Lewis v. State Farm Mut. Auto. Ins. Co.

• Decision Date: 15 June 1993
• Docket Number: No. 62794,62794
• Citation: 857 S.W.2d 465
• Parties: Nancy LEWIS, Plaintiff/Appellant, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant/Respondent.
• Court: Missouri Court of Appeals

Page 465

857 S.W.2d 465

Nancy LEWIS, Plaintiff/Appellant, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant/Respondent.

No. 62794.

Missouri Court of Appeals,

Eastern District,

Division One.

June 15, 1993.

Motion for Rehearing and/or Transfer to

Supreme Court Denied July 14, 1993.

Application to Transfer Denied Aug. 17, 1993.

Henry B. Robertson, St. Louis, for plaintiff/appellant.

Ben Ely, Jr., Cheryl A. Callis, Kortenhof & Ely, St. Louis, for defendant/respondent.

AHRENS, Presiding Judge.

Plaintiff, Nancy Lewis, ¹ appeals from a summary judgment in favor of defendant, State Farm Mutual Automobile Insurance Company (State Farm), in plaintiff's suit for underinsured motorist benefits. We affirm.

The parties stipulated to the following facts. ² On January 19, 1988, plaintiff was a passenger in a vehicle driven by Guy Lewis. The Lewis vehicle was involved in an accident with a vehicle driven by Deborah Weber. ³ Plaintiff was injured in the collision. At the time of the collision, Guy Lewis carried an insurance policy with a liability limit of $50,000.00 per person for personal injury; plaintiff settled with Guy Lewis' liability insurance carrier for the full $50,000.00 policy limit. Deborah Weber carried an insurance policy with a liability limit of $100,000.00 per person for personal injury at the time of the collision; plaintiff settled with Deborah Weber's insurance carrier for $50,000.00.

At the time of the collision, plaintiff carried an insurance policy with State Farm which provided for underinsured motorist benefits with limits of $25,000.00 for each person and $50,000.00 for each accident. The policy contained the following language:

We will pay damages for bodily injury an insured is legally entitled to collect from the owner or driver of an underinsured motor vehicle. The bodily injury must be caused by accident arising out of the operation, maintenance or use of an underinsured motor vehicle.

THERE IS NO COVERAGE UNTIL THE LIMITS OF LIABILITY OF ALL BODILY INJURY LIABILITY BONDS AND POLICIES THAT APPLY HAVE BEEN USED UP BY PAYMENT OF JUDGMENTS OR SETTLEMENTS.

(Emphasis original).

After plaintiff settled with Guy Lewis' and Deborah Weber's liability carriers, plaintiff filed suit against State Farm for underinsured motorist benefits. State Farm raised the "exhaustion" clause as an affirmative defense and as a basis for summary judgment. The insurer claimed plaintiff was not entitled to underinsured motorist benefits because she had not "used up" all bodily injury liability policies that applied to the accident and had settled with one of the tortfeasors, Deborah Weber, for less than the tortfeasor's insurance limits. The trial court granted State Farm's motion for summary judgment. On appeal, this court reversed and remanded without reaching the issue of whether the exhaustion clause applied. Lewis v. State Farm Auto. Ins. Co., 833 S.W.2d 22 (Mo.App.1992). After remand, State Farm filed its second amended motion for summary judgment, which the trial court sustained on August 20, 1992. Plaintiff timely appealed.

On an appeal from summary judgment, we review the record in the light most favorable to the party against whom judgment was entered. ITT Commercial Fin. Corp. v. Mid-America Marine Supply Corp., 854 S.W.2d 371 at 376 (Mo. banc 1993); Krombach v. Mayflower Ins. Co., Ltd., 785 S.W.2d 728, 729 (Mo.App.1990).

In her sole point, plaintiff asserts she has fulfilled the exhaustion requirement of the policy by recovering the liability limits of the only bodily injury policy that "applies," the policy of Guy Lewis, since she is proceeding only against him. Plaintiff further claims that if there is other applicable insurance, it has been "used up" by settlement of plaintiff's claim against Deborah Weber, even if the settlement amount was less than the policy limit. We disagree.

This court has recently construed an identical underinsured motorist provision in State ex rel. Sago v. O'Brien, 827 S.W.2d 754 (Mo.App.1992). In Sago, we found that under the terms of the insurance contract, the insurer is obligated to pay damages only after the insured demonstrates (1) he or she has received bodily injuries; (2) the injuries occurred as a result of an incident involving an underinsured vehicle; and (3) he or she is "legally entitled" to collect from the owner of the underinsured vehicle. Id. at 755. For an insured to be legally entitled to collect, there must be a prior, judicially enforceable determination of liability and damages. Id. Further, the conditions for underinsured motorist coverage are only met if such damages "exceed the limits of the existing liability coverages." Id. (Emphasis added). We read this interpretation to condition an insured's coverage and recovery on the exhaustion of the limits of all bodily injury policies in existence at the time of the collision.

Plaintiff argues the exhaustion clause applies to the "underinsured motor vehicle" referenced in the paragraph immediately preceding the exhaustion provision, and that she therefore fulfilled the exhaustion requirement by recovering the limits of liability of Guy Lewis' policy. Alternatively, plaintiff claims that what policies "apply" is ambiguous, and there is no occasion to consider the other alleged tortfeasor's liability since she is proceeding only against Guy Lewis. Such constructions, however, ignore the plain language of the policy provision, which conditions coverage on the exhaustion of the "limits of liability of all bodily injury liability bonds and policies that apply by payment of judgments or settlements." (Emphasis added). Such constructions also ignore the requirement that to effectuate underinsured motorist coverage, there must be a prior determination of damages which "exceed the limits of the existing liability coverages." See id. Nothing in the contract language supports plaintiff's contention that the exhaustion provision applies only to one...