State Farm Mut. Auto. Ins. Co. v. Kuehling, 54962

• Decision Date: 11 September 1985
• Docket Number: No. 54962,54962
• Citation: 475 So.2d 1159
• Parties: STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY v. Susan T. KUEHLING.
• Court: Mississippi Supreme Court

Page 1159

475 So.2d 1159

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY v. Susan T. KUEHLING.

No. 54962.

Supreme Court of Mississippi.

Sept. 11, 1985.

Billy W. Hood, Leslie Scott Sheffield, Bryan, Nelson, Allen, Schroeder & Cobb, Gulfport, for appellant.

Joe Sam Owen, Owen & Galloway, Gulfport, for appellee.

Before WALKER, HAWKINS and PRATHER, JJ.

PRATHER, Justice, for the Court:

The issue of this appeal is whether underinsured motorist coverage of an insurance company may require offset for payments of the tortfeasor's liability carrier. The answer turns upon an interpretation of the Mississippi Uninsured Motorist Act and the construction of the parties' contract. After analysis of the Act and the contract, this Court holds that an insurance company may offset the tortfeasor's payments against underinsurance benefits. Susan T. Kuehling sued the driver and the owner of an automobile, together with her own uninsured motorist carrier for damages sustained by her in an automobile accident. On a summary judgment motion, the trial court held the insured entitled to receive total coverage limits afforded by her uninsured motorist coverage plus amounts received from the tortfeasor's liability carrier, without offset. State Farm Mutual Automobile Insurance Company appeals asserting that the trial court erred as a matter of law in granting to Kuehling, and denying to State Farm, a motion for summary judgment.

The assignment of error is based upon the contention that:

A. The Mississippi Uninsured Motorist Act, Miss. Code Ann. Sec. 83-11-101 et seq. (Supp.1982), makes a clear distinction between uninsured and underinsured motorist coverage and, by definition alone, creates a wholly separate category of insurance coverage entitling insureds to collect as benefits under uninsured coverage only that amount by which the underinsurance limits of liability exceed the liability coverage of the adverse driver.

B. In creating underinsured motorist coverage by amendment of Miss. Code Ann. Sec. 83-11-103(c)(iii) in 1979, the Mississippi Legislature did not intend to abrogate the rights of underinsured motorist carriers to subrogation as provided by Miss. Code Ann. Sec. 83-11-107 (1972) and, therefore, the two statutory provisions must be construed in conjunction with each other, resulting in the allowance of a credit to the underinsured motorist carrier in the amount of the liability payment of the adverse driver in lieu of subrogation.

I.

On November 26, 1981, Susan T. Kuehling suffered substantial injuries when involved in a headon collision with a vehicle driven by Timothy Sparling and owned by William Herring. The driver, Timothy Sparling, whose negligence was the cause of the accident, was covered through a personal liability policy with maximum coverage of $10,000. William Herring was uninsured. The appellee, Susan T. Kuehling, was insured through two separate liability policies issued by State Farm in the amount of $10,000, allowing aggregate coverage of $20,000.

On August 4, 1982, without written consent, but with knowledge of State Farm, appellee executed a "full and final release of all claims" for $10,000 with Timothy Sparling; and on August 10, 1982, she dismissed with prejudice her action against Sparling and Herring reserving her right to pursue her uninsured motorist claim against State Farm.

State Farm voluntarily paid to the appellee $5,000 representing the maximum medical payments benefit under the policy and $10,000 of uninsured motorist coverage--an amount determined by State Farm to be the full extent to which she was entitled, based upon the difference between the aggregated $20,000 maximum and the $10,000 coverage afforded by the settlement with Sparling. Appellee claimed that she was entitled to the full $20,000 payment from State Farm notwithstanding the fact that the tortfeasor's payment had compensated her to the extent of $10,000.

In January, 1983, both parties filed motions for summary judgment. Stipulations entered by the parties provided that:

(1) The appellee incurred hospital, medical expenses, and lost wages totaling $11,382.90;

(2) The appellee was not at fault for the accident; and

(3) In the event the lower court ordered the appellant to pay the additional $10,000 in controversy and if that ruling was then affirmed by this Court, then the appellant would agree to make the $10,000 payment sought by the appellee without further proof being submitted to the lower court, thus preventing this case from being in the nature of an interlocutory appeal. The court below rendered judgment in favor of appellee in the amount of $10,000.

II.

State Farm contends that the insurance contract under which the parties were operating expressly authorized the insurance company to reduce, or offset, the amount of underinsured motorist coverage by any amount received by the insured from one legally liable for damages to the insured.

The contract in pertinent part states that the limits of liability are as follows:

A. Any amount payable under this section for bodily injury (property damage) shall be reduced by:

(1) Any amount paid or payable to or for the insured:

(a) By or for any person or organization who is or may be held legally liable for the bodily injury sustained by the insured;

(2) An amount equal to total limits of liability for bodily injury (property damage) of all liability policies that apply to the accident.

Kuehling argues that the underinsurance motorist statute has no provision allowing setoffs such as those set forth by the insurance policy. She further contends that any attempt by State Farm, through its policy provisions, to reduce or setoff the underinsured motorist coverage by the amounts paid on behalf of the tortfeasor is invalid and unenforceable under the Mississippi statute.

We agree that a policy cannot cut down on coverage which the Motor Vehicle Safety Responsibility Act is intended to require by including clauses which attempt to limit the statutory requirements. McMinn v. New Hampshire Insurance Co., 276 So.2d 682 (1973). In Talbot v. State Farm Mutual Automobile Insurance Co., 291 So.2d 699 (Miss.1974) an insurance company sought a deduction from its uninsured motorist liability for payments made under the medical coverage of the same insurance. This Court prohibited such a deduction since it would reduce the statutory requirement for payment of $5,000 of uninsured motorist coverage. Id. at 703. No such conflict is present in the case sub judice; State Farm has already paid to Kuehling the $10,000 minimum required by the Mississippi Motor Vehicle Safety Responsibility Law. Miss. Code Ann. Sec. 83-11-101 (Supp.1984).

State Farm asserts that the effect of the provision in the Kuehling's policy is to guarantee a uniform total available recovery by its insured when injured by a tortfeasor who has no liability insurance, a tortfeasor who has some liability insurance but not enough and a tortfeasor whose liability limits equal that of the insured's uninsured motorist coverage limits.

An analysis of possible situations which could arise in an accident will help in answering this question. And for this analysis, this Court will assume that that tortfeasor's payment is permitted to be offset by the uninsured carrier. When the tortfeasor is completely uninsured, and the insured carries $20,000 uninsured motorist limits, the insured is entitled to $20,000. When the tortfeasor has $10,000 in liability insurance and the insured carries $20,000 uninsured motorist, the insured is entitled to $10,000 from the tortfeasor and $10,000 from the insured for a total coverage of $20,000. When the tortfeasor and the insured have liability limits in equal amounts...