Wold v. Progressive Preferred Ins. Co.

• Decision Date: 02 August 2002
• Docket Number: No. S-9775.,S-9775.
• Parties: Cynthia WOLD, individually and as Personal Representative of the Estate of Heidi Wold, Appellant, v. PROGRESSIVE PREFERRED INSURANCE COMPANY, Appellee.
• Court: Alaska Supreme Court

52 P.3d 155

Cynthia WOLD, individually and as Personal Representative of the Estate of Heidi Wold, Appellant, v. PROGRESSIVE PREFERRED INSURANCE COMPANY, Appellee.

No. S-9775.

Supreme Court of Alaska.

August 2, 2002.

Laurel J. Peterson, Laurel J. Peterson, P.C., Anchorage, for Appellant.

Daniel T. Quinn, Richmond & Quinn, Anchorage, for Appellee.

Before: FABE, Chief Justice, MATTHEWS, EASTAUGH, and BRYNER, Justices.

OPINION

BRYNER, Justice.

I. INTRODUCTION

Heidi Wold was killed while riding in a pick-up that rolled over after its driver, Koby Smith, swerved to avoid an on-coming car; the on-coming car kept driving and was never identified. Heidi's estate and her parents settled with Smith's insurer; Heidi's mother, Cynthia, then claimed benefits—both individually and as personal representative of Heidi's estate—from Progressive Preferred Insurance Company on Cynthia's own uninsured/underinsured motorists (UM/UIM) policy. Progressive refused to pay and sought a declaratory judgment, claiming that the unknown driver's conduct could not trigger UM/UIM coverage without a collision and that Smith's negligence could not trigger UM/UIM coverage because the Wolds had not exhausted his liability coverage. The superior court entered judgment for Progressive. We affirm in part and reverse in part, agreeing that Alaska law treats unidentified vehicles as uninsured only when there is a collision but holding that Heidi Wold's estate used up Smith's liability coverage and so may claim UM/UIM benefits from Progressive.

II. FACTS AND PROCEEDINGS

On December 27, 1995, Koby Smith rolled his pick-up truck when he swerved to avoid a car coming toward him in his lane of traffic. Smith's truck did not hit the oncoming car; the car kept driving, and its driver was never identified. Koby Smith's passenger, sixteen-year-old Heidi Wold, was killed in the accident. Heidi's mother was called to the accident scene and arrived soon after, just before Heidi died.

Smith was insured under a policy issued by Allstate Insurance Company that provided both liability and uninsured/underinsured motorists coverage, each having limits of $100,000 per person and $300,000 per accident. Heidi Wold's mother, Cynthia Wold, had her own UM/UIM policy with Progressive, which had the same limits as the Allstate policy. It is undisputed that Heidi qualified as an insured person under both the Allstate and Progressive policies.

Through their attorney, Laurel Peterson, the Wolds negotiated with Allstate for payment under Smith's liability and UM/UIM coverages. Cynthia Wold asserted a wrongful death claim as the personal representative of Heidi's estate; on her own behalf, Cynthia asserted a "bystander" claim for negligent infliction of emotional distress (NIED); and both Cynthia and Heidi's father, Greg Wold, evidently asserted individual claims for loss of consortium or society. The Wolds asserted these claims against both Smith and the unknown driver, alleging that each had been negligent. They maintained that Smith was covered for his own negligence under Allstate's liability policy and that, under Alaska law, the unknown driver was considered to be an uninsured motorist whose actions were covered under the policy's UM/UIM provisions.¹

The Wolds and Allstate reached a settlement on two of their claims in early December 1997. On December 19 Allstate sent Peterson two checks for $135,600, one representing a policy-limits settlement ($100,000 plus costs and attorney's fees) for the estate's wrongful death UM/UIM claim and the other for Cynthia Wold's NIED UM/UIM claim. Both of these claims arose from the unknown driver's alleged negligence. Peterson accepted both checks on behalf of the Wolds.

Meanwhile, two days earlier, on December 17, Peterson had filed a superior court complaint against Smith in order to prevent the Wolds' unresolved claims from being barred under the two-year tort statute of limitations,² which otherwise would have expired on December 27. The complaint listed as plaintiffs "Cynthia Wold individually, Cynthia Wold, as Appointed Personal Representative of the Estate of Heidi Wold, and Gary Wold." Over the next two months Allstate and Peterson continued to negotiate on the Wolds' unresolved claims. In February 1998 the Wolds filed a global offer of judgment, proposing to settle all their remaining claims against Allstate and Smith for $100,000 plus costs, interest, and attorney's fees—a total that Peterson calculated to be $137,883.81. Allstate accepted the offer, and on March 4, 1998, it delivered a settlement check to Peterson "in trust for Cynthia Wold, Gary Wold, [and] Cynthia Wold as personal rep of the Heidi Wold Estate," in exchange for the Wolds' release of all claims against Allstate and Smith.

