Spain v. Valley Forge Ins. Co., CV

• Citation: 731 P.2d 84,152 Ariz. 189
• Decision Date: 14 October 1986
• Docket Number: No. CV,CV
• Parties: William J. SPAIN, Personal Representative of the Estate of Patricia L. Story, Plaintiff/Appellant, v. VALLEY FORGE INSURANCE COMPANY, a Pennsylvania corporation, Defendant/Appellee. 86 0065-PR.
• Court: Supreme Court of Arizona

Page 84

731 P.2d 84

152 Ariz. 189

William J. SPAIN, Personal Representative of the Estate of Patricia L. Story, Plaintiff/Appellant, v. VALLEY FORGE INSURANCE COMPANY, a Pennsylvania corporation, Defendant/Appellee.

No. CV 86 0065-PR.

Supreme Court of Arizona, In Banc.

Oct. 14, 1986.

Supplemental Opinion Jan. 8, 1987.

Reconsideration Denied Jan. 8, 1987.

Leonard and Clancy, P.C. by Kenneth P. Clancy, Phoenix, for plaintiff/appellant.

Jennings, Strouss & Salmon by M. Byron Lewis, Stephen A. Myers, Phoenix, for defendant/appellee.

FELDMAN, Justice.

William J. Spain (Spain) and Valley Forge Insurance Company (Valley Forge) petitioned this court to review a court of appeals decision concerning the amount of uninsured motorist (UM) coverage recoverable by Spain. The court of appeals held that Valley Forge is potentially liable under its automobile insurance contract for only $15,000 of a $100,000 limit UM endorsement. This is so, the court reasoned, because of a contractual provision offsetting the available UM coverage by amounts already recovered under the liability coverage of the same policy. Spain v. Valley Forge Insurance Co., 152 Ariz. 185, 731 P.2d 80 (App.1985).

We granted review to consider whether the UM offset provision violates the policy of the uninsured motorist statute, A.R.S. § 20-259.01 (Supp.1985). We have jurisdiction pursuant to Ariz.Const. art. 6, § 5(3), and Rule 23, Ariz.R.Civ.App.P., 17A A.R.S. (Supp.1985).

FACTS

On June 9, 1982, Patricia L. Story (Story), a passenger in a Subaru owned and driven by Estelle Billing (Billing), died from injuries she received when the Subaru collided with a car owned and operated by an uninsured motorist. For purposes of this action the parties have stipulated that both drivers were negligent. Billing's Valley Forge automobile insurance policy provided $100,000 liability coverage for bodily injury or death, $100,000 uninsured motorist protection, and medical payments coverage. Under the policy's definition, Story, a passenger, was an insured under the UM coverage. ¹ The policy, however, contained standard insurance industry form language providing that the insurance company was obligated to pay only a "single limit" of $100,000 per accident. See 1 A. WIDISS, UNINSURED AND UNDERINSURED MOTORIST INSURANCE, App. A (2d ed.1985) (Personal Auto Insurance Form of Insurance Services Office); 8D J. APPLEMAN, INSURANCE LAW AND PRACTICE § 5128.55, at 181 (1981). The coverage terms provided that sums paid under the liability coverage reduce the limit of liability under the UM coverage. ² Spain Spain sought a declaratory judgment that Valley Forge was liable for the additional $100,000. The trial court granted summary judgment for Valley Forge. The court of appeals held that if both drivers had negligently caused the collision, both the liability and UM endorsements applied. 152 Ariz. at 187, 731 P.2d at 82. Even so, it reasoned that Spain could not recover the full $100,000 limit under each coverage because the insurance company had unambiguously limited its total liability by offsetting the amount paid under one coverage against amounts payable under the other coverage. Id. 152 Ariz. at 187-188, 731 P.2d at 82-83. The court concluded, however, that A.R.S. § 20-259.01(A) obligates an insurance company issuing motor vehicle liability policies to provide at least $15,000 of separate UM coverage. Id. Thus, Valley Forge was not free to eliminate UM coverage by offset, but could contract to limit its liability for sums exceeding the $15,000 required by statute. In other words, if Spain can prove that his damages exceed $100,000, Valley Forge will be liable under the UM coverage for an additional $15,000 only. The court relied on Arceneaux v. State Farm Mutual Automobile Insurance Co., 113 Ariz. 216, 550 P.2d 87 (1976) for its decision. 152 Ariz. at 188, 731 P.2d at 83.

                [152 Ariz. 191] Story's personal representative, claimed that Billing, the host driver, had been negligent and was liable for tort damages.  Valley Forge paid the $100,000 liability limit on this claim.  Spain claimed also that the uninsured driver's negligence caused the accident, and demanded an additional $100,000 pursuant to the uninsured motorist endorsement. 3  Valley Forge refused on the ground that the policy's offset provisions prevent Spain from recovering more than $100,000 on the combined coverages
                

The court of appeals also stated, without explanation, that A.R.S. § 20-259.01(B) does not apply to the facts of this case. 152 Ariz. at 188, 731 P.2d at 83. That statute requires an insurance company writing motor vehicle liability policies to offer in writing and, upon purchase by the insured, to provide its insured with uninsured motorist coverage covering all persons insured under the policy in an amount equal to whatever limits of liability coverage have been sold. ⁴ We requested supplemental briefs to address the question of whether recognition of the offset provisions of the Valley Forge policy offends A.R.S. § 20-259.01(B).

