Omni Ins. Co. v. Foreman

• Decision Date: 11 May 2001
• Parties: OMNI INSURANCE COMPANY v. Jennifer B. FOREMAN.
• Court: Alabama Supreme Court

802 So.2d 195

OMNI INSURANCE COMPANY v. Jennifer B. FOREMAN.

1000148.

Supreme Court of Alabama.

May 11, 2001.

Cooper C. Thurber, William E. Shreve, Jr., and S. Wesley Pipes of Lyons, Pipes & Cook, P.C., Mobile, for appellant.

Wyman O. Gilmore, Jr., and Frederick P. Gilmore of Gilmore Law Office, Grove Hill, for appellee.

LYONS, Justice.

Omni Insurance Company appeals from the trial court's denial of its postjudgment motion for a judgment as a matter of law ("JML"), for a new trial, or to alter or amend a judgment entered on a jury verdict in favor of Jennifer B. Foreman. We affirm.

I. Underlying Facts and Course of the Proceedings

On May 22, 1998, at approximately 11:00 p.m., John Edward Brock was driving a pickup truck owned by his mother, Amy W. Quail, on Monroe County Road 27 west of Monroeville. He ran a stop sign at the intersection of County Road 27 and U.S. Highway 84; his vehicle collided with an automobile on Highway 84 driven by Jennifer B. Foreman, who was on her way home from her job in a clothing factory. John testified that he "wasn't paying attention to the road or [was] playing with the radio" and that when he looked up, he saw Foreman's automobile coming, but that it was too late to stop. Although John was only 17 years old, he had been drinking beer with friends, two of whom were passengers in his vehicle. Tests made after the accident revealed that John had a blood-alcohol level of .06%. He later pleaded guilty to DUI charges.

The impact of the collision caused Foreman's automobile to flip in the air and land on the opposite side of the highway. Various parts of Foreman's body were cut and bruised in the collision. She also suffered a torn meniscus in her left knee (the meniscus is the cartilage behind the kneecap). Foreman was transported by ambulance to Monroe County Hospital, where she was treated; she was released the following morning. She later had arthroscopic surgery on her left knee. Her medical bills totalled $7,769.03.

Foreman sued John and his mother, alleging that John had negligently or wantonly caused or allowed the vehicle owned by his mother to collide with Foreman's vehicle, thereby injuring her. John was insured under an automobile liability policy with limits of $50,000. Foreman and her husband were insured under three automobile liability policies with Omni Insurance Company. Each of those policies provided uninsured/underinsured-motorist ("UIM") coverage with limits of $20,000, for a total of $60,000 in UIM benefits available to Foreman and her husband. Foreman later amended her complaint to add Omni as a defendant and to state against that defendant a breach-of-contract claim. She sought to recover from Omni UIM benefits to which she contended she was entitled.

The trial court entered a summary judgment in favor of Amy Quall. John's insurer settled Foreman's claims against him for $42,500. Omni had advance notice of the settlement and consented to it. Foreman then proceeded against Omni alone. Her claim against Omni was tried before a jury.

Before the trial, Omni moved to strike Foreman's claim for punitive damages, arguing that permitting Foreman to seek punitive damages against her own UIM carrier would not serve the purposes for which punitive damages are allowed. Omni states in its brief that the trial court denied its motion to strike, but it explains in a footnote that "[t]he [trial] court never expressly ruled on [its] motion to strike, but it submitted Foreman's claim for punitive damages to the jury and thus implicitly denied the motion."

At trial, Omni moved for a JML at the close of Foreman's case and again at the close of all the evidence. In both motions, Omni argued that Foreman's complaint should be dismissed in its entirety because she had settled with John for less than the limits of his policy and thus had failed to exhaust the limits of John's liability coverage; that Foreman's claim for punitive damages should be dismissed because assessing punitive damages against her own insurance company would punish the company, not the tortfeasor; and that Foreman had not proved that John's actions were wanton. The trial court denied both motions.

The jury returned a verdict in favor of Foreman. The verdict form states:

"We the jury find for the Plaintiff, JENNIFER B. FOREMAN, and further find that the Plaintiff is `legally entitled to recover damages of John Brock' and find that he was guilty of:

"(choose one or both)

"(x) Negligence

"(x) Wantonness

"We the jury find that the Plaintiff, JENNIFER B. FOREMAN, is entitled to compensatory damages of $60,000 Dollars.

"We the jury, find by clear and convincing evidence that punitive damages should be awarded in the amount of $60,000 Dollars."

