Thomas v. Nationwide Mut. Ins. Co.

• Decision Date: 16 December 1992
• Docket Number: No. 20927,20927
• Citation: 425 S.E.2d 595,188 W.Va. 640
• Parties: Deborah THOMAS, Plaintiff, v. NATIONWIDE MUTUAL INSURANCE COMPANY, a corporation, Defendant.
• Court: West Virginia Supreme Court

Page 595

425 S.E.2d 595

188 W.Va. 640

Deborah THOMAS, Plaintiff, v. NATIONWIDE MUTUAL INSURANCE COMPANY, a corporation, Defendant.

No. 20927.

Supreme Court of Appeals of West Virginia.

Submitted Sept. 9, 1992.

Decided Dec. 16, 1992.

Syllabus by the Court

1. "Insurers may incorporate such terms, conditions and exclusions in an automobile insurance policy as may be consistent with the premium charged, so long as any such exclusions do not conflict with the spirit and intent of the uninsured and underinsured motorists statutes." Syl. pt. 3, Deel v. Sweeney, 181 W.Va. 460, 383 S.E.2d 92 (1989).

2. When an insurer issues an automobile insurance policy which provides both liability and underinsured motorists coverage, but which policy contains what is commonly referred to as a "family use exclusion" for the underinsured motorist coverage, and when, in a single car accident, the passenger/wife receives payments under the liability coverage for the negligence of the driver/husband, such exclusion is valid and not against the public policy of this state. That exclusion, which excludes from the definition of "underinsured motor vehicle" any automobile owned by or furnished for the regular use of the insured or a relative, has the purpose of preventing underinsured coverage from being converted into additional liability coverage.

3. "West Virginia Code § 33-6-31 (1992) does not forbid the inclusion and application of an anti-stacking provision in an automobile insurance policy where a single insurance policy is issued by a single insurer and contains an underinsured endorsement even though the policy covers two or more vehicles. Under the terms of such a policy, the insured is not entitled to stack the coverages of the multiple vehicles and may only recover up to the policy limits set forth in the single policy endorsement." Syl. pt. 5, Russell v. State Automobile Mutual Ins. Co., 188 W.Va. 81, 422 S.E.2d 803 (1992).

Mark Jenkinson, James A. McKowen, Hunt & Wilson, Charleston, for plaintiff.

Gray Silver III, Patrick J. Nooney, Steptoe & Johnson, Martinsburg, for defendant.

McHUGH, Chief Justice:

This case is before the Court upon certified questions of the Circuit Court of Berkeley County. The plaintiff is Deborah Thomas. The defendant is Nationwide Mutual Insurance Company.

I

On July 8, 1990, the plaintiff and her husband were driving on State Route 9 when their 1982 Chevrolet Chevette went off the road and struck a utility pole at a high rate of speed. The plaintiff's husband was driving at the time of the accident. No other vehicles were involved in the accident.

The plaintiff sustained multiple fractures to her hip and legs, which required extensive surgery and rigorous physical therapy. ¹ The plaintiff has been medically advised that the severity of her injuries will leave her with some permanent impairment. The plaintiff's total medical bills currently exceed $90,000.

At the time of the accident, the plaintiff and her husband had two vehicles, the Chevette, and a 1984 Chevrolet Citation, insured with the defendant, under a single insurance policy. Under the terms of the policy, the vehicles carried liability and underinsurance limits of $100,000/$300,000 each. The defendant paid the full $100,000 liability coverage to the plaintiff on the Chevette, but denied coverage under the underinsurance provisions of the policy on either vehicle.

Accordingly, this declaratory judgment action was filed by the plaintiff to determine the rights and obligations of the parties. Three questions were certified to this Court by the circuit court:

1. May an insured who is covered simultaneously by two or more underinsured motorist policy endorsements on multiple vehicles under the same policy recover under all of such endorsements up to the aggregated or stacked limits of the same, or up to the amount of judgment obtained against the underinsured motorist, whichever is less, as a result of one accident and injury?

2. Whether an insured can stack such underinsurance coverage on top of the limits of liability coverage previously paid under the same policy for the same accident up to the aggregated or stacked limits of the same, or up to the amount of judgment obtained against the underinsured motorist, whichever is less?

3. Whether in the instant case the following definitional exclusion (known as the Family Use Exclusion) is a valid exclusion in light of the current law and public policy of the State of West Virginia?

'2. We will not consider as an underinsured motor vehicle: e) any vehicle owned by or furnished for the regular use of you or a relative.'