Peterson then sent a demand letter to Cynthia's own insurer, Progressive, asserting that the Allstate policy's limits had now been exhausted and that Cynthia and the estate had a right to further reimbursement under Cynthia's UM/UIM policy with Progressive. Progressive denied any obligation to pay and filed a superior court action seeking declaratory relief. The declaratory judgment complaint offered two reasons to support Progressive's position that it had no legal duty to pay the UM/UIM claims. First, insofar as Cynthia and the estate claimed coverage for injuries caused by the unknown driver's negligence, Progressive asserted that Alaska law precluded the unknown driver from being considered an uninsured motorist "because there was no physical contact between the vehicle driven by Koby Smith and the phantom driver's vehicle." Second, insofar as Cynthia and the estate sought to recover for injuries resulting from Koby Smith's negligence, Progressive asserted that Smith could not be considered an underinsured driver under Alaska law because the Wolds had not used up the policy limits available under Smith's Allstate liability policy.

Following an evidentiary hearing into the circumstances surrounding the Wolds' settlements with Allstate, Superior Court Judge Brian C. Shortell issued findings of fact and conclusions of law sustaining Progressive's position.

Cynthia appeals in her own right and on behalf of Heidi's estate.

III. DISCUSSION

A. The Physical Contact Requirement

Cynthia challenges the superior court's ruling that Progressive had no duty to pay her claim for UM/UIM benefits arising from the unknown driver's negligence because the unknown driver's car did not collide with Smith's pick-up. Although she acknowledges that Progressive's policy required physical contact, Cynthia argues that this requirement should not have been enforced because it is undisputed that Koby Smith's accident was caused by an unidentified vehicle whose driver failed to stop at the scene of the accident.³

But the trial court's ruling enforcing the Progressive policy's physical contact requirement was mandated by Alaska law. In 1984 Alaska's Motor Vehicle Safety Responsibility Act (MVSRA), to which all automobile policies must conform,⁴ was amended by the addition of a section relating to uninsured and underinsured motorists coverage. Alaska Statute 28.20.445(f) provides:

If both the owner and operator of the uninsured vehicle are unknown, payment under the uninsured and underinsured motorists coverage shall be made only where direct physical contact between the insured and uninsured or underinsured motor vehicles has occurred. A vehicle that has left the scene of the accident with an insured vehicle is presumed to be uninsured if the person insured reports the accident to the appropriate authorities within 24 hours.⁵

The Alaska Mandatory Automobile Insurance Act (AMAIA) contains similar language. Alaska Statute 28.22.201(b) reads:

If both the owner and operator of a vehicle are unknown, payment under the uninsured and underinsured motorists coverage may be made only where direct contact between the motor vehicles has occurred. A vehicle and operator that have left the scene of an accident with another vehicle are presumed to be uninsured if the insured person reports the accident to the appropriate authorities within 24 hours.⁶

Thus, under both the MVSRA and the AMAIA an insured can only receive UM/UIM payments for accidents involving an unknown vehicle if there was physical contact between the vehicles.

The UM/UIM coverage in Cynthia's Progressive policy contained a clause that matched these statutory provisions. The Progressive policy defined "uninsured or underinsured motor vehicle" to include:

a "hit and run vehicle" which strikes an INSURED PERSON, YOUR INSURED CAR, or, in the case of BODILY INJURY, a vehicle which an INSURED PERSON is OCCUPYING which causes BODILY INJURY to an INSURED PERSON or PROPERTY DAMAGE to YOUR INSURED CAR arising from an ACCIDENT where there is physical evidence of contact between the INSURED PERSON or YOUR INSURED CAR and the hit and run vehicle, provided that:

1) the operator or owner cannot be ascertained at the time of the ACCIDENT and remains unknown,

2) the INSURED PERSON or someone on his or her behalf shall have reported the ACCIDENT to the appropriate law enforcement agency within 24 hours.

The policy further specified: "If both the owner and operator of the uninsured vehicle are unknown, payment under the Uninsured and Underinsured Motorist Coverage shall be made only where direct physical contact between the INSURED and the UNINSURED or UNDERINSURED MOTOR VEHICLES has occurred."

Cynthia concedes that Smith's truck did not physically contact the unknown vehicle and that the literal terms of her UM/UIM policy precluded recovery for the unknown driver's actions. But she nonetheless argues that Progressive's physical contact clause should not be enforced because she offered extrinsic proof "of the presence of the phantom vehicle." Cynthia points out that other courts have been willing to set aside physical contact policy clauses when corroborative evidence demonstrates the presence and...