Leuchtenmacher v. Farm Bureau Mut. Ins. Co., 89-741
| Decision Date | 18 July 1990 |
| Docket Number | No. 89-741,89-741 |
| Citation | 461 N.W.2d 291 |
| Parties | David LEUCHTENMACHER, Administrator of the Estate of Alice Leuchtenmacher, Deceased, Appellee, v. FARM BUREAU MUTUAL INSURANCE COMPANY, Appellant. |
| Court | Iowa Supreme Court |
James A. Pugh of Morain, Burlingame, Pugh, Juhl & Peyton, West Des Moines, for appellant.
Kevin C. Neylan of Neylan Law Office, Elkader, for appellee.
Considered by LARSON, P.J., and CARTER, LAVORATO, NEUMAN, and ANDREASEN, JJ.
Alice Leuchtenmacher was killed in an automobile accident with an underinsured driver, and her estate sued her insurance company, Farm Bureau Mutual, to recover under the underinsured motorist benefits of its policy. Prior to trial, the estate settled with the driver of the other car for the amount of his liability limits of $55,000. After trial to a jury, the district court entered a judgment for the plaintiff for the policy limit of her underinsured motorist coverage. Farm Bureau appealed, contending the district court erred by (1) allowing the plaintiff to bring a direct action against it without first obtaining a judgment against the underinsured driver to determine the amount of damages, and (2) admitting into evidence the liability and underinsured policy limits. The plaintiff estate cross-appealed, claiming that the court improperly deducted from its underinsured motorist benefits the amount of Farm Bureau's previous payments under the medical portion of the policy. We affirm on the appeal and reverse on the cross-appeal.
In April 1987, Alice Leuchtenmacher was killed when a drunken driver named Odegard crossed the centerline and struck her car. Odegard had insurance on his car, but Alice's estate representative considered it to be inadequate to cover the damages sustained by the estate. The estate filed suit against both Odegard, for negligence, and Farm Bureau under the policy provisions for underinsured motorist benefits. Farm Bureau responded by claiming that the estate could not bring an action directly against it under its underinsured motorist provisions until there had been a determination, through a suit against Odegard, to determine the amount of damages sustained.
The court disagreed with Farm Bureau on this issue, ruling that the phrase "legally entitled to recover," under the underinsured motorist provisions of Iowa Code section 516A.1 (1987), and the language of Alice's automobile policy, does not mean that the injured party must obtain a judgment against the third party prior to a suit on the policy.
Although the estate settled its case against Odegard prior to trial, its suit against Farm Bureau proceeded to trial and judgment. The jury returned a verdict for the plaintiff for $223,251.57, which it determined to be the total amount the estate was "legally entitled to recover" against Odegard. The court entered judgment against Farm Bureau for $97,263, which represented the policy limits of $100,000 under the provisions for underinsured motorist benefits less Farm Bureau's previous payments under the medical provisions of its policy.
Farm Bureau contends that, when a dispute arises over the amount its insured is "legally entitled to recover" from an underinsured motorist, that amount must be determined through a judgment against the third party. It argues that, under Iowa Code section 516A.1, and the language of Alice's policy which tracks that language, it is implicit that "legally entitled to recover" means the insured may not pursue a direct action against the insurance company for underinsured motorist benefits until a judgment against the third party has established the amount of damages.
Farm Bureau contends that allowing the insured to bring a direct action is unfair and prejudicial to its rights in three respects: First, a direct action against one's own insurance company places the focus of the action on the insured's own coverage rather than on the civil liability of the third party underinsured motorist. Second, the costs of defending the liability case will necessarily be shifted from the liability carrier (here, Odegard's company), which contracted to bear that cost, to the insured's own company, which did not. Finally, it argues, a direct action requires the underinsured motorist's insurer to take on the defense of a tort action without the benefit of the "cooperation clause" which is available to the tortfeasor's own liability carrier.
Both parties rely on Hall v. Allied Mutual Insurance Co., 261 Iowa 1258, 158 N.W.2d 107 (1968), to support their respective positions. Farm Bureau contends that Hall, while not addressing this exact issue, made it clear that it is the tort recovery which controls the amount of underinsured benefits available to a claimant. The estate counters that Hall permitted a recovery against the insurer even though the insured had not brought an action against the tortfeasor.
Our court has apparently never ruled on this precise issue, but courts in other jurisdictions have looked to the intent of the legislature in passing their uninsured and underinsured motorist statutes to determine whether the insured has a right to bring a direct action against the underinsured motorist insurer. See Annotation, Insured's Right To Bring Direct Action Against Insurer For Uninsured Motorist Benefits, 73 A.L.R.3d 632, 637 (1976).
Our underinsured motorist statute is Iowa Code section 516A.1 (1989), which provides in part:
No automobile liability or motor vehicle liability insurance policy insuring against liability for bodily injury or death arising out of the ownership, maintenance, or use of a motor vehicle shall be delivered ... unless coverage is provided ... for the protection of persons insured under such policy who are legally entitled to recover damages from the owner or operator of an uninsured motor vehicle or a hit-and-run motor vehicle or an underinsured motor vehicle because of bodily injury, sickness, or disease, including death resulting therefrom, caused by accident and ... use of such uninsured or underinsured motor vehicle....
(Emphasis added.)
In ascertaining legislative intent, we consider the language used in the statute, the object sought to be accomplished, and the wrong to be remedied. We are obliged to interpret the statute reasonably to effect its purposes. Rodman v. State Farm Mut. Auto. Ins. Co., 208 N.W.2d 903, 909 (Iowa 1973). In Rodman, we said as to the uninsured motorist provisions of chapter 516A:
The statute is written to protect the insurance consumer, not the policy vendor. It refers to the concrete situation where the insured is "legally entitled to recover damages" but the liability of the person legally responsible is not insured. There is no reason to believe the legislature intended to deny the purchaser of uninsured motorist coverage the protection he purchased just because the liability coverage is abstractly applicable to someone else.
In American States Insurance Co. v. Tollari, 362 N.W.2d 519, 522 (Iowa 1985), we stated that the purpose of underinsured motorist coverage is to provide protection from losses caused by a tortfeasor who is not financially responsible. If the tortfeasor has liability insurance, but the insurance is insufficient to fully compensate for the loss, the insured may recover the balance of the loss from the insured's own carrier. Neither this case, nor any of the others decided under chapter 516A, suggest to us that the amount required to fully compensate the loss must be determined by a second lawsuit.
In the recent case of In re Estate of Rucker, 442 N.W.2d 113 (Iowa 1989), the underinsured motorist provision required exhaustion of the underinsured driver's liability limits as a condition precedent to a suit against the company under its underinsured motorist provisions. The issue in Rucker was whether a settlement for slightly less than the...
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