Monteith v. Jefferson Ins. Co. of New York, 91-244

Decision Date23 October 1992
Docket NumberNo. 91-244,91-244
Citation618 A.2d 488,159 Vt. 378
PartiesJoseph MONTEITH v. JEFFERSON INSURANCE COMPANY OF NEW YORK and Peerless Insurance Company.
CourtVermont Supreme Court

Richard H. Saudek of Cheney, Brock & Saudek, P.C., Montpelier, for plaintiff-appellant.

Samuel Hoar, Jr. and Frederick S. Lane III of Dinse, Erdmann & Clapp, Burlington, for defendant-appellee Jefferson Ins. Co. of New York.

David L. Cleary and Ellen J. Abbott of David L. Cleary Associates, Rutland, for defendant-appellee Peerless Ins. Co.

Before GIBSON, DOOLEY, MORSE and JOHNSON, JJ., and PECK, J. (Ret.), Specially Assigned.

JOHNSON, Justice.

Plaintiff was injured when he was struck by an automobile while riding his motorcycle. He suffered total personal injury damages exceeding $200,000, and recovered only $100,000 from the insurer for the driver of the other vehicle, whose negligence caused the accident. He appeals from a trial court decision holding that two insurers with whom he had policies are not liable for his additional damages under policy provisions covering accidents with underinsured motorists. We reverse.

At the time of the accident, plaintiff had a policy with defendant Jefferson Insurance Company of New York covering his motorcycle and providing $100,000 in uninsured motorist/underinsured motorist (UM/UIM) coverage. Plaintiff also had a policy with defendant Peerless Insurance Company covering plaintiff's automobiles and providing $300,000 of UM/UIM coverage.

Plaintiff brought a declaratory judgment action, claiming that both Jefferson and Peerless were obligated under their respective policies to pay him the difference between the damages he suffered and the amount he recovered from the underinsured tortfeasor, up to the maximum amount of $400,000 available to him under the two policies.

Defendant Peerless moved for summary judgment on the grounds that plaintiff's policy contained an explicit provision excluding from coverage any injuries sustained while "occupying ... any motor vehicle owned by you ... which is not insured for coverage under this policy." Defendant Jefferson moved for summary judgment on the grounds that plaintiff was covered for only $100,000 under his policy with Jefferson, an amount already recovered by plaintiff from the tortfeasor, thus discharging Jefferson's duty to plaintiff. Jefferson further argued that its policy could not be "stacked" with the Peerless policy to create a total available coverage amount of $400,000, because the exclusion provision of the Peerless policy barred any recovery against Peerless.

In opposing defendants' joint motion for summary judgment, plaintiff argued that the tortfeasor was underinsured under 23 V.S.A. § 941(f), thus allowing a claim against Peerless, whose $300,000 UIM limit was clearly in excess of the $100,000 maximum recovery limit of the tortfeasor's insurer, as well as against Jefferson, since the total underinsurance coverage available under the two policies, pursuant to § 941(f), was $400,000. Plaintiff claimed that he should be permitted to "stack" the UIM coverage of the two policies at issue.

The trial court granted Peerless's summary judgment motion, holding that the exclusion provision contained in its policy barred recovery for injuries suffered by plaintiff because his motorcycle was a motor vehicle owned by plaintiff and not covered under the Peerless policy. The court also granted Jefferson's summary judgment motion, holding that its UIM coverage limit of $100,000 matched the $100,000 recovery limit of the tortfeasor's insurance, thus eliminating any claim of underinsurance. The present appeal followed.

I.

The focus of dispute with regard to the Peerless policy is a clause providing in pertinent part:

We do not provide Uninsured Motorists Coverage 1 for, ... bodily injury sustained by any person:

1. While occupying ... any motor vehicle owned by you ... which is not insured for this coverage under this policy.

Plaintiff does not dispute that this clause excludes coverage, but argues that it violates Vermont law. We agree. 23 V.S.A. § 941(a) (emphasis supplied) provides, in pertinent part, that:

No policy insuring against liability arising out of the ownership, maintenance or use of any motor vehicle may be delivered or issued for delivery in this state with respect to any motor vehicle registered or principally garaged in this state unless coverage is provided therein, or supplemental thereto, for the protection of persons insured thereunder who are legally entitled to recover damages, from owners or operators of uninsured, underinsured or hit-and-run motor vehicles, for bodily injury, sickness or disease, including death, and for property damages resulting from the ownership, maintenance or use of such uninsured, underinsured or hit-and-run motor vehicle.

