Walton v. State Farm Mut. Auto. Ins. Co.

• Decision Date: 19 February 1974
• Docket Number: No. 5411,5411
• Citation: 518 P.2d 1399,55 Haw. 326
• Parties: John J. WALTON, Plaintiff-Appellee, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant-Appellant.
• Court: Hawaii Supreme Court

Page 1399

518 P.2d 1399

55 Haw. 326

John J. WALTON, Plaintiff-Appellee, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant-Appellant.

No. 5411.

Supreme Court of Hawai'i.

Feb. 19, 1974.

Syllabus by the Court

1. An 'other insurance' clause in an uninsured motorists provision in an automobile insurance policy is a type of clause that purports to make insurer liable to insured only for the 'excess' by which insured's stated miximum uninsured motorist coverage with insurer exceeds the applicable limits of liability of all other such insurance available to insured.

2. In order to effectuate the protective purpose of HRS § 431-448, 'other insurance' clauses from uninsured motorist provisions in automobile liability insurance policies must be deemed invalid to the extent that such clauses effectively limit insured's total recovery to less than actual damage.

James E. Duffy, Honolulu (Wallace S. Fujiyama, Honolulu, with him on the briefs, Chuck & Fujiyama, Honolulu, of counsel), for appellant.

Ton Seek Pai, Honolulu (Okumura & Takushi, Honolulu, of counsel), for appellee.

Before RICHARDSON, C. J., and LEVINSON, KOBAYASHI and OGATA, JJ., and Circuit Judge LANHAM Assigned Temporarily by Reason of Vacancy.

OGATA, Justice.

On May 27, 1971, plaintiff-appellee (hereinafter appellee or appellee-insured) was seriously injured in an automobile accident while riding as a passenger in the car of Gary Seto. Appellee's host driver (Seto), and appellee himself both carried uninsured motor vehicle coverage as the named insureds of separate automobile liability insurance policies. The driver of the other vehicle involved in the automobile accident was an uninsured motorist. Appellee collected from host driver Seto's insurer the amount of $10,000, the maximum amount recoverable under the uninsured motorist provisions of Seto's policy.

Subsequently, appellee obtained a final judgment against the uninsured motorist for the sum of $25,000. No portion of the judgment has been collected by appellee, because, following the entry of judgment against him, the uninsured motorist filed a voluntary petition in bankruptcy. Appellee then sought to collect $10,000 from defendant-appellant, appellee's own insurer (hereinafter appellant or appellant-insurer) which amount appellee claimed pursuant to the provisions of his own insurance policy relating to uninsured motor vehicle coverage. Appellant denied appellee's claim of coverage, and thereafter, appellee filed a complaint against appellant for $10,000. The circuit court granted appellee summary judgment in the amount of $10,000 against appellant on November 8, 1972. We affirm.

Appellant contends that the circuit court erred in ruling as null and void a clause of the insurance policy upon which appellant relies and which specifically excludes coverage for appellee in accident situations such as that here involved. The clause specifically states that with respect to coverage for bodily injury sustained by an insured while occupying a motor vehicle not owned by that insured, the uninsured motorist insurance provisions of the occupant-insured's policy provide only 'excess' insurance over other applicable insurance coverage of the occupant-insured. This type of uninsured motorist coverage is termed 'excess', because it applies only to the extent that its limits exceed the limits of any other uninsured motorist insurance proceeds available to the occupant-insured. ¹ Since appellee, as passenger of his host driver's car, had already collected $10,000 from his host driver's insurer, and since appellee-insured's uninsured motorist coverage under the policy with appellant-insurer was in the maximum amount of $10,000 the provision noted above, if valid, excuses appellant-insurer from any duty to pay appellee any sum whatsoever arising from this accident, notwithstanding appellee's outstanding judgment against the uninsured motorist in the amount of $25,000.

The question before us is a narrow one. We must decide whether the provisions of the insurance policy cited above, and relied upon by appellant, shall be allowed to stand, in view of HRS § 431-448. The statute reads in pertinent part as follows:

§ 431-448 Automobile liability; coverage for damage by uninsured motor vehicle. No automobile liability or motor vehicle liability policy . . . shall be delivered, issued for delivery, or renewed in this State . . . unless coverage is provided therein or supplemental thereto, in limits for bodily injury or death set forth in section 287-7, under provisions filed with and approved by the insurance commissioner, for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured motor vehicles . . . provided, however, that the coverage required under this section shall not be applicable where any insured named in the policy shall reject the coverage in writing.

