UIM coverage. Insurer of host vehicle does not have to provide both liability and UIM benefits to injured passenger.

Progressive Casualty Insurance Co. v. MMG Insurance Co., 2014 VT 70 (01-Aug-2014)


REIBER, C.J. In this insurance coverage dispute, we are asked to interpret 23 V.S.A. § 941(f) in the context of a single-car accident with multiple victims. Plaintiff Progressive Casualty Insurance Company insured the vehicle involved in the accident here. The driver was solely responsible for the accident. Given the number of victims, the policy’s liability coverage did not fully compensate at least one of the injured passengers. The parties disputed whether the injured passenger was therefore entitled to UIM benefits under Progressive’s policy. Progressive argued that coverage was barred by certain exclusions in its policy. The trial court found Progressive’s owned-vehicle exclusion unenforceable in the multiple-claimant setting as inconsistent with the definition of an “underinsured vehicle” set forth in 23 V.S.A. § 941(f). Progressive appeals, arguing that its exclusions should be enforced, and that it should not have to provide both liability and UIM benefits to the injured passenger. We agree with Progressive, and therefore, reverse the trial court’s decision.

The issue here is whether Progressive’s policy exclusions violate § 941(f). As amended in 2005, this section provides that: a motor vehicle is underinsured to the extent that: (1) the liability insurance limits applicable at the time of the accident are less than the limits of the uninsured motorist coverage applicable to the insured; or (2) the available liability insurance has been reduced by payments to others injured in the accident to an amount less than the limits of the uninsured motorist coverage applicable to the insured. 23 V.S.A. § 941(f).

Consistent with legislative intent and the plain language of the statute, we conclude that, as applicable to this single-car accident case, the law now allows an injured individual to recover UM/UIM benefits under policies that he or she had purchased when a tortfeasor’s liability insurance has been depleted by payments to multiple victims. For purposes of this case, that means that the victim can claim the benefit of his or her own UIM policies to the extent that the limits of his or her UM/UIM coverage exceed the liability recovery. We do not read § 941 to require an insurer effectively to provide “double liability insurance,” a concept that we rejected in Hubbard, 2007 VT 121, and an approach that has been uniformly rejected by other courts which, hold that one cannot recover under both the liability and UM/UIM provisions of the same insurance contract. Id. ¶ 15.

The statute must be interpreted consistently with its purpose to ensure that when an insured purchases mandatory UM/UIM coverage, he or she “is guaranteed at least that amount of recovery regardless of a lower level of liability insurance purchased by a tortfeasor.” Hubbard, 2007 VT 121, ¶¶ 7, 10. The exclusions in Progressive’s host-vehicle policy do not interfere with this purpose and they do not violate § 941. We therefore conclude that Progressive was entitled to summary judgment in its favor, and reverse the trial court’s decision.

Reversed and remanded for entry of judgment consistent with this opinion.


ROBINSON, J., dissenting. The majority’s reasoning relies heavily on its assertion that the statute defining an underinsured motor vehicle calls for a comparison of the available liability insurance to the injured passenger’s “own” UIM insurance, or the insurance purchased by the passenger, but not to UIM coverage applicable to the passenger through the host-vehicle policy. This distinction does not derive in any way from the text of the statute; rather, it is an additional qualification judicially grafted on to the statute.

Liability coverage and UIM coverage provide separate and distinct benefits under the policy. When the actual liability coverage available from a third-party tortfeasor is less than the limits of the UIM coverage applicable to the passenger through the host-vehicle policy, nobody suggests that the passenger’s invocation of the host vehicle’s UIM coverage converts that coverage into “liability” coverage. The whole point of UIM coverage is to make up for a shortfall in liability coverage relative to the UIM limits. That is true whether the tortfeasor happens to be the driver of the passenger’s car, or the driver of a different car.

The majority also argues that the trial court’s approach would give the passenger more UIM protection than the passenger had actually purchased. That is not an incongruous result; it  can occur when then tortfeasor is the driver of a different car. It is not at all clear why the result should change because he was injured by the driver of the car in which he was riding, rather than the driver of a different car.

The Legislature has specifically sought to ensure that UIM coverage be available to fill the gap between the liability coverage actually available to a person injured by a negligent driver, taking into account reductions in the available liability insurance due to payments to others injured in the accident, and the limits of the UIM coverage applicable to the insured. The exclusions upheld by the majority in this case frustrate that purpose, and are incompatible with the express requirement of the statute. For that reason, I respectfully dissent. I am authorized to state that Justice Dooley joins this dissent.