Referring to § 941(a), we stated in Sanders v. St. Paul Mercury Insurance Co., 148 Vt. 496, 498-99, 536 A.2d 914, 915-16 (1987) (citations omitted) (emphasis supplied):

This statute protects insured motorists from uninsured, financially irresponsible drivers. Recovery is not limited to situations involving the motor vehicle of the insured. Though no cases have reached this Court on the question, the language of § 941 extends coverage to insured persons wherever they may be, provided that they are injured by an uninsured motorist, and that is the interpretation of similar statutes elsewhere. No policy can be issued which reduces the amount of coverage mandated by statute.

The essence of UM/UIM coverage under § 941 is its portability. The statute does not allow insurers to condition coverage on the location of the insured nor the insured's status as a motorist, a passenger in a private or public vehicle, or as a pedestrian. In the language of § 941(a), UM coverage is designed "for the protection of persons," not vehicles. This reading is consistent with the basic philosophy of the statute, which is to put the insured in the same position as if the negligent driver had been as responsible as the insured in obtaining liability insurance. As we said in Muir v. Hartford Accident & Indemnity Co., 147 Vt. 590, 593, 522 A.2d 236, 238 (1987), "UM coverage protects those insured 'against the unfortunate hazard presented by an injury inflicted in an accident with an irresponsible operator who is uninsured or has fled the scene.' " (quoting Rhault v. Tsagarakos, 361 F.Supp. 202, 205 (D.Vt.1973)).

Had plaintiff in this case been a pedestrian, and had the driver causing the accident been uninsured, there would be no question that plaintiff could have obtained $300,000 in UM recovery from Peerless, assuming damages in that amount. Similarly, if plaintiff had been a passenger in an uninsured vehicle in collision with a negligent driver who was also uninsured, there would be no question about a UM recovery from Peerless, up to $300,000. It follows that Peerless cannot deny UM coverage where an accident occurs while the insured is driving a vehicle owned by the insured but not insured by Peerless. Allowing that kind of exclusion would defeat the broad, remedial purpose of UM coverage just as surely as if the company attempted to deny coverage if the insured were walking down the street or riding in a bus when an accident occurred. To the extent a motorist is underinsured, the same principle applies.

Courts in other jurisdictions are divided on the validity of an exclusion to coverage where a named insured operates a vehicle owned but not insured under the policy, but many courts have held that such clauses violate state uninsured motorists statutes and are therefore invalid. See, e.g., Mullis v. State Farm Mutual Auto. Ins. Co., 252 So.2d 229, 237-38 (Fla.1971); Barnett v. Crosby, 5 Kan.App.2d 98, 99-100, 612 P.2d 1250, 1252 (1980); Earl v. Commercial Union Ins. Co., 391 So.2d 934, 938-39 (La.Ct.App.1980); Nygaard v. State Farm Mutual Auto. Ins. Co., 301 Minn. 10, 18-19, 221 N.W.2d 151, 157 (1974); Jacobson v. Implement Dealers Mutual Ins. Co., 196 Mont. 542, 545-47, 640 P.2d 908, 910-12 (1982); Beek v. Ohio Casualty Ins. Co., 135 N.J.Super. 1, 5-6, 342 A.2d 547, 549 (App.Div.1975), aff'd, 73 N.J. 185, 373 A.2d 654 (1977), cited with approval in Sanders, 148 Vt. at 503, 536 A.2d at 918. But see Corso v. State Farm Mutual Auto. Ins. Co., 668 F.Supp. 364, 372-73 (D.Del.1987), aff'd, 838 F.2d 1205 (3d Cir.1988); Brackett v. Middlesex Ins. Co., 486 A.2d 1188, 1190-91 (Me.1985).

Peerless argues that the language of 23 V.S.A. § 800(a), that "[n]o owner or operator of a motor vehicle ... shall operate ... the vehicle" without required insurance, requires each vehicle owned by an insured to have its own insurance. This, in turn, limits UM/UIM coverage to each vehicle's individual policy. To hold otherwise, Peerless argues, could result in coverage of an uninsured vehicle, contrary to the basic intent of the Financial Responsibility and Insurance statute (23 V.S.A. ch. 11).

We disagree. The point is not that Peerless is made to cover an uninsured vehicle under plaintiff's theory, but rather that it is barred from writing exceptions to a clear statutory requirement that it cover its insureds wherever they become victims of an uninsured or underinsured motorist. The same proposition was well stated by the court in Nygaard: "If our interpretation of the intent of the uninsured-motorist statute is correct, little room is left for an insurer unilaterally to narrow the geographic scope of the statutorily required coverage." 301 Minn. at 19, 221 N.W.2d at 157.

Peerless mistakenly relies on Sanders to support its argument. In Sanders we held that the insurer could write and enforce an intrapolicy stacking provision, but we did not extend our rationale to interpolicy stacking provisions. 148 Vt. at 503, 536 A.2d at 918. We thus distinguished between an insurer's power to define the scope of UM...

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