Pena v. Viking Ins. Co. of Wis.

• Decision Date: 01 February 2022
• Docket Number: Docket No. 48379
• Citation: 503 P.3d 201
• Parties: Erick PENA, Plaintiff-Appellant, v. VIKING INSURANCE COMPANY OF WISCONSIN, Defendant-Respondent.
• Court: Idaho Supreme Court

503 P.3d 201

Erick PENA, Plaintiff-Appellant,

v.VIKING INSURANCE COMPANY OF WISCONSIN, Defendant-Respondent.

Docket No. 48379

Supreme Court of Idaho, Boise, June 2021 Term.

Filed: February 1, 2022

Gordon Law Firm, Inc., Idaho Falls, attorneys for Appellant. Brent Gordon argued.

Betts, Patterson & Mines, P.S., Seattle, Washington, attorneys for Respondents. Matthew Munson argued.

BEVAN, Chief Justice.

This appeal arises from a dispute regarding underinsured motorist ("UIM") coverage. Erick Pena filed a declaratory action against Viking Insurance Company of Wisconsin ("Viking"), alleging the automobile insurance policy he purchased was illegal because it provided illusory minimum limits of UIM coverage. Pena then filed a motion for summary judgment asking the court to declare that the UIM coverage was illusory. Viking filed a cross-motion for summary judgment, arguing that the policy was not illusory because it provided tangible benefits to a group of insured persons and that the offset provision in the policy complied with Idaho public policy. The district court granted Viking's motion for summary judgment. Pena timely appealed. We reverse the district court's judgment based on our determination that Viking's minimum limits UIM policy offered illusory coverage.

I. FACTUAL AND PROCEDURAL BACKGROUND

Pena contracted to purchase automobile insurance from Viking (the "Policy"). Pena was covered for bodily injury liability insurance as well as uninsured motorist ("UM") coverage. He also elected to purchase UIM coverage. Pena chose limits of $25,000 per person and $50,000 per accident for each of the three coverages, paying a separate premium for each. Pena also purchased medical coverage that paid for certain medical and related benefits without regard to fault.

In September 2016, Pena was injured in a car accident caused by Dominic Baker in a vehicle owned by Renae Baker. Renae Baker was insured by State Farm under a policy with $25,000 of liability insurance, which paid its policy limits to Pena. Viking also paid its policy limit of $5,000 for Pena's medical care.

In March 2018, Pena presented a UIM claim to Viking, stating his damages exceeded the $25,000 he received from State Farm. Viking denied Pena's claim, asserting that Baker's vehicle was not an underinsured motor vehicle as defined by the Policy and that Viking had a right to offset Pena's recovery of $25,000 from Baker against the $25,000 underinsured motorist limits provided by the Policy.

The relevant policy provisions on which Viking relied in denying Pena's claim are set forth in an endorsement titled "UNDERINSURED MOTORISTS COVERAGE ENDORSEMENT – IDAHO " (bold and capitalization in original) which provides:

We will pay for damages for bodily injury which an insured person is legally entitled to recover from the owner or operator of an underinsured motor vehicle . The bodily injury must be caused by a car accident and result from the ownership, upkeep or use of an underinsured motor vehicle .¹

The endorsement defines "Underinsured motor vehicle " as "A motor vehicle to which a bodily injury liability bond or policy applies at the time of the car accident providing bodily injury liability limits less than the limit of liability for this coverage." The Policy then provides that an "Underinsured motor vehicle " does not mean a vehicle:

(A) Insured by a bodily injury liability bond or policy at the time of the car accident but which provides bodily injury limits of liability less than the minimum bodily injury liability limits that comply with the financial responsibility law of the policy state .

....

The endorsement also explains the amounts payable under UIM coverage:

Limits of Liability

(1) The bodily injury limit for "each person" is the maximum limit for all claims by all persons for damages from bodily injury to any one person for damages from bodily injury to any one person, including all spousal claims, claims for care and loss of services, loss of companionship, loss of society and loss of consortium.

....

Any amounts payable under this part will be reduced by the following:

(1) Any payments made by or on behalf of the owner or operator of the underinsured motor vehicle . Also any payment made by or on behalf of any other person or organization which may be legally liable.

(2) Any payments made or payable because of bodily injury under any workers’ compensation law or disability benefits law or similar law. ....

No one will be entitled to duplicate payments under this policy for the same elements of damages.

We will reduce the insured person's total damages by any amount available to that insured person , under any bodily injury liability bonds or policies applicable to the underinsured motor vehicle that such insured person did not recover as a result of a settlement between that insured person and the insurer of the underinsured motor vehicle . However, any reduction of the insured person's total damages will not reduce the limit of liability for this coverage. This reduction shall not apply if we advance payment to the insured person in an amount equal to the tentative settlement with the insurer of the underinsured motor vehicle .

