Sanders v. St. Paul Mercury Ins. Co., 85-544

• Citation: 536 A.2d 914,148 Vt. 496
• Decision Date: 09 October 1987
• Docket Number: No. 85-544,85-544
• Parties: Doreen E. SANDERS v. ST. PAUL MERCURY INSURANCE CO.
• Court: United States State Supreme Court of Vermont

Page 914

536 A.2d 914

148 Vt. 496

Doreen E. SANDERS v. ST. PAUL MERCURY INSURANCE CO.

No. 85-544.

Supreme Court of Vermont.

Oct. 9, 1987.

Manfred W. Ehrich, Jr., Bennington, and Joy C. Frank, Dorset, for plaintiff-appellant.

Allan R. Keyes and Mark H. Kolter of Ryan Smith & Carbine, Ltd., Rutland, for defendant-appellee.

Before ALLEN, C.J., PECK, J., and BARNEY, C.J. (Ret.), and KEYSER, J. (Ret.), Specially Assigned.

ALLEN, Chief Justice.

Plaintiff seeks interlocutory review under V.R.A.P. 5 of a partial summary judgment declaring that defendant-insurer's liability to her under its uninsured motorist (UM) coverage was limited to the stated policy limit of $25,000. We affirm.

While driving an automobile insured by defendant, plaintiff was injured in an accident caused by an uninsured motorist. Plaintiff was living at home at the time and was a "covered person," entitled to recover damages under Part C of the policy relating to UM coverage. The policy issued to plaintiff's father covered four automobiles, and a separate premium was assessed for each vehicle for uninsured motorist coverage. The plaintiff argued below that the payment of four premiums allowed her to claim four times the stated policy maximum for UM accidents, notwithstanding the "Limit of Liability" provision of the policy which states:

LIMIT OF LIABILITY The limit of liability shown in the Declarations for "each person" for Uninsured Motorists Coverage is our maximum limit of liability for all damages for bodily injury sustained by any one person in any one accident. Subject to this limit for "each person", the limit of liability shown in the Declarations for "each accident" for Uninsured Motorists Coverage is our maximum limit of liability for all damages for bodily injury resulting from any one accident. This is the most we will pay regardless of the number of:

1. Covered persons;

2. Claims made;

3. Vehicles shown in the Declarations; or

4. Vehicles involved in the accident.

The trial court disagreed with plaintiff and granted defendant partial summary judgment, concluding that "the limit of liability clause in the ... policy is clear and unambiguous and should be enforced according to its terms." The court entered an order of report by agreement pursuant to V.R.A.P. 5(a) on the following question of law:

Did the Superior Court err in its Order dated November 18, 1985, declaring that the limits of the Defendant's liability to the Plaintiff was $25,000 under the terms of the uninsured motorist policy issued by the Defendant to the Plaintiff in this case and under the law of the State of Vermont?

In answering this question we are asked to determine an issue of first impression in Vermont: whether plaintiff should be permitted to aggregate or "stack" the uninsured motorist coverage provided for each of the four automobiles insured by defendant under a single policy.

An automobile insurance policy that does not offer UM coverage cannot be issued in Vermont on an automobile "registered or principally garaged in this state." 23 V.S.A. § 941(a). 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. Lundy v. Aetna Casualty & Surety Co., 92 N.J. 550, 553, 458 A.2d 106, 108 (1983); Constant v. Amica Mutual Insurance Co., 497 A.2d 343, 346 (R.I.1985) (Bevilacqua, C.J., dissenting). No policy can be issued which reduces the amount of coverage mandated by statute. See Muir v. Hartford Accident & Indemnity Co., 147 Vt. 590, 593, 522 A.2d 236, 238 (1987). The question before this Court is whether the trial judge's validation of a clause barring intra-policy stacking effectively reduced the amount of mandated coverage.

Decisions in other jurisdictions based on generally similar statutes have been sharply divided on the issue of stacking in each of three major classes of cases that treat the issue: (1) cases involving the stacking of coverages in policies issued by different insurers to the same insured, e.g., St. Paul Fire & Marine Insurance Co. v. Goza, 137 Ga.App. 581, 224 S.E.2d 429 (1976); (2) cases involving the stacking of coverages in multiple policies issued by the same insurer to the same insured, e.g., Sayers v. Safeco Insurance Co. of America, 628 P.2d 659 (Mont.1981); and (3) cases like the one at bar, involving the stacking of coverages provided in a single policy covering different vehicles of the same insured, e.g., Arminski v. United States Fidelity & Guaranty Co., 23 Mich.App. 352, 178 N.W.2d 497 (1970). See Comment, Stacking of Uninsured Motorist Coverage, 49 Mo.L.Rev. 571 (1984); Comment, Intra-Policy Stacking of Uninsured Motorist and Medical Payments Coverages: To Be or Not to Be, 22 S.D.L.Rev. 349 (1977).

