Mercury Ins. Co. v. Vanwanseele-Walker

• Decision Date: 10 January 1996
• Docket Number: No. D019836,VANWANSEELE-WALKER,D019836
• Court: California Court of Appeals Court of Appeals
• Parties: , 96 Cal. Daily Op. Serv. 285, 96 Daily Journal D.A.R. 395 MERCURY INSURANCE COMPANY, Plaintiff and Respondent, v. Deborah A.et al., Defendants and Appellants.

Page 28

49 Cal.Rptr.2d 28

41 Cal.App.4th 1093, 96 Cal. Daily Op. Serv. 285,

96 Daily Journal D.A.R. 395

MERCURY INSURANCE COMPANY, Plaintiff and Respondent, v. Deborah A. VANWANSEELE-WALKER et al., Defendants and Appellants.

No. D019836.

Court of Appeal, Fourth District, Division 1, California.

Jan. 10, 1996.

Review Denied May 1, 1996.

Casey, Gerry, Casey, Westbrook, Reed & Schenk, Robert J. Francavilla and Bonnie E. Kane, San Diego, for Defendants and Appellants.

Kinkle, Rodiger & Spriggs and Guillermo W. Schnaider, Los Angeles, for Plaintiff and Respondent.

HALLER, Associate Justice.

A passenger is fatally injured in a single vehicle accident. The passenger's heirs recover money from the negligent driver's insurer and from the car manufacturer. The negligent driver's insurance policy limits are less than the passenger's underinsurance motorist policy limits. Must the heirs' recovery under the passenger's underinsurance policy be offset by the amount received from the car manufacturer? As we shall explain, the answer clearly mandated by Insurance Code section 11580.2, subdivision (p)(4) ¹ is that the insurance benefits are reduced by the amount received from the car manufacturer.

FACTS

The facts are undisputed. Michael Walker was a passenger in a Toyota owned and driven by Kevin Rausis. Walker and two other passengers were killed when the Toyota was involved in a single vehicle accident.

When the accident occurred, Walker had an automobile insurance policy with Mercury Insurance Company (Mercury), providing him with underinsured bodily injury coverage of $100,000 per person and $300,000 per accident. Rausis had an automobile insurance policy with California Casualty with bodily injury limits of $30,000 per person and $60,000 per accident.

Walker's wife and two children ² (appellants) suffered wrongful death damages in excess of $1,000,000. Appellants brought a wrongful death action against Rausis and Toyota. Appellants settled the lawsuit against both parties. Toyota paid appellants $466,666.67 in settlement of appellants' products liability claims. California Casualty, on behalf of Rausis, settled with appellants for $25,000. The balance of California Casualty's policy limits was paid to the heirs of the other passengers who died in the accident.

Mercury brought an action against appellants, seeking a declaration it did not owe any underinsured motorist benefits under Walker's policy because appellants had already received more than the underinsured policy limits ($100,000) from responsible parties. The trial court agreed and ruled that Mercury was not obligated to pay any underinsured motorist benefits to appellants.

Appellants contend the court erred in determining the benefits to which they were entitled under Walker's underinsurance policy must be offset by the amount they received from Toyota. For the reasons explained below, we reject appellants' contention and affirm the judgment.

DISCUSSION

Scope of Review

Generally, the rights of the parties to an insurance dispute are determined by reference to the terms of the insurance policy. Here, the relevant insurance policy provisions are essentially identical to the provisions of section 11580.2(p) ³, which set forth rules and procedures governing underinsurance motor vehicle coverage. Thus, both parties agree their dispute should be resolved by reference to the statutory provisions. (See Hartford Fire Ins. Co. v. Macri (1992) 4 Cal.4th 318, 324, 14 Cal.Rptr.2d 813, 842 P.2d 112 (Macri ).)

Moreover, because the trial court made its determination by applying undisputed facts to the applicable law, the issue is subject to a de novo appellate review. (Rudd v. California Casualty Gen. Ins. Co. (1990) 219 Cal.App.3d 948, 951-952, 268 Cal.Rptr. 624.)

How Underinsurance Coverage Works

Section 11580.2(p) contains seven separate subsections governing underinsured motorist coverage. Under the statutory scheme, whether underinsurance coverage is triggered depends on the relationship between the tortfeasor's insurance limits and the victim's underinsurance coverage limits. (§ 11580.2(p); Macri, supra, 4 Cal.4th at p. 328, 14 Cal.Rptr.2d 813, 842 P.2d 112; Fagundes v. American Internat. Adjustment Co. (1992) 2 Cal.App.4th 1310, 1315, 3 Cal.Rptr.2d 763.) Underinsurance policy benefits are potentially available only when " 'the tortfeasor's liability policy is in an amount less than the underinsured motorist policy of the injured driver....' " (Macri, supra, 4 Cal.4th at p. 328, 14 Cal.Rptr.2d 813, 842 P.2d 112, quoting Schmidt, Interpreting the Recently Enacted California Underinsurance Provisions of the Uninsured Motorist Statute (1987) 14 Pepperdine L.Rev. 691, 694-695.) If the tortfeasor's coverage limits are lower than the victim's underinsurance policy limits, the insured is entitled, at most, to recover the difference between the two. (Ibid; see Quintano v. Mercury Casualty Company, supra, 11 Cal.4th 1049, 1056, 48 Cal.Rptr.2d 1, 906 P.2d 1057.)

