninsured motorist clause is so clearly contractual that the matter of subrogation cannot change the result. If an injustice exists regarding time limits on subrogation suits, the proper avenue would be to the legislature.

We hold that the action by Barton and Laura's estate was timely.

II. Deduction of Medical Expenses. Under the medical payments clause of the Oldsmobile policy, Grinnell Mutual paid Barton $3658.07 and Laura's estate $2924.95. Under that medical payments clause and under the corresponding clause in the Ford policy, Grinnell Mutual paid Paul a total of $6000. The parties stipulated that the damage of Barton, Paul, and Laura's estate is each at least $10,000 above the medical and burial expenses. The limits of the uninsured motorist clause in the Oldsmobile policy are $10,000 and $20,000, and the effective limit in the Ford policy is $10,000 since only Paul is covered. The uninsured motorist coverages in both policies contain this paragraph:

(T)he company shall not be obligated to pay under this Coverage that part of the damages which the insured may be entitled to recover from the owner or operator of an uninsured automobile which represents expenses for medical services paid or payable under Medical Payments Coverage of the policy.

Grinnell Mutual contends that under this paragraph it is entitled to deduct from the uninsured motorist insurance the medical payments it made.

We discussed the validity of paragraphs of this nature in McClure v. Employers Mut. Cas. Co., 238 N.W.2d 321 (Iowa). The courts are divided on the validity of such clauses in states having statutes containing only provisions corresponding to our § 516A.1 of the Code. Anno. 24 A.L.R.3d 1353, 1356-1358. But our statute contains additional § 516A.2 ("duplication of insurance or other benefits"), and under that section paragraphs of this nature are valid. McClure v. Employers Mut. Cas. Co., supra. See also Westhoff v. American Interinsurance Exch., 250 N.W.2d 404 (Iowa); Fisher v. State Farm Mut. Auto. Ins. Co., 243 Cal.App.2d 749, 52 Cal.Rptr. 721; Northwestern Mut. Ins. Co. v. Rhodes, 238 Cal.App.2d 64, 47 Cal.Rptr. 467; Stuyvesant Ins. Co. v. Johnson, 307 So.2d 229 (Fla.App.); Cooper v. Currigan, 59 Mich.App. 354, 229 N.W.2d 451; Terry v. Aetna Cas. & Sur. Co.,510 S.W.2d 509, 511 (Tenn.).

The question thus relates to the applicability of this paragraph under present facts. Two situations may exist, illustrated as follows. In the first situation an insured has $2000 medical expense and $10,000 other damage for a total of $12,000, and in the second situation an insured has $2000 medical expense and $8000 other damage for a total of $10,000. In each situation the insured has an uninsured motorist limit of $10,000 and in each the insurer pays the insured $2000 under the medical payments clause.

Under § 516A.2 and McClure, a policy paragraph can be drafted and enforced which allows the insurer to deduct $2000 medical payments from the uninsured motorist insurance in either of the two situations, so that each insured collects a total of $10,000 of insurance. But the language of the paragraph must show that such is the intent, and an ambiguity in the paragraph is of course resolved against the insurer. Benzer v. Iowa Mut. Tornado Ins. Ass'n, 216 N.W.2d 385 (Iowa). Moreover, the existence of a statute such as § 516A.2 does not automatically allow deduction of such insurance as medical payments. An appropriate implementing paragraph in the policy is essential. Cannizzo v. Guarantee Ins. Co., 245 Cal.App.2d 70, 53 Cal.Rptr. 657.

Each of the present three claims is like the first situation, that is, the insured has damage of at least $10,000...