Winters v. Northwestern Nat. Cas. Co.
| Decision Date | 02 November 1993 |
| Docket Number | Civ. No. 93-5044. |
| Citation | 838 F. Supp. 440 |
| Parties | Raymond R. WINTERS and Harold Speck, Plaintiffs, v. NORTHWESTERN NATIONAL CASUALTY COMPANY and United Fire & Casualty Company, Defendants. |
| Court | U.S. District Court — District of South Dakota |
Steven C. Beardsley, Lynn Jackson Shultz & Lebrun, Rapid City, SD, for plaintiffs.
Douglas M. Deibert, Cadwell, Sanford & Deibert, Sioux Falls, SD, for defendant Northwestern.
Paul S. Swedlund, Gunderson, Palmer, Goodsell & Nelson, Rapid City, SD, for defendant United.
This case represents an underinsured motorist (UIM) coverage dispute. Defendant Northwestern National Casualty Company (NWNCC) insured a pickup truck owned by plaintiff Harold Speck (Speck). Speck was a passenger in his own pickup driven by co-plaintiff Raymond Winters (Winters). Defendant United Fire & Casualty Company (UF & CC) insured plaintiff Winters. In this declaratory judgment action the parties seek a determination of the applicability of the respective policies as to the amount of coverage available after the two separate tortfeasors paid damages to the extent of the tortfeasors' liability policies.
Cross motions for summary judgment have been filed.
The facts are not in dispute. Plaintiffs Winters and Speck sustained injuries in a motor vehicle collision. The tortfeasors (Mark A. Orem and Mark D. Darrow) each carried liability insurance of $100,000 per person, $300,000 per accident. Their two insurance carriers paid the per person limit of $100,000 to each plaintiff. Each plaintiff therefore received a total of $200,000.
After receiving the aggregate of $200,000 each, Winters and Speck now seek to collect UIM benefits under their individual policies. NWNCC insured Speck for $300,000 UIM coverage. UF & CC insured Winters for $300,000 UIM coverage. For purposes of this action, the parties stipulate that the injury and damages to Winters and Speck exceed $200,000 each. The issue then is the extent of the UIM coverage remaining under each plaintiff's policy.
The plaintiffs' policies contained an endorsement to conform to the law of South Dakota requiring UIM coverage. South Dakota Codified Laws (SDCL) 58-11-9.5 provides as follows:
Payment to insured for portion of judgment not collected from underinsured motorist — Coverage limits. Subject to the terms and conditions of such underinsured motorist coverage, the insurance company agrees to pay its own insured for uncompensated damages as its insured may recover on account of bodily injury or death arising out of an automobile accident because the judgment recovered against the owner of the other vehicle exceeds the policy limits thereon. Coverage shall be limited to the underinsured motorist coverage limits on the vehicle of the party recovering less the amount paid by the liability insurer of the party recovered against.
The South Dakota UIM statute is substantially identical in form and content to the model statute enacted by nearly every legislature across the nation.
The policy endorsements are identical as follows:
It is each plaintiff's position that there is an entitlement to UIM benefits under each of their own policies to the extent of the uncompensated damages over $200,000, limited only to the amount of the single limit coverage of $300,000. Plaintiff Speck argues that his company, NWNCC, is obligated to provide its total limit of $300,000 minus payment by the tortfeasors of $200,000 resulting in a remaining coverage of $100,000. Plaintiff Winters argues that his company, UF & CC, is obligated to provide its total limit of $300,000 minus the payment by the tortfeasors of $200,000 resulting in a remaining coverage of $100,000. In each case, however, the recovery will depend upon the proof of the additional amount at trial. The Court agrees.
The position of NWNCC is straightforward. NWNCC would have the Court hold that since a combined total of $400,000 was recovered in total by plaintiffs, the tortfeasors were not underinsured. Additionally, because the tortfeasors had liability coverage of $300,000 per accident and the plaintiffs have $300,000 UIM coverage, the tortfeasors were not considered underinsured motorists. The Court does not agree.
