State Farm Mut. Auto. Ins. Co. v. United Services Auto. Ass'n

• Decision Date: 04 September 1970
• Citation: 211 Va. 133,176 S.E.2d 327
• Court: Virginia Supreme Court
• Parties: STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY v. UNITED SERVICES AUTOMOBILE ASSOCIATION et al. UNITED SERVICES AUTOMOBILE ASSOCIATION v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY et al.

Page 327

176 S.E.2d 327

211 Va. 133

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY v. UNITED SERVICES AUTOMOBILE ASSOCIATION et al.

UNITED SERVICES AUTOMOBILE ASSOCIATION v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY et al.

Supreme Court of Appeals of Virginia.

Sept. 4, 1970.

Adelard L. Brault, Fairfax, John B. Browder, Richmond (James W. Morris, III, Richmond, Brault & Lewis, Fairfax, Browder, Russell, Little & Morris, Richmond, on the brief), for appellant, State Farm Mutual Automobile Ins. Co. and others.

Joseph Dyer, Arlington (John J. Daly, Anthony J. Siciliano, Ribert L. Ellis, Paul F. Sheridan, Siciliano, Daly & Ellis, Arlington, on the brief), for appellees, United Services Automobile Ass'n and others.

Before SNEAD, C.J., and I'ANSON, CARRICO, GORDON, HARRISON, COCHRAN and HARMAN, JJ.

SNEAD, Chief Justice.

These appeals involve the priority, if any, of coverage under the uninsured motorist endorsement of three separate automobile liability insurance policies.

Caroline S. Sargent, a minor, suffered personal injuries in an automobile collision between the vehicle in which she was a passenger and a vehicle driven by David Russell Whisenhunt, an uninsured motorist. The automobile in which Caroline Sargent was riding was owned by John A. Lobi and driven, with Lobi's consent, by Christopher S. Call. Consent judgments totalling $22,500 were entered for Caroline Sargent and Jack S. Sargent, her father, against Whisenhunt. Sargent's recovery was for medical expenses incurred on behalf of his injured daughter.

United Services Automobile Association (USAA) had issued an automobile insurance policy to Jack S. Sargent and it admitted coverage of the Sargents under its uninsured motorist endorsement. Givernment Employees Insurance Co. (GEICO) had issued a policy to Lobi covering his vehicle and it also admitted coverage of the Sargents under its uninsured motorist endorsement. State Farm Mutual Automobile Insurance Company (State Farm) had issued a policy to the parents of Christopher S. Call on their vehicle. Call, being a resident of his parents' household, was an insured under the policy. While State Farm denied any coverage of the Sargents under its uninsured motorist endorsement in the court below, the assignment of error pertaining thereto has been waived. Each of the policies provided the insured with the minimum uninsured motorist coverage ($15,000) ¹ required at the time of the accident.

At the outset it should be noted that the judgments amounting to $22,500 in favor of the Sargents are not at issue here. It is conceded that they are entitled to collect the full amount of the judgments. Our concern in this appeal is with the priority of payment of the judgments among the above mentioned companies.

Prior to the entry of the judgments, USAA on March 7, 1968 filed a Motion for Declaratory Judgment requesting the court below to determine which of the insurance policies, if any, were 'primary' and which, if any, were 'secondary'. State Farm, GEICO, the Sargents, Lobi, Call and Whisenhunt were named as defendants. Other insurance companies were included but non-suits were later taken as to them.

By a decree entered on August 9, 1968, the trial court held that the Sargents were insured under each of the policies of GEICO, State Farm and USAA, and that the three companies were 'each liable equally to pay all sums to Caroline S. Sargent, a minor, and Jack S. Sargent which David Russell Whisenhunt (an uninsured motorist) has become legally obligated to pay as damages for bodily injuries or injury or destruction of property rising out of the operation of a motor vehicle by said David Whisenhunt on October 20, 1964.' We granted State Farm and USAA appeals from that decree. GEICO, the appellee, did not file a printed brief and was not represented by counsel in this appeal.

State Farm maintains that the court erred in not holding GEICO liable as primary carrier for the payment of the first $15,000 and State Farm and USAA liable pro rate for the balance of $7,500, or $3,750 each. USAA contends that GEICO is primarily liable for $15,000, that State Farm is secondarily liable for $7,500 and that it (USAA) is not liable for any amount of the judgments.

The policies of State Farm, GEICO, and USAA all contain the following language as a part of their respective uninsured motorist provisions:

'Other Insurance. With respect to bodily injury to an insured while occupying an automobile not owned by the named insured, the insurance hereunder shall apply only as excess insurance over any other similar insurance available to such insured and applicable to such automobile as primary insurance, * * *.

'Except as provided in the foregoing paragraph, if the insured has other similar bodily injury insurance available to him and applicable to the accident, * * * the company shall not be liable for a greater proportion of any loss to which this coverage applies than the limit of liability hereunder bears to the sum of the applicable limits of liability of this insurance and such other insurance.'

The first clause of the 'Other Insurance' provision is known as the 'excess' coverage clause. Essentially this clause makes the insurance covering the vehicle 'primary' insurance and other insurance covering the insured is 'excess' or 'secondary' insurance. Thus, the 'excess' insurance would come into play only in event the established liability exceeded the coverage of the primary insurance. If there should be more than one insurer providing 'excess' coverage then the amount of the excess is prorated among the 'excess' carriers. This is the basic purpose of the 'pro rata' clause, which is quoted above with the 'excess' coverage clause.

Subsection (b) of Code § 38.1--381 provides in part:

'Nor shall any such policy or contract relating to ownership, maintenance or use of a motor vehicle be so issued or delivered unless it contains an endorsement or provisions undertaking to pay the insured all sums which he shall be legally entitled to recover as damages from the owner or operator of an uninsured motor vehicle, within limits which shall be no less than the requirements of § 46.1--1(8), as amended from time to time, * * *.'

The trial court held that the 'excess coverage clause' was void and of no legal effect but that the 'pro rata' clause was valid. Relying on Bryant v. State Farm Mutual, 205 Va. 897, 140 S.E.2d 817 (1965) the trial court stated that this court 'declared the 'excess coverage clause' to be contrary to Section 38.1--381 of the Code of Virginia of 1950, as amended, and of no legal effect,' but 'the 'pro rata' clause remains effective and is applicable to the circumstances involved in this...