Mid-Century Ins. Co. TX v. Kidd, 070199

• Decision Date: 01 July 1999
• Docket Number: MID-CENTURY
• Citation: 997 S.W.2d 265
• Parties: (Tex. 1999) INSURANCE COMPANY OF TEXAS, PETITIONER v. JACK KIDD, RESPONDENT NATIONWIDE MUTUAL INSURANCE COMPANY, PETITIONER v. CATHERINE GERLICH, RESPONDENT NO. 98-0800 NO. 98-1024
• Court: Texas Supreme Court

Page 265

997 S.W.2d 265 (Tex. 1999)

MID-CENTURY INSURANCE COMPANY OF TEXAS, PETITIONER v. JACK KIDD, RESPONDENT NATIONWIDE MUTUAL INSURANCE COMPANY, PETITIONER v. CATHERINE GERLICH, RESPONDENT

NO. 98-0800

NO. 98-1024

IN THE SUPREME COURT OF TEXAS

Argued March 4, 1999

Decided July 1, 1999

ON PETITION FOR REVIEW FROM THE COURT OF APPEALS FOR THE FOURTH DISTRICT OF TEXAS

[Copyrighted Material Omitted] JUSTICE GONZALES delivered the opinion for a unanimous Court.

These two cases present a common question: can an insured recover the same loss under both the uninsured/underinsured motorist (UM/UIM) and personal injury protections (PIP) of a standard automobile insurance policy? Two courts of appeals answered yes and refused to enforce a policy provision barring duplication of UM and PIP benefits that would result in double recovery.¹ We hold that a nonduplication-of-PIP-benefits provision in an automobile insurance policy is valid and enforceable. Accordingly, we reverse the judgments of the courts of appeals and remand these cases to their respective trial courts for further proceedings.

Jack Kidd was injured in a vehicle collision caused by an uninsured motorist running a red light. Mid-Century Insurance Company, Kidd's insurance carrier, paid Kidd $10,000 in PIP benefits. After settlement negotiations for UM benefits broke down, Kidd sued Mid-Century. A jury found that Kidd suffered $13,000 in past medical expenses and no other damages. Mid-Century moved for a judgment of $2,070 - Kidd's $13,000 in damages less $10,000 paid under PIP and $930 paid to another doctor. The trial court granted the $930 offset but denied the $10,000 PIP offset and rendered a judgment for $12,070 plus pre- and post-judgment interest. The court of appeals affirmed.²

Catherine Gerlich was also injured in a vehicle collision caused by an uninsured motorist. Nationwide Mutual Insurance Company, Gerlich's insurance carrier, paid Gerlich $2,208.72 in PIP benefits and orally agreed to settle her UM claim for $3,500. But Nationwide tendered Gerlich only $1,291.28, asserting that it could offset the $3,500 settlement amount by the $2,208.72 it had paid in PIP benefits. Gerlich sued Nationwide for breach of contract. Following a bench trial on stipulated facts, the trial court rendered judgment for Gerlich, holding that Nationwide was not entitled to a PIP credit. A divided court of appeals, sitting en banc, affirmed.³

In affirming the trial courts' judgments, the Kidd opinion and the Gerlich plurality opinion concluded that the following UM/UIM provision, found in all standard Texas motor vehicle policies, was unenforceable:

In order to avoid insurance benefits payments in excess of actual damages sustained, subject only to the limits set out in the Declarations and other applicable provisions of this coverage, we will pay all covered damages not paid or payable under any workers' compensation law, disability benefits law, any similar law, auto medical expense coverage or Personal Injury Protection Coverage.

Both courts held that this offset was inconsistent with the UM/UIM and PIP statutes⁴ and violated our holding in Dabney v. Home Insurance Co.⁵ In contrast, three other courts of appeals, recently pressed with the same arguments, have upheld the same offset provision.⁶ We granted the petitions in Gerlich and Kidd to resolve this conflict among the courts of appeals.

I

Kidd and Gerlich contend that the PIP offset provision contravenes the text, purpose, and intent of the UM and PIP statutes. We begin our analysis with an overview of those statutes.

