Thompson v. Nodak Mut. Ins. Co., 900328

CourtUnited States State Supreme Court of North Dakota
Citation466 N.W.2d 115
Docket NumberNo. 900328,900328
PartiesRebecca THOMPSON, Jonathan Mark Thompson, and Meghann Marie Thompson, Plaintiffs and Appellants, v. NODAK MUTUAL INSURANCE COMPANY, Defendant and Appellee.
Decision Date21 February 1991

Dosland, Dosland, Nordhougen, Lillehaug & Johnson, Moorhead, Minn., for plaintiffs and appellants; appearance by J.P. Dosland.

Hvass, Weisman & King, Minneapolis, Minn., for plaintiffs and appellants; argued by Charles T. Hvass.

Gunhus, Grinnell, Klinger, Swenson & Guy, Moorhead, Minn., for defendant and appellee; argued by Cheryl L. Anderson.

ERICKSTAD, Chief Justice.

On June 11, 1986, Mark Thompson died as the result of injuries arising from a vehicle accident. His children and wife (Thompsons) initiated an action, in part, to recover underinsured motorist benefits under a policy which had been purchased by him from Nodak Mutual Insurance (Nodak). Both parties filed motions seeking summary judgment. Thompsons appeal from a judgment dated July 13, 1990, issued by the District Court for the East Central Judicial District, which granted Nodak's motion for summary judgment dismissal of Thompsons' complaint, and denied the Thompsons' motion for summary judgment. We affirm.

The decedent died as the result of injuries he sustained in a two-vehicle accident. At the time of his death, the decedent was covered by three separate insurance policies which were issued by Nodak. Froelich Feeds, the employer of the driver of the second vehicle involved in the accident, paid the sum of $500,000, through its insurer, Fireman's Fund Insurance Company, to the plaintiffs prior to the initiation of this action. The Thompsons' claims for damages exceed the $500,000 recovered from the third-party tort-feasor.

We are presented with the question of whether or not Thompsons are entitled to recover underinsured motorist benefits under a policy issued by Nodak to the decedent. Essentially, the Thompsons argue that underinsured motorist benefits under the policy are available whenever the damages incurred exceed the amount of insurance carried by the tort-feasor, while Nodak argues that underinsurance benefits only apply when the amount of insurance carried by the tort-feasor is less than the applicable limit of underinsurance coverage.

In 1987, the legislature enacted compulsory underinsurance coverage which included a provision which defines an underinsured motor vehicle as "one for which the applicable limit of liability insurance is less than the applicable limit of underinsurance coverage." Davis v. Auto-Owners Insurance Co., 420 N.W.2d 347, 349 (N.D.1988); N.D.C.C. Sec. 26.1-40-15.3 (1989). However, because the decedent's untimely death occurred prior to the enactment of the 1987 legislation, that legislation does not apply to this case as there is no indication that the 1987 statute should apply retroactively. Section 1-02-10, N.D.C.C. See e.g., State v. Dimmler, 456 N.W.2d 297, 298 (N.D.1990); Reiling v. Bhattacharyya, 276 N.W.2d 237, 238 (N.D.1979).

The Thompsons begin their argument by quoting the following language of the underinsurance provisions of Part V of the policy:

"COVERAGE 1-2--Under-insured Motor Vehicle

"We will pay damages for bodily injury:

1. caused by accident; and

2. arising out of the maintenance or use of an under-insured motor vehicle.

"These must be damages an insured:

1. has not been compensated for; and

2. is legally entitled to recover from the owner or driver of an under-insured motor vehicle.

"THERE IS NO COVERAGE UNTIL THE LIMITS OF LIABILITY OF ALL BODILY INJURY LIABILITY BONDS AND POLICIES THAT APPLY HAVE BEEN USED UP BY PAYMENTS OF JUDGMENTS OR SETTLEMENTS." [See pages 38 & 39 of the policy.]

The language in capital letters indicates that no underinsurance coverage exists until the damages at least exceed the third-party tort-feasor's liability coverage.

The Thompsons proceed with their argument by further quoting the policy again under Part V as follows:

"COVERAGE 1-2

1. The amount of coverage is shown on the front of the Declarations under '1-2--Each Person Each Accident.'

Under 'Each Person' is the amount of coverage for all damages due to bodily injury to one person."

We believe that the remainder of part 1 as well as parts 2 and 3 of COVERAGE 1-2 are also relevant to determination of this appeal and read as follows:

"1. ...

Under 'Each Accident' is the total amount of coverage for all damages due to bodily injury to two or more persons in the same accident.

2. Any amount payable under this coverage shall be reduced by any amount paid or payable to or for the insured:

a. under any workers' compensation, disability benefits or similar law; or

b. by or for any person or organization who is or who may be held legally liable for the bodily injury to the insured; or

c. for bodily injury under the liability coverage.