Although it is clear that the policy provisions here at issue were approved by the insurance commissioner, this approval is not dispositive of the issue before us. Even disregarding the probably warranted assumption that approval by the commissioner is perfunctory and nondeliberative, it is evident that the commissioner would have no authority to approve any polciy provisions that are in contravention of any part of the Hawaii Insurance Law, ch. 431 of HRS, § 431-35(a). see, Sullivan v. Doe, 159 Mont. 50, 61 495 P.2d 193, 199 (1972); Simpson v. State Farm Mutual Automobile Ins. Co., 318 F.Supp. 1152, 1156 (S.D.Ind.1970).

Although the issue involved herein is of first impression in Hawaii, it has been the subject of numerous decisions in other jurisdictions, and we are confronted at the outset with a split in authority. The rule adopted in a very heavy majority of the jurisdictions that have dealt with the issue on appeal is that state statutory provisions, in many cases totally or very substantially identical with HRS § 431-448, must be interpreted as invalidating clauses in insurance policies that, if effectuated, would reduce the benefits directly payable by the injured-insured's insurer to a sum below the statutory minimum. The statutory minimum in Hawaii is incorporated by reference within HRS § 431-448, and is 'not less than $10,000 because of bodily injury to . . . one person in any one accident.' HRS § 287-7. The minority rule is that provisions such as HRS § 431-448 do not invalidate clauses in policies that would reduce insured's actual coverage from his own insurer below the statutory minimum so long as the clauses, such as the 'other insurance' clause involved herein, when effectuated, do not result in an insured's total recovery from all sources being less than the minimum limits prescribed by the state financial responsibility law, determined in Hawaii by HRS § 287-7.

In Blakeslee v. Farm Bureau Mutual Ins. Co. of Michigan, 388 Mich. 464, 470-472, 201 N.W.2d 786, 789-790 (1972), the Michigan court found nineteen state courts, and one federal court applying state law, to have disallowed 'other insurance' limitations such as that here at issue as contrary to the state statute on 'uninsured motorist' insurance requirements. ² In contrast, states adopting the minority view are only barely one third as numerous. ³ Recent trends reveal that at least eight additional states have now also chosen the majority rule. ⁴ Because the issue in the case at bar is one of statutory interpretation, none of the preceding cases can be dispositive. In any event, a mere preponderance in the number of jurisdictions espousing given positions is also not independently persuasive in assessing the respective merits of the majority as against the minority rule. However, we think that the majority rule expresses the better view, and we adopt it as a correct statement of the law in this jurisdiction.

A study of the cases cited for the minority view reveals that the minority rule validating such 'other insurance' clauses has but a weak foundation that crumbles like a castle of sand on closer examination. The minority rule cases either cite case authority later repudiated, or build upon case law completely inapposite due to the important distinguishing feature of the absence of any statute having provisions similar to those of HRS § 431-448. See Discussion, Simpson v. State Farm Mutual Automobile Insurance Co., 318 F.Supp. 1152, 1151-1156 (S.D.Ind.1970). Upon turning to the reasons given by the actually apposite case law in order to support the minority viewpoint, comparable inadequacies are discovered. The chief reasons given to defend the minority view by the apposite cases are two in number.

First, it is contended that uninsured motorist statutes, such as HRS § 431-448, are enacted only in order to assure protection in an amount equal to the amount that would have been payable had the uninsured motorist been insured for the minimum required by statute for any vehicle insurance policy. M. F. A. Mutual Ins. Co. v. Wallace, 245 Ark. 230, 431 S.W.2d 742 (1968); Morelock v. Millers' Mutual Ins. Ass'n of Illinois, 49 Ill.2d 234, 274 N.E.2d 1 (1971); Maryland Casualty Company v. Howe, 106 N.H. 422, 213 A.2d 420 (1965). Though there may be information from legislative history that supports such bald statements by the Arkansas, New Hampshire, and Illinois courts, it remains unarticulated. Other jurisdictions have found their state statute's legislative history to suggest an opposite conclusion. ⁵ The legislative history in Hawaii is not fully dispositive of the effect of HRS § 431-448 as to 'other insurance' clauses in insurance policies. Standing Committee Report 194 on H.B. 26 (which became HRS § 431-448), 1965 House Journal, page 582, states in part:

The purpose of this bill is to promote protection, through voluntary insurance, for persons who are injured by uninsured motorists who cannot pay for personal injuries caused by motor vehicle accidents. . . .

While admittedly not...