Porter v. Empire Fire & Marine Ins. Co.

• Decision Date: 08 October 1970
• Docket Number: No. 10051--PR,10051--PR
• Parties: James T. PORTER, Appellant, v. The EMPIRE FIRE AND MARINE INSURANCE COMPANY, a Nebraska corporation, Appellee.
• Court: Arizona Supreme Court

Page 258

475 P.2d 258

106 Ariz. 274

James T. PORTER, Appellant, v. The EMPIRE FIRE AND MARINE INSURANCE COMPANY, a Nebraska corporation, Appellee.

No. 10051--PR.

Supreme Court of Arizona, In Banc.

Oct. 8, 1970.

Lesher & Scruggs, by Robert O. Lesher, Tucson, for appellee.

William T. Healy, Tucson, for appellant.

American Trial Lawyers Assn., Arizona Chapter by William B. Revis, Langerman, Begam & Lewis, Phoenix, for amicus curiae.

McFARLAND, Justice.

There is no dispute as to the simple facts involved on this review. The plaintiff-respondent, James T. Porter (Porter) received injuries in an automobile accident caused solely by the negligence of one Joseph B. Fitch (Fitch). Four other persons, not parties to this action, were injured along with Porter. Fitch carried liability insurance with the Employer's Group in the minimum amounts of $10,000 for each person, $20,000 per occurrence and $5,000 property damage as set forth in the Financial Responsibility Act, § 28--1170, subsec. B(2) A.R.S. ¹ The Employer's Group responded in the full amount of its policy coverage by virtue of settlement agreements with Porter and the other four injured persons, with Porter receiving $2,500. It is alleged, and not denied for the purposes of appeal, that Porter sustained injuries in the amount of $10,000.

Porter was insured by the defendant-petitioner, the Empire Fire and Marine Insurance Company (Empire) and his policy contained the standard uninsured motorist provision. Prior to accepting Employer's settlement, Porter demanded that Empire pay the difference between his injuries and the proposed settlement--a sum of $7,500--under the uninsured motorist policy, which Empire declined to do. Porter then filed suit in the Superior Court for the County of Pima. Empire answered and filed a Motion to Dismiss the Complaint on the grounds that it failed to state a claim upon which relief could be granted, which Motion was granted by the court. Empire bases its defense on the ground that the tort-feasor, Fitch was covered by a policy of insurance at the time of the accident which conformed to the minimum requirements of the financial responsibility law and therefore was not an uninsured motorist which exempts Empire's uninsured motorist coverage. Empire's policy definition of a noninsured vehicle is as follows:

'INSURING AGREEMENTS. * * *

(c) 'uninsured automobile' means:

(1) an automobile with respect to the ownership, maintenance or use of which there is, in at least the amounts specified by the financial responsibility law of the state in which the insured automobile is principally garaged, no bodily injury liability bond or insurance policy applicable at the time of the accident with respect to any person or organization legally responsible for the use of such automobile, or with respect to which there is a bodily injury liability bond or insurance policy applicable at the time of the accident but the company writing the same denies coverage thereunder; or

(2) a hit-and-run automobile as defined; but the term 'insured automobile' shall not include:

(i) an insured automobile * * *.'

On the other hand Porter claims that since an apportionment of insurance proceeds to him made available only $2,500 of his stipulated $10,000 damages that the tort-feasor was actually uninsured as to the difference between the amount available to Porter and the minimum amount of the Financial Responsibility Act. Porter appealed and the Court of Appeals reversed. 12 Ariz.App. 2, 467 P.2d 77.

We granted the Petition for Review because of the inconsistencies between the Court of Appeal's decision in this case and in Harsha v. Fidelity General Insurance Company, 11 Ariz.App. 438, 465 P.2d 377. In Harsha, the Court of Appeals was faced with a situation wherein the plaintiff had received a recovery of $9,500 on a $10,000 policy held by the third-party tort-feasor and was seeking a full recovery of $10,000, in addition thereto, on her own uninsured motorist coverage; ² whereas here the plaintiff seeks the difference between his actual recovery of $2,500 and the statutory minimum of $10,000. In Harsha the appellant did not advance the alternate argument involved here, that she was entitled to at least the difference of $500.00.