LEGISLATIVE OBJECTIVES--UM COVERAGE

Uninsured motorist coverage is designed to protect insured victims from the negligence of uninsured motorists and "places the victim's insurer in the shoes of the tortfeasor as a source of payment to the In our view, these amendments to the UM statute signify the legislature's strong commitment to require UM coverage and to allow those with foresight to protect themselves and their passengers with coverage above minimum limits, even if their insurance carrier previously would have been unwilling to write such a policy. A.R.S. § 20-259.01(B); 1 A. WIDISS, supra, § 2.12, at 43-44. Arizona's uninsured motorist statute provides greater protection than do the statutes of most states. 1 A. WIDISS, supra, §§ 2.1 to 2.6, at 21-35. Spain argues that enforcement of Valley Forge's offset provisions would avoid this clear legislative mandate and negate the uninsured motorist coverage which A.R.S. § 20-259.01(B) required Valley Forge to offer Billing and which she bought.

                [152 Ariz. 192] victim."   12A G. COUCH, CYCLOPEDIA OF INSURANCE LAW § 45:652, at 212 (2d ed.1981).  The Arizona legislature has continually strengthened the protection available to those injured by the negligence of a driver with no insurance or insufficient insurance.  Until 1966, automobile owners involved in an accident were required only to prove that they were insured or were financially able to pay the minimum sums required by A.R.S. §§ 28-1102 to 28-1174 (Supp.1969-70) ($10,000 per person and $20,000 per accident).  In 1965, the legislature enacted the uninsured motorist statute to "close the gap" in the Financial Responsibility Act by protecting those who were injured by the negligence of a financially irresponsible motorist.  A.R.S. § 20-259.01 (Supp.1969-70);  Transamerica Insurance Co. v. McKee, 27 Ariz.App. 158, 551 P.2d 1324 (App.1976);  Kraft v. Allstate Insurance Co., 6 Ariz.App. 276, 431 P.2d 917 (1967), modified on other grounds, 6 Ariz.App. 326, 432 P.2d 470 (App.1967).  Until 1972, an insured had the right to reject the offered uninsured motorist coverage.  A 1972 amendment, however, required every motor vehicle liability insurer automatically to provide UM coverage of $15,000 in every policy, and to give the insured the option of purchasing up to $45,000 UM coverage.  A.R.S. § 20-259.01 (Supp.1972-73).  That same year, the legislature increased the minimum liability coverage limits to $15,000 per person and $30,000 per accident.  A.R.S. §§ 28-1102 to 28-1174 (Supp.1972-73).  In 1981, the legislature further strengthened the protection by requiring insurance companies automatically to provide in every policy $15,000 coverage each for UM and underinsured motorist coverage.  In addition, the insurer was required to notify the insured in writing that he or she could purchase additional UM coverage up to the limits of the liability coverage.  A.R.S. § 20-259.01 (Supp.1981-82).  The next year, the legislature eliminated compulsory underinsured motorist coverage, but it has not altered the compulsory UM coverage provisions or the requirement that the insurer offer and, upon purchase by the insured, provide the insured with UM coverage up to the limits of the liability coverage.  A.R.S. § 20-259.01 (Supp.1985)
                

Even before the legislature strengthened § 20-259.01 in 1981, Arizona's courts held that the statute was remedial and should be liberally construed to carry out the intent of the legislature. Williams v. Williams, 23 Ariz.App. 191, 531 P.2d 924 (App.1975); Reserve Insurance Co. v. Staats, 9 Ariz.App. 410, 453 P.2d 239 (App.1969). The statute establishes a public policy that every insured is entitled to recover under his or her UM coverage the damages he or she would have been able to recover from a negligent uninsured driver had that driver maintained a policy of liability insurance with a solvent company. Calvert v. Farmers Insurance Co. of Arizona, 144 Ariz. 291, 294, 697 P.2d 684, 687 (1985); Transportation Insurance Co. v. Wade, 106 Ariz. 269, 273, 475 P.2d 253, 257 (1970). In effect, A.R.S. § 20-259.01(B) does no more than raise that entitlement from the minimum limit of $15,000 set by subsection (A) to an amount equal to the liability limits which the insured has bought. Thus, A.R.S. § 20-259.01(B) allows the driver to protect himself and his passengers--most often his own family and friends--from the loss by injury caused by uninsured drivers The policy declarations statement that Billing received from Valley Forge shows that Billing was covered by $100,000 liability protection and $100,000 UM protection. Valley Forge has never claimed that these declarations were incorrect. Other than this declarations statement, the record contains no evidence of Billing's intent in purchasing the policy. There are no details of the circumstances under which Billing purchased the policy, and the record does not show whether Valley Forge offered the...