The trial court entered a judgment on the jury's verdict.

Omni then filed a postjudgment motion in which, among other things, it renewed its motion for a JML and also sought a reduction of the $120,000 verdict by $50,000, the limits of Brock's liability coverage. The trial court reduced the verdict from $120,000 to $70,000, and it then further reduced the verdict to $60,000, the limits of Foreman's policies with Omni. The trial court otherwise denied Omni's postjudgment motion.

II. Issues

Omni raises two issues on appeal. First, Omni asks us to hold that the terms of its policy do not provide, and that Alabama's UIM statute, § 32-7-23, Ala.Code 1975, does not require, coverage for punitive damages. Second, Omni asks us to hold that Foreman forfeited any benefits under her UIM coverage when she settled with John for less than his policy limits, thereby failing to exhaust his liability coverage. We address these issues in reverse order, because, if we agreed with Omni on the second issue, it would be unnecessary to reach the first issue.

III. Forfeiture of UIM Benefits by Accepting Less Than the Policy Limits

Omni contends that Foreman's acceptance of a settlement from John in an amount less than the limits of John's liability coverage prevents her from recovering under Omni's UIM coverage. In State Farm Mutual Automobile Insurance Co. v. Scott, 707 So.2d 238 (Ala.Civ.App.1997), the Court of Civil Appeals held that an injured person who accepts from a tortfeasor driver's automobile liability insurer an amount that is less than the limits of the driver's coverage forgoes any right under Alabama's UIM statute to collect the shortfall, that is, the difference between the amount of the settlement and the amount of available coverage. However, Scott recognizes that acceptance of an amount less than the available coverage does not defeat the right of an injured person to recover any damages to which he or she might be entitled that are in excess of the tortfeasor's limits of coverage. In Scott, the Court of Civil Appeals recognized a split of authority among the courts that had considered the question and recognized that its holding was consistent with the majority view. Id., 707 So.2d at 243 n. 6.

Omni acknowledges that Scott stands for a result contrary to that which it urges in this case. However, Omni maintains that this Court overruled Scott sub silentio in Knowles v. State Farm Mutual Automobile Insurance Co., 781 So.2d 211 (Ala. 2000). In Knowles, a plurality of this Court stated that the UIM carrier had no obligation where the plaintiff had accepted $32,500 from the tortfeasor's liability-insurance carrier in a setting where the liability limits under the tortfeasor's policy were $1 million. We choose to read the Knowles plurality opinion as consistent with Scott. Had the plaintiff in Knowles offered substantial evidence that his damages exceeded $1 million, and had this Court concluded that the UIM carrier had no obligation under those facts, then we would have to reconcile Knowles and Scott. However, because Knowles is so readily distinguishable from this case and from Scott, it is unnecessary for us to attempt to harmonize the rule announced in Scott. We find Scott to be a sound decision, and we agree with its reasoning. We therefore hold that Foreman did not forfeit UIM benefits when she accepted a settlement from John in an amount less than the limits of his liability coverage. The trial court properly declined to enter a JML on that basis.

IV. Availability of Punitive Damages Under UIM Coverage

Omni asks us to construe Alabama's UIM statute so as to preclude the recovery of punitive damages. The UIM provision in the policy issued to Foreman provides:

"UNINSURED MOTORISTS COVERAGE

"We will pay damages which an insured person is legally entitled to recover from the owner or operator of an uninsured motor vehicle because of bodily injury sustained by an insured person, caused by accident and arising out of the ownership, maintenance or use of the uninsured motor vehicle."

The policy includes in its definition of an "uninsured motor vehicle" a motor vehicle "to which a bodily injury liability bond or policy applies at the time of the accident but its limit for bodily injury liability is not enough to pay the full amount an insured person is entitled to recover." Section 32-7-23(a) states that no policy of automobile liability insurance will be delivered or issued for delivery in Alabama "unless coverage is provided therein ... for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured motor vehicles because of bodily injury, sickness or disease, including death, resulting therefrom." The statute further provides for coverage for the insured when "[t]he sum of the limits of liability under all bodily injury liability bonds and insurance policies available to an injured person after an accident is less than the damages which the injured person is legally entitled to recover." § 32-7-23(b)(4). We read the governing statutory law into the insurance policy. See Higgins v. Nationwide Mut. Ins. Co., 291 Ala. 462, 465, 282 So.2d 301, 303 (1973) (dealing with the uninsured-motorist s...