The majority of modern cases in the first two classes allow stacking. See Annotation, 23 A.L.R. 4th 12 (1983); Annotation, 25 A.L.R. 4th 6 (1983). Some of these decisions have cited a policy's ambiguity. Employers Liability Assurance Corp. v. Jackson, 289 Ala. 673, 270 So.2d 806 (1972); Goodman v. Continental Casualty Co., 347 A.2d 662 (Del.Super.Ct.1975); Squire v. Economy Fire & Casualty Co., 69 Ill.2d 167, 13 Ill.Dec. 17, 370 N.E.2d 1044 (1977); Lipscombe v. Security Insurance Co., 213 Va. 81, 189 S.E.2d 320 (1972). Some have stressed adherence to state insurance statutes, Lundy, 92 N.J. at 560, 458 A.2d at 111; Tucker v. Government Employees Insurance Co., 288 So.2d 238, 242-43 (Fla.1973), and still others are based on the court's conclusion that it is unfair to allow an insurer to retain additional premiums while not providing additional coverage for the extra premiums. Taft v. Cerwonka, 433 A.2d 215, 219 (R.I.1981).

Plaintiff advances all of the foregoing theories of recovery, arguing that Part C of the policy is ambiguous and that the ambiguity should be resolved in favor of the insured; that reading the policy language to prevent stacking would be inconsistent with 23 V.S.A. § 941 and would violate public policy; and that enforcement of the anti-stacking clause would be unconscionable, first because the payment of multiple premiums without affording coverage beyond that acquired under the first premium constitutes windfall for the defendant, and second, because a policyholder paying multiple premiums has a reasonable expectation of receiving multiple benefits.

I. Ambiguity

Insurance contracts must be interpreted according to their terms and the evident intent of the parties, as gathered from the contract language. Town of Troy v. American Fidelity Co., 120 Vt. 410, 417, 143 A.2d 469, 474 (1958). Ambiguity in policy language should be resolved in favor of the insured since the insurer is in a far better position to avoid latent ambiguity in the text of a policy. Id.; see Muir v. Hartford Accident & Indemnity Co., 147 Vt. 590, 522 A.2d 236. Where "limits of liability" language is ambiguous, it will be construed against the insurer. Goodman v. Continental Casualty Co., 347 A.2d at 665; Squire v. Economy Fire & Casualty Co., 69 Ill.2d at 179, 13 Ill.Dec. at 22, 370 N.E.2d at 1049; Sturdy v. Allied Mutual Insurance Co., 203 Kan. 783, 792, 457 P.2d 34, 41 (1969); Hartford Accident & Indemnity Co. v. Bridges, 350 So.2d 1379, 1381-82 (Miss.1977).

The argument for ambiguity in the present policy is weak. Against the plain meaning of the language in Part C of the policy plaintiff raises but a single point, namely that the language of Part C differs from the language of Part A, relating to liability coverage, and Part B, dealing with medical payments coverage. Parts A and B have identical subparagraphs:

This is the most we will pay regardless of the number of

....

3. Vehicles or premiums shown in the Declarations....

Part C in contrast omits the reference to premiums and states:

This is the most we will pay regardless of the number of

....

3. Vehicles shown in the Declarations....

Plaintiff argues that the omission of the word "premiums" in Part C is purposeful and reflects an intention to permit stacking where multiple premiums are in fact paid, relying on the general rule of contract construction that "contract provisions must be viewed in their entirety and read together". In re Stacey, 138 Vt. 68, 72, 411 A.2d 1359, 1361 (1980) (citations omitted). But a reading of the entire agreement does not detract from the meaning of Part C, which is clear on its face. As this Court also said in In re Stacey, 138 Vt. at 71, 411 A.2d at 1361, "[a] contract will be interpreted by the common meaning of its words where the language is clear. Moreover, the Court will not read terms into a contract, unless they arise by necessary implication." (citations omitted). In the present case the argument for ambiguity is the variance between two parallel provisions of the policy, each dealing with limits of liability. We would apply the variance in language to plaintiff's benefit if she had provided the predicate for doing so by pointing out some reason why Part C could not be interpreted definitively without reference to some other contract provision. Plaintiff has not provided such a reason, and we do not perceive one.

II. Consistency with 23 V.S.A. § 941

Plaintiff contends that 23 V.S.A. § 941 bars enforcement of the clause in the policy limiting the insurer's liability under a single policy to a fixed amount for "each person" irrespective of the number of vehicles insured or premiums paid. Plaintiff's rationale is based on an extension and application of the underlying theory in multiple policy cases. That theory is exemplified in Goodrich v. Lumbermens Mutual Casualty Co., 423 F.Supp. 838, 842 (D.Vt.1976), where the court held that an "excess-escape" or ...