The position of UF & CC is different. It argues that because Speck was not its insured, it owed no contractual duty to provide him UIM insurance. Additionally, because Winters was driving the Speck pickup, Speck's carrier, NWNCC, became the insured of Winters as the primary insurance carrier. Under the NWNCC endorsement, paragraph B, an insured is anyone "occupying" a covered vehicle. NWNCC was therefore the primary insurer and UF & CC was the secondary insurer. The argument continues to the effect that because Winters received $200,000 from the tortfeasors, there remained $100,000 UIM coverage from the primary carrier NWNCC. Assuming that Winters can establish damages of $300,000, he would collect an additional $100,000 from the primary carrier, NWNCC. He would not be underinsured as respects his own policy with UF & CC because he would then have received $300,000 from "other insurance" which equals the limit of his own uninsured motorist policy. The Court agrees in part.
In support of plaintiffs' position, they rely on Farmland Insurance Cos. v. Heitmann, 498 N.W.2d 620, 627 (S.D.1993). The Court does not believe that Farmland Insurance is dispositive of all the issues here. It did not involve the issue of primary and secondary UIM coverage. Nevertheless, Farmland Insurance is authority in its interpretation of SDCL 58-11-9.5
In Farmland Insurance, the South Dakota Supreme Court, considering SDCL 58-11-9.5, specifically held that "coverage is limited to the difference between the underinsured motorist coverage limits on the vehicle of the insured less the amount paid by the liability insurer of the underinsured motorist." Id. at 625. "The maximum liability of the insurer ... is the lesser of the difference between the limits of UIM coverage ... and the amount paid to the insured by the tortfeasor or tortfeasors...." Id. (citing Broton v. Western Nat'l Mut. Ins. Co., 428 N.W.2d 85, 90 (Minn.1988)) (emphasis added). Farmland Insurance characterized the South Dakota UIM statute as a "difference of the limits statute." Farmland Insurance at 625.
In support of its position, NWNCC urges the Court to adopt the ruling of Waylett v. United Services Auto. Association, 224 Neb. 741, 401 N.W.2d 160 (1987). In Waylett, the four members of the Waylett family suffered injuries from an auto accident and collected $325,000 total from the liability carriers of three different alleged tortfeasors. In holding that all of the monies received by the family should be included to reduce the amount of UIM benefits available, the Nebraska Supreme Court stated that the Wayletts' policy "provided in clear and precise terms that the $300,000 (the limit of liability) is to be reduced by all sums paid because of the bodily injury by or on behalf of persons or organizations which may be legally responsible." Id. at 163. Therefore, the $300,000 was reduced by the $325,000 already received resulting in a minus $25,000 figure. Consequently, no UIM coverage was available.
In this case, however, NWNCC's position and reliance on Waylett is misplaced. The Wayletts had $300,000 in total underinsured limits and collected a total of $325,000 from the tortfeasors; thus, they were not underinsured. Here, each plaintiff has collected $200,000 from tortfeasors, the maximum recovery available under the tortfeasors' policies. However, each plaintiff has $300,000 underinsured motorist coverage, which when reduced by the $200,000 recovered, leaves each plaintiff with $100,000 in UIM coverage. To aggregate each plaintiff's recovery with the other and preclude underinsured status not only would be contrary to the weight of legal authority on this issue, but also would be directly opposed to the legislative intent of UIM coverage1 in providing an insured with maximum coverage.
This case presents the problem of determining which "limit" of the tortfeasors' liability coverage should be used to reduce the available UIM coverage for the plaintiffs. However, SDCL 58-11-9.5, public policy, and Farmland Insurance indicate that it is the per person limit in the tortfeasors' policies ($100,000) that should be used to reduce the UIM coverage available to the plaintiffs.
SDCL 58-11-9.5 provides that "coverage shall be limited to the underinsured motorist coverage limits on the vehicle of the party recovering less the amount paid by the liability insurer of the party recovered against." (Emphasis added.) The statute makes no other reference to the way in which the amount of underinsurance is established and provides no definition of when a vehicle is underinsured.
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