Appellants concede the insurance benefits to which they are entitled from Mercury ($100,000) must be offset by the amount they received from Rausis ($25,000). Appellants do not agree, however, that the amount they received from Toyota should offset their insurance recovery. In addressing this assertion, we turn first to the relevant subdivision of section 11580.2: subdivision (p)(4).

Section 11580.2(p)(4)

Section 11580.2(p)(4) establishes the maximum amount for which an insurer must pay under an underinsured motorist policy. That code section states in relevant part:

"[T]he maximum liability of the insurer providing the underinsured motorist coverage shall not exceed the insured's underinsured motorist coverage limits, less the amount paid to the insured by or for any person or organization that may be held legally liable for the injury." (Italics added.)

Appellants concede Toyota is an "organization that may be held legally liable for the injury." Thus, under the plain words of the statute, Mercury's maximum liability "shall not exceed" Walker's underinsurance coverage limits ($100,000) less amounts paid by Toyota ($466,666.67). Since $466,666.67 is more than $100,000, appellants are not entitled to any payment from Mercury.

Appellants nonetheless maintain amounts received from Toyota should not be used as an offset because the result is contrary to the "fundamental" purpose of the underinsurance scheme, which is "to provide the insured with the same insurance protections he would have enjoyed if the adverse driver had been properly insured." (Rudd v. California Casualty Gen. Ins. Co., supra, 219 Cal.App.3d at p. 954, 268 Cal.Rptr. 624; see also State Farm Mut. Auto. Ins. Co. v. Messinger (1991) 232 Cal.App.3d 508, 521, 283 Cal.Rptr. 493 [California's underinsurance coverage rules "focu[s] on placing the insured in the position he or she would have been in if the underinsured motorist had had liability coverage equal to the insured's underinsured motorist limits"].) As appellants point out, if Rausis had liability coverage equal to appellants' underinsured coverage, appellants would have been entitled to receive their share of the policy limits of that insurance plus recover additional damages from Toyota under a products liability theory.

While we agree section 11580.2(p)(4) does not place appellants in the same position in which they would have been had Rausis purchased coverage equal to their own, the result here is consistent with another fundamental principle underlying the underinsurance statute, which is to focus on the amount of the tortfeasor 's policy limits rather than on the damages suffered by the injured party. (Macri, supra, 4 Cal.4th at p. 328, 14 Cal.Rptr.2d 813, 842 P.2d 112; Fagundes v. American Internat. Adjustment Co., supra, 2 Cal.App.4th at p. 1315, 3 Cal.Rptr.2d 763.) Although other jurisdictions have adopted rules ensuring that those who purchase underinsurance coverage will be fully compensated, California's underinsured coverage "is not the equivalent of full excess coverage." (Macri, supra, 4 Cal.4th at p. 328, 14 Cal.Rptr.2d 813, 842 P.2d 112.) " 'As the statutory scheme is designed, the underinsured motorist carrier gets a dollar-for-dollar credit for all payments by third party tortfeasors to the insureds, whether the insureds are made whole or not. In other words, a carrier providing underinsured motorist benefits never pays the full amount, only the difference between the policy limits and all contributions by all tortfeasors to all insureds.' " (Ibid., second italics added, quoting Malone v. Nationwide Mutual Ins. Co. (1989) 215 Cal.App.3d 275, 277, 263 Cal.Rptr. 499; accord Fagundes v. American Internat. Adjustment Co., supra, 2 Cal.App.4th at p. 1315, 3 Cal.Rptr.2d 763; see also Quintano v. Mercury Casualty Company, supra, 11 Cal.4th at p. 1056, 48 Cal.Rptr.2d 1, 906 P.2d 1057.)

Moreover, the fact the Legislature intended to place an automobile accident victim who purchased underinsurance coverage in the same position as if the tortfeasor had purchased equivalent policy limits, does not necessarily mean the Legislature sought to achieve the same level of equality where the injured party receives additional payments from third parties. As Mercury asserts, there is nothing inconsistent in seeking to address a coverage gap and simultaneously specifying that third party payments are to be considered in determining whether a gap exists and the size of the gap. The Legislature could have legitimately decided that to the extent of payments from third party tortfeasors, underinsurance protection is not needed.

Further, appellants' legislative policy argument does not permit us to ignore the plain language of the statute. In interpreting the detailed provisions of section 11580.2, the courts have strictly adhered to the rule that where a statute is clear, it is improper to " 'interpret away clear language in favor of an ambiguity that does not exist.' [Citation]."...