Poehls v. Guaranty Nat. Ins. Co.
| Decision Date | 22 February 1989 |
| Docket Number | No. 88-737,88-737 |
| Citation | 436 N.W.2d 62 |
| Parties | Janet K. POEHLS, Administrator of the Estate of Timothy A. Poehls, Sr., Deceased, Plaintiff, v. GUARANTY NATIONAL INSURANCE COMPANY, Defendant. |
| Court | Iowa Supreme Court |
Michael J. Warner, Raymond J. Conklin, and Duane Thompson of Braud/Warner, Ltd., Rock Island, Ill., for plaintiff.
Robert V.P. Waterman, Jr. and Maria Mihalakis Waterman of Lane & Waterman, Davenport, for defendant.
Considered by HARRIS, P.J., and LAVORATO, NEUMAN, SNELL, and ANDREASEN, JJ.
The United States District Court for the Southern District of Iowa has certified a question to this court that gives a new twist to the underinsured motorist coverage issues we first faced in American States Insurance Co. v. Estate of Tollari, 362 N.W.2d 519 (Iowa 1985) and recently revisited in McClure v. Northland Insurance Cos., 424 N.W.2d 448 (Iowa 1988). As in Tollari and McClure, the plaintiff challenges an insurer's ability to lawfully limit underinsured motorist coverage by deducting amounts paid through liability and other insurance. Unlike those cases, however, the present case raises the "offset" issue in the context of claims made against the liability and underinsured motorist coverages of the same policy. Finding that neither state law nor a reasonable reading of the contract of insurance compels recovery without offset under such circumstances, we so advise the federal court.
This litigation stems from a one-car accident that occurred in December 1986. Timothy Poehls was killed in the accident. He was a passenger in a car owned and operated by Kevin Burmeister.
At the time of the accident, Burmeister's vehicle was insured by defendant Guaranty National Insurance Company (Guaranty). Guaranty's policy furnished the following coverage: $20,000 per person/$40,000 per accident for bodily injury liability; $1000 medical payments, and $25,000 underinsured motorist coverage. Poehls carried no insurance. The parties agree, however, that because Poehls was an occupant of the Burmeister vehicle, he met the "insured person" definition under the Guaranty policy.
Pertinent to this litigation are the policy's terms applicable to underinsured motorist coverage. An endorsement for that purpose provides:
We will pay damages for bodily injury which an insured person is legally entitled to recover from the owner or operator of ... an underinsured motor vehicle.
The underinsured motorist endorsement also includes the following limitation in coverage:
Any amounts payable will be reduced
(2) A payment under the Liability Coverage of this policy; and
(3) A payment under the Medical Payments Coverage of this policy.
Guaranty tendered $25,000 in policy benefits to the administrator of Poehls' estate, plaintiff Janet K. Poehls (Poehls). Guaranty derived this figure as follows: $20,000 policy limit for liability coverage for a single person; the $1000 policy limit for medical payments coverage; plus an additional $4000 to reach the $25,000 policy limit for underinsured motorist coverage.
Poehls rejected this offer, claiming entitlement to $46,000 under the policy. Her figure represents the sum of the liability policy limits ($20,000), plus medical payments ($1000), and underinsured motorist coverage ($25,000). The parties agree that Poehls' damages are well in excess of $46,000.
Given this factual background, the federal court has posed the following question:
Is the "Limits of Liability" clause contained in Guaranty's policy valid and enforceable against plaintiff under Iowa law, so that the amount of coverage available to plaintiff under the underinsured provisions of the policy will be reduced by any amounts paid to plaintiff pursuant to the liability and medical coverage provisions?
As noted by the federal court, the dispute centers on whether the answer to the certified question is found in American States Insurance Co. v. Estate of Tollari, 362 N.W.2d 519 (Iowa 1985).
In Tollari, we adopted what has come to be known as the "broad view" of underinsurance coverage; that is, coverage that provides full recovery, not for just a statutory minimum amount (as in the case of un-insured motorist coverage), but for the amount of the insured's loss that the tortfeasor's liability insurance does not reach, subject only to the limit of the insured's underinsurance clause. Tollari, 362 N.W.2d at 522; see also Comment, Underinsured Motorist Coverage in Iowa: American States Insurance Co. v. Tollari, 71 Iowa L.Rev. 1569, 1585-86 (1986). Accordingly, we allowed the Tollari estate to recover full underinsurance benefits under Tollari's own auto policy without reduction for benefits paid pursuant to the tortfeasor's liability policy so long as the combination did not exceed the loss sustained. Tollari, 362 N.W.2d at 522. Implicitly applying a consumer-oriented meaning to the term "underinsured," we reasoned that "[a]ny other interpretation of underinsurance would mean the
victim cannot recover part of the underinsurance limit he has bought and paid for, and that portion of the limits also would be illusory." Id.
We recently reaffirmed the vitality of Tollari in McClure v. Northland Insurance Cos., 424 N.W.2d 448 (Iowa 1988). McClure involved a plaintiff who was injured in an auto collision while acting in the scope of his employment. We refused to allow an insurance company to deduct from the plaintiff's own underinsurance benefits sums paid pursuant to the tortfeasor's liability policy and the employer's workers' compensation settlement. Id. at 450. Referring to the "illusory coverage" problem we perceived in Tollari, we reasoned that the purpose of underinsurance is "full compensation of the victim." Hence we perceived there could be no duplication of benefits "until the victim has been fully compensated." Id.
The issue of duplication of benefits raised in McClure is really at the heart of the controversy before us. Iowa Code § 516A.2 permits an insurer to write exclusions and limitations into an auto policy, even relating to uninsured and underinsured coverage, so long as those conditions "are designed to avoid duplication of insurance or other benefits." Id.; Kluiter v. State Farm Mut. Auto. Ins. Co., 417 N.W.2d 74, 76 (Iowa 1987); see also Tri-State Ins. Co. v. De Gooyer, 379 N.W.2d 16, 18-19 (Iowa 1985).
Poehls claims that under Tollari and McClure, no duplication of benefits exists until the...
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