(emphasis in original)

We believe that the primary issue in this case is the third certified question. Accordingly, we first address that question. ²

II

The third certified question in this case deals with the "family use exclusion" in the insurance policy, specifically, the validity of such an exclusion.

The circuit court answered this question by stating that such an exclusion is valid.

The insurance policy at issue in this case, in the "underinsured motorists" section, contains the following provisions:

We will pay compensatory damages as a result of bodily injury and/or property damage suffered by you or a relative and due by law from the owner or driver of an underinsured motor vehicle. Damages must result from an accident arising out of the:

1. ownership;

2. maintenance; or

3. use;

of the underinsured motor vehicle.

(emphasis in original) The policy goes on to state, in the underinsured motorists "definition" section, the following:

1. An underinsured motor vehicle is a motor vehicle with respect to the ownership, operation, or use of which there is liability insurance applicable at the time of the accident, but the limits of that insurance are either:

a) less than limits the insured carried for underinsured motorists coverage, or

b) has been reduced by payments to others injured in the accident to limits less than limits the insured carried for underinsured motorists coverage.

2. We will not consider as an underinsured motor vehicle:

....

e) any vehicle owned by or furnished for the regular use of you or a relative.

(emphasis in original)

Provision "2(e)," is commonly referred to as the family use exclusion.

In Myers v. State Farm Mutual Automobile Ins. Co., 336 N.W.2d 288 (Minn.1983), the Supreme Court of Minnesota held that under that state's statutory provisions in effect at the time:

Underinsured motorist coverage is first-party coverage and, in that sense, the coverage follows the person not the vehicle. Here, however, the decedent passenger's heirs have already collected under the liability coverage of the insurer of the Stein car. To now collect further under the same insurer's underinsured motorist coverage would be to convert the underinsured motorist coverage into third-party insurance, treating it essentially the same as third-party liability coverage. The policy definition defining an 'underinsured motor vehicle' to exclude a vehicle owned by or regularly furnished or available to the named insured properly prevents this conversion of first-party coverage into third-party coverage.

The purpose of underinsured coverage is to protect the named insured and other additional insureds from suffering an inadequately compensated injury caused by an accident with an inadequately insured automobile.

336 N.W.2d at 291 (emphasis supplied).

In Eisenschenk v. Millers' Mutual Ins. Assoc., 353 N.W.2d 662 (Minn.Ct.App.1984), the Court of Appeals of Minnesota followed the lead of that state's supreme court, in upholding the validity of the family use exclusion. The Eisenschenk court focused on the insured's failure to purchase additional insurance. In Eisenschenk, the plaintiff was injured in a single car accident in which he was a passenger in a car owned by his father and driven by his sister. The pertinent policy excluded from the definition of "uninsured" vehicle "an automobile furnished for the regular use of the named insured or of any person resident in the same household who is related to the named insured by blood, marriage or adoption[.]" 353 N.W.2d at 663.

The court in Eisenschenk went on to reiterate the points made in Myers:

We are unable to factually distinguish the instant case from Myers. The plaintiff in Myers was a 'covered person' under State Farm's policy; Thomas Eisenschenk is a 'covered person' under Millers' policy here. Just as the policy in Myers was 'not designed to compensate (owner) or his additional insureds from (owner's) failure to purchase sufficient liability insurance,' [336 N.W.2d] at 291, neither is the Millers' policy designed to protect Dennis Eisenschenk or his additional insureds (of which Thomas is one) from Dennis' failure to purchase sufficient liability insurance.

353 N.W.2d at 665.

In Fidelity & Casualty Co. v. Streicher, 506 So.2d 92 (Fla.Dist.Ct.App.), review denied, 515 So.2d 231 (Fla.1987), the court rejected the plaintiff's public policy argument that underinsurance benefits should be stacked on liability coverage. In Streicher, the plaintiff was seriously injured in an automobile accident wherein she was a passenger in her family's car. The defendant Fidelity had issued a policy which provided liability and uninsured motorist coverage on three family vehicles, including the one involved in the accident. The defendant Fidelity paid the plaintiff the liability policy limits of $100,000. Although the policy also included underinsured motorist coverage of $100,000 on each vehicle, "the policy's definition of uninsured or underinsured motor vehicle excluded any vehicle owned by the insured or a relative." 506 So.2d at 93.

In rejecting the plaintiff's contention that she be entitled to recover all available underinsured motorist benefits because her damages exceeded the liability coverage, the Florida District Court of Appeal held The plaintiff argues that to deny her UM [underinsured...