We are aware that this question has plagued the courts for several years and has evoked a contrariety of opinions. The 'uninsured motorist' has been treated to definitions, principles and rules almost as varied as the fact-patterns presented to the courts of the several states, but without the emergence of a single, consistent line of reasoning which can serve as a guideline in the determination of subsequent, similar cases.

There are several situations where the tort-feasor actually had some form of liability insurance at the time of the accident but was nevertheless considered 'uninsured', for the purposes of the uninsured motorist coverage under the injured party's policy. One of the more common occurrences is where the tort-feasor's carrier becomes insolvent after the claim has arisen. Another is where the policy in force does not cover the particular type injury suffered or for some reason the insurer disclaims liability. And, since not all state statutes require the same minimum coverages, cases arise wherein the tort-feasor has insurance available but with policy limits less than the statutory requirements. Of course, there can be found a number of cases holding the contrary--i.e. that the tort-feasor is not an uninsured motorist. Cases in each of these areas have been collected in an Annotation in 26 A.L.R.3d 883. Professor Widiss has listed the various statutory provisions relating to these situations. Widiss, A Guide to Uninsured Motorist Coverage § 3.9 (W. H. Anderson Co.).

In a number of these instances the injured party recovered some damages from the tort-feasor's carrier but nevertheless the courts considered the tort-feasor to be uninsured as to the difference between the recovery and the statutory minimum. This contravenes Empire's argument in its brief that:

'The Statute requires only that a policy of insurance provide coverage against 'uninsured' motorists, not 'partially insured motorists.' In fact, there is no such thing as a 'partially insured motorist'; one is 'insured' (as that term is defined by law) or one is 'uninsured."

In Stephens v. Allied Mutual Insurance Company, 182 Neb. 562, 156 N.W.2d 133, the court held the tort-feasor to be 'insured' and permitted the injured party to recover on his own policy even though he had received $5,000 from the tort-feasor's carrier prior to its entry into insolvency receivership. The court stated:

'The proper construction of this separately paid for insurance coverage clause should not be an exercise in the blind semantics of literal language construction. We do not feel that the Legislature intended to restrict the benefits of uninsured motorist coverage to those cases where the tort-feasor lacks insurance at the very moment of injury. We feel that when an insurer fails to defend a claim or to satisfy a judgment against its insured, whether Voluntarily or Involuntarily, it 'denies coverage' in the only meaningful sense of the term. Realistically, an injured person is as unprotected by a tort-feasor insurance carrier who has become insolvent prior to the satisfaction of his claim just as much as is the person injured by a tort-feasor who has no insurance at all. We therefore hold that the insolvency of a tort-feasor's carrier occurring subsequent to the accident, with a consequent refusal or inability of the carrier to defend or pay a judgment or claim resulting therefrom for which the tort-feasor has become liable, constitutes a 'denial of coverage' within the meaning of such provision in the uninsured motorist clause of the insured's policy. The above rule is bottomed upon the fundamental principles that the uninsured motorist statute established in this state a public policy that every insured is entitled to recover damages he or she would have been able to recover if the offending motorist had maintained a policy of liability insurance in a solvent company capable of responding for damages duly adjudicated against its insured.' (Emphasis in original)

In Allstate Insurance Company v. Fusco, 101 R.I. 350, 223 A.2d 447, plaintiff's decedent was killed through the negligence of a tort-feasor who was insured for $5,000 per person although the statutory minimum in Rhode Island was $10,000. The court permitted the spouse to recover against decedent's uninsured motorist endorsement up to the minimum amount of mandatory insurance--5,000 additional dollars. In construing the policy definition of 'uninsured automobile' which is similar to that contained in Empire's policy, the court said:

'We therefore think that, by legislative intendment as set forth in the cited statutes, 'no bodily injury liability insurance applicable at the time of the accident' as the same...