3. Any payment made to a person under this coverage shall reduce any amount payable to that person under the bodily injury liability coverage." [See pages 42 and 43 of the Policy.]

The Thompsons interpret the first paragraph under part 1 of COVERAGE 1-2 on page 42 of the policy to mean that the amount of coverage is $100,000, irrespective of what they may have collected from the third-party tort-feasor's liability coverage, or under the workers' compensation disability benefits or similar law. They then proceed to interpret paragraph 2 under part 1 of COVERAGE 1-2 to be a procedural step for calculating the amount of damages, focusing on the phrase "all damages due to bodily injury." They also contend that "any amount payable" under part 2 must refer to "any damages payable." We do not agree. The first paragraph of part 1 of COVERAGE 1-2 on page 42 tells the reader where to find the amount of coverage for either "Each Person" or "Each Accident." The second paragraph of part 1 then defines "Each Person" coverage, and the third paragraph of part 1 then defines "Each Accident" coverage. These three paragraphs aid the policyholder in reading the provisions on the front of the Declarations page attached to the policy.

In our view, "any amount payable under this coverage", under part 2, relates to the reference to "1-2 Underinsured Motorist $100,000 EACH PERSON/$300,000 EACH OCCUR." which is shown on the front of the Declarations page. If we take that amount, i.e., $100,000 and reduce it by items listed in paragraphs a., b., and c. of part 2, we arrive at negative $400,000 in this case, as the Thompsons have already been paid $500,000 by the third-party tort-feasor's insurance carrier.

The Thompsons argue that, if "amount payable" is construed to mean the limit of the policy, perverse results would occur as indicated in the following example: A policy is sold by Nodak for $100,000 coverage; an accident occurs causing $50,000 of bodily injury; the tort-feasor has $25,000 of liability insurance. The Thompsons contend that if you follow the district court's interpretation Nodak would be required to pay $75,000 in this example, an amount which is greater than the actual injury. However, the Thompsons fail to consider the following language, which they quoted earlier in their argument, which defines damages and requires that the damages must be damages an insured "is legally entitled to recover from an owner or driver of an under-insured motor vehicle." This provision clearly prevents compensation above the amount of bodily injury. In the above example, the injured party is "legally entitled to recover" only the additional $25,000.

We have previously recognized that insurance contracts are to be interpreted according to the rules of construction in Chapter 9-07 of the North Dakota Century Code. Walle Mutual Insurance Co. v. Sweeney, 419 N.W.2d 176, 178 (N.D.1988). Section 9-07-06 of the North Dakota Century Code requires the contract to be interpreted as a whole. The Thompsons appear to have selected individual words or partial phrases in order to create uncertainty as to the construction of the contract. When read as a whole the policy is unambiguous. "When the language of an insurance policy is unambiguous it should not be strained to impose liability on the insurer." Davis v. Auto-Owners Insurance Company, 420 N.W.2d 347, 348 (N.D.1988) (citing Anderson v. American Standard Insurance Co., 293 N.W.2d 878 (N.D.1980)).

We have previously upheld provisions for underinsurance similar to the provisions provided in the policy in this case where the "policy unambiguously stated that its underinsurance coverage applied only when the tort-feasor's liability insurance was less than Auto-Owners' agreed amount of underinsurance coverage." Davis, 420 N.W.2d at 348. Accord Smith v. Atlantic Mut. Ins. Co., 155 Wis.2d 808, 456 N.W.2d 597 (1990); Paape v. Northern Assur. Co. of America, 142 Wis.2d 45, 416 N.W.2d 665 (Wis.App.1987).

We note that underinsurance coverage has been interpreted to provide coverage in the manner similar to that proposed by the Thompsons as "add on coverage". But those decisions are based primarily upon the application of specific state statutes. See Auto-Owners Ins. Co. v. Hudson, 547 So.2d 467 (Ala.1989) (an application of Sec. 32-7-23, Code of Alabama (1975)); American States Ins. Co. v. Estate of Tollari, 362 N.W.2d 519 (Iowa 1985) (an application of Iowa Code Sec. 516A.1 (1981)); Wood v. American Family Mut. Ins. Co., 148 Wis.2d 639, 436 N.W.2d 594 (1990) (allowing "add on coverage" in light of the ambiguities in the policy).

Other states, including North Dakota, have either previously applied or are currently applying contrary statutes to reach the result we have reached herein. See N.D.C.C., Sec. 26.1-40-15.3 (1989); Minn.Stat. Sec. 65B.49, Subd. 4a (1986). 1 In Broton v. Western Nat. Mut. Ins. Co., 428 N.W.2d 85 (Minn.1988) the Minnesota Supreme Court applied Minn.Stat. Sec. 65B.49, Subd. 4a (1986) which defined the limits of underinsurance coverage as the "lesser of the difference between the UIM coverage set...

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