In 1967, the Legislature enacted Insurance Code article 5.06-1 to mandate that all automobile insurance policies provide uninsured motorist protection.⁷ The Legislature amended the statute in 1977 to also require underinsured motorist protection.⁸ Under the statute, UM/UIM coverage must give insureds limited protection from bodily injuries and property damage caused by financially irresponsible motorists:

[C]overage is provided . . . for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured or underinsured motor vehicles because of bodily injury, sickness, or disease, including death, or property damage resulting therefrom.⁹

Currently, the statute sets the minimum limits of UM/UIM liability at $20,000 per person and $40,000 per accident for bodily injury and at $15,000 per accident for property damage.¹⁰ An insured may decline UM/UIM coverage and not have to pay premiums for it, but must do so in writing.¹¹

In 1973, the Legislature enacted Insurance Code article 5.06-3 to require all automobile liability insurance policies to offer PIP coverage.¹² PIP gives a minimum of $2500 coverage to any covered person - the insured, members of the insured's household, and occupants of the insured's vehicle - for reasonable medical expenses and lost wages that result from an accident.¹³ PIP coverage, unlike UM/UIM coverage, is a form of no-fault insurance:

The benefits required by this Act shall be payable without regard to the fault or non-fault of the named insured or the recipient in causing or contributing to the accident, and without regard to any collateral source of medical, hospital, or wage continuation benefits.¹⁴

PIP's limitation to medical expenses and lost wages, along with its collateral-source and no-fault features, are designed to simplify and hasten claim resolution and payment.

II

Over the years, questions have been raised about whether an insured may aggregate or "stack" coverages under different provisions of the same policy or under multiple policies. The Texas Department of Insurance [TDI] has approved various provisions to offset amounts recoverable under one policy or policy provision by amounts received under other policies or policy provisions. This Court has previously struck down many offset provisions for being inconsistent with the express requirements and purposes of the UM/UIM statute. But none of these cases involved the exact question here.

In American Liberty Insurance Co. v. Ranzau,¹⁵ for example, we struck down an "other insurance" clause that prevented claimants from stacking coverages under multiple policies. The Ranzaus' daughter suffered $50,000 in damages after an insured vehicle in which she was a passenger was struck by an uninsured motorist. The Ranzaus recovered $10,000 in UM benefits from the vehicle owner's insurer and sought to recover $10,000 more in UM benefits under their own policy. The Ranzaus' insurer invoked the policy's "other insurance" clause, which purported to reduce its own policy limits by the policy limits of any other available insurance policy, to deny any recovery. We held that this was invalid. "[T]o permit one policy, or the other, to be reduced or rendered ineffective by a liability limiting clause would be to frustrate the insurance benefits which the statute sought to guarantee and which were purchased by the respective insureds."¹⁶

In American Motorists Insurance Co. v. Briggs,¹⁷ we again rebuffed an insurer's attempt to enforce the "other insurance" clause struck down in Ranzau. The Briggs were riding in their employer's truck when it was struck by a hit-and-run driver. Thomas and JoJean Briggs sustained $11,230.39 and $6,115.95 in damages, respectively. They each settled with the employer's insurer for $5,750 and sought to recover the difference under the UM provisions of their own policy. American Motorists acknowledged that under Ranzau it could not escape liability altogether - that is, by reducing its own policy limits by an amount equal to the employer's policy limits. But it argued that Ranzau did not invalidate language in the "other insurance" clause stating that "[t]he insurance . . . shall apply only as excess insurance over any other similar insurance available to such insured and applicable to such automobile as primary insurance."¹⁸ Under this language, American Motorists argued that it was liable for sums only in excess of $10,000 - the employer's policy limits - even though the Briggs settled their claims with the employer's insurer for less than the policy limits. We rejected this argument, holding that the UM statute "preclud[ed] the use of 'other insurance' clauses to limit the recovery of actual damages caused by an uninsured motorist."¹⁹ We concluded that "[i]f coverage exists under two or more policies, liability on the policies is joint and several to the extent of plaintiff's actual damages, subject to the qualification that no insurer may be required to pay in excess of its policy limits."²⁰

In Westchester Fire Insurance Co. v. Tucker,²¹ we held that an offset provision could not be used to reduce the UM policy limits by amounts paid or payable under medical expense coverage. The offset provision stated that "[t]he company shall not be obligated to pay under this [UM] 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 [the part of the policy relating to medical expense coverage]."²² We held that the policy provision was "ineffective to the extent that it reduces the uninsured motorist protection below the minimum limits required by" the UM statute.²³ Therefore, we allowed an accident victim who suffered more than $36,000 in damages to stack her policy's UM and medical expense coverages to obtain a total recovery of $16,000.²⁴

All three cases - Ranzau, Briggs, and Tucker - stand for the proposition that offsets in the UM/UIM section of the policy are ineffective to the extent that they prevent recovery of actual damages or reduce UM protection below the minimum limits required by the UM statute. But none of these cases endorse the proposition advanced by Kidd and Gerlich that offsets are ineffective even if they prevent only excess recoveries. On the contrary,...