On February 13, 2020, Pena filed a declaratory action against Viking, alleging the UIM coverage under the Policy was illusory. On March 9, 2020, Pena filed a motion for summary judgment and memorandum in support, asking the district court to declare: (1) the Policy provided illusory UIM coverage based on its definition of an underinsured motor vehicle and (2) the Policy provided illusory UIM coverage based on offsets that eliminated UIM coverage. Viking opposed Pena's motion and filed its own cross-motion for summary judgment. Viking argued that the Policy complied with Idaho's UIM statute, as well as regulations and case law based on the statute. Viking claimed Pena was seeking to obtain excess UIM coverage that the Idaho Legislature did not mandate and for which he did not pay a premium.

On September 2, 2020, the district court entered a memorandum decision and order denying Pena's motion for summary judgment and granting Viking's motion for summary judgment. The district court first held that although the language in the Policy was deficient and different from the definition adopted in Idaho Code section 41-2503(2), the Policy would not be illusory if the district court replaced the policy language with the statutory definition of an underinsured motor vehicle. The court then held that the Policy was not illusory because it had an identifiable group who could collect UIM benefits. Applying the relevant statutes and taking the legislative history recited by this Court in Wood v. Farmers Insurance Co. of Idaho , 166 Idaho 43, 454 P.3d 1126 (2019), into consideration, the district court found that the offset provision in the Policy was neither illusory nor contradictory to public policy. Thus, the district court entered a judgment dismissing Pena's complaint with prejudice. Pena filed a timely notice of appeal.

II. ISSUES ON APPEAL

1. Whether Viking offered illusory UIM coverage based on the definition of "underinsured motor vehicle."

2. Whether the limits of UIM coverage can contain a provision offsetting recovery below the $25,000 Idaho law requires.

III. STANDARD OF REVIEW

Whether an insurance contract violates public policy presents a question of law for this Court to resolve. Eastman v. Farmers Ins. Co ., 164 Idaho 10, 14, 423 P.3d 431, 435 (2018) (citing Quiring v. Quiring , 130 Idaho 560, 566, 944 P.2d 695, 701 (1997) ).

IV. ANALYSIS

A. The Policy provides illusory coverage.

Pena argues that Viking's policy is illegal and void as against public policy because it provides the illusion of UIM coverage through the declaration and payment of premiums for UIM coverage and then, through unambiguous definitions and exclusions, takes away all UIM coverage.

Idaho Code section 41-2502 governs uninsured motorist and underinsured motorist coverage for automobile insurance. In 2008, the Idaho Legislature amended section 41-2502 to require automobile insurers to offer UIM coverage of at least $25,000, at extra cost to the insured, when selling liability policies. Wood v. Farmers Ins. Co. of Idaho , 166 Idaho 43, 45, 454 P.3d 1126, 1128 (2019) (citing Act of March 5, 2008, ch. 69, § 1, 2008 Idaho Sess. Laws 183, 183). This Court interpreted the legislature's intention as protecting Idaho's citizens from drivers carrying policies at or above the statutorily required policy levels but who have insurance insufficient to compensate their tort victims. Id. (citing Hill v. Am. Fam. Mut. Ins. Co ., 150 Idaho 619, 625, 249 P.3d 812, 818 (2011) ). "The public policy footings of this law are two-fold: First, UIM coverage is to protect against ‘the threat that underinsured motorists pose to public safety,’ and second, insuring UIM coverage for an insured's claims up to her policy limits avoids the absurd result where ‘Idahoans injured by a totally uninsured driver [would] sometimes recover more than those injured by underinsured drivers.’ " Eastman v. Farmers Ins. Co ., 164 Idaho 10, 14, 423 P.3d 431, 435 (2018) (quoting Hill , 150 Idaho at 624, 249 P.3d at 817 ). We have also emphasized that UIM coverage should be "scrupulously guarded" because it is "intended to provide excess coverage to compensate an insured against losses for which there would otherwise be no coverage." Id . (quoting Hill , 150 Idaho at 626, 249 P.3d at 819 ). That "excess coverage," however, can be specifically limited by the amount of UIM coverage the insured purchased from his insurer. See Wood , 166 Idaho at 46, 454 P.3d at 1129 (paying more premium to obtain additional UIM coverage subject to offset provisions does not violate public policy).

Supported by these principles, Pena argues that the appropriate remedy, once the district court found the Policy's language to be "deficient," was not to reform the policy by substituting statutory language from Idaho Code section 41-2503...