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.

Any UIM coverage in a corporate liability policy does not extend to, and is not required for, an executive riding a personally owned vehicle, not in the course of business.

Mayhew v. Alterra Excess and Surplus Insurance Co., Case No. 2:11-cv-190 (D. Vt., January 25, 2012)

In this dispute over insurance coverage, the parties  have cross-moved for summary judgment. At issue is whether Alterra must provide Uninsured/Underinsured Motorist ("UM/UIM") coverage to Mayhew as president of Mayhew Enterprises, Inc., under a policy issued to the corporation,  for injuries Mayhew sustained in an auto accident. For the reasons stated below, the Court holds that Mayhew is not a covered individual under the issued insurance policy. Additionally, because the Vermont Uninsured/Underinsured Motorist Statute, Vt. Stat. Ann. tit. 23, § 941, only applies to those insured under the policy in question, Alterra is not required to provide UM/UIM coverage to Mayhew.

The definition of an insured provided in the policy is unambiguous. The Mayhew Enterprises, Inc. policy specified that the policy excluded "any partner or executive officer with respect to any auto owned by such partner or officer or a member of her household." This exclusion, which eliminates coverage not only for family members of executives using private vehicles, but also the executive officers themselves, unambiguously excludes executive officers who are using their own vehicles not on company business. Based upon the plain meaning of the definition of an insured in the Endorsement, Mayhew is excluded from coverage under part as he was an executive officer riding his motorcycle, a personally owned vehicle, not in the course of business.

While UM/UIM is statutorily mandated and insurance provisions cannot reduce or eliminate UM/UIM coverage, "those protections extend only to those insured under the policy. " Norman v. King, 659 A.2d 1123, 1125 (1995). Thus, if a "plaintiff cannot show that she meets any of the definitions of `an insured' under the UIM section of the policy . . . by its terms the policy excludes plaintiff from UIM coverage." Canedy v. Liberty Mutual Ins. Co., 126 F.3d 100, 104 (2d Cir. 1997) (construing Vt. law).

Because Mayhew is not an insured under the Endorsement, Vt. Stat. Ann. tit. 23, § 941 does not compel Alterra to provide UM/UIM coverage to him under the CGL.

Insurance. Denial of UIM claim affirmed because policy delivered out-of-state. Phrase “with respect to” is a conjunction.

 McGoff v. Acadia Insurance Co., 2011 VT 102 (mem.)

Plaintiffs appeal an order  granting defendant Acadia  summary judgment with respect to plaintiffs’ underinsured motorists (UIM) claim arising from an automobile accident in which Thomas McGoff was injured. Plaintiffs argue that the court erred in ruling that Vermont’s UIM requirements do not apply to the instant policy on grounds that the policy was not delivered or issued for delivery in Vermont. We affirm.

In relevant part, § 941(a) provides that no motor vehicle policy “may be delivered or issued for delivery in this state with respect to any motor vehicle registered or principally garaged in this state unless” UM/UIM coverage is provided for the protection of the insureds. The policy was issued and delivered to Sandri, a Massachusetts company with its principal place of business in Massachusetts, by a Massachusetts agent, for vehicles—including the Plymouth supplied to McGoff—registered in Massachusetts. In short, given § 941(a)’s plain language, the statute does not apply to the subject policy.

Plaintiffs appear to argue that because the Plymouth was garaged in Vermont rather than in Massachusetts, as indicated in the Acadia policy, and thus should have been registered in Vermont rather than Massachusetts, § 941’s UIM requirements should apply, including § 941(c), which requires that UM/UIM coverage in a policy be provided in the same amount as the liability coverage “unless the policyholder otherwise directs.” This position is contrary to the plain language of § 941(a) as well as the nearly unanimous relevant case law, and therefore we decline to adopt it under the present circumstances.

The salient language in § 941(a) limits application of the statute to policies “delivered or issued for delivery in this state with respect to any motor vehicle registered or principally garaged in this state.” (Emphasis added.) The two key phrases connected by the term “with respect to” are conjunctive rather than disjunctive, thereby requiring both elements to be satisfied for the statute to apply. Whether the issue is framed as one of statutory construction or choice-of-law, the courts construing statutes similar to § 941(a) are nearly unanimous in concluding that insurance policies such as the instant Acadia policy are not subject to that state’s statutory UM/UIM coverage requirements unless the policy was delivered or issued for delivery in that state, even if the subject vehicle was regularly garaged in that state.

UIM insurance

Primary carrier pays nothing because primary carrier, not the excess carrier, gets to offset the full amount of the tortfeasor’s liability payment. Humphrey v. Vermont Mutual and State Farm, 2009 VT 53 (mem.)

Humphrey was injured when the car in which she was a passenger was struck by another car. State Farm insured the driver of the car in which Humphrey was a passenger. Humphrey had an automobile insurance policy with Vermont Mutual. She brought suit to enforce uninsured/underinsured motorist (UM/UIM) provisions in both the Vermont Mutual and the State Farm policies, because her damages exceeded the tortfeasor’s liability coverage. The superior court granted summary judgment to State Farm, ruling that the tortfeasor’s $100,000 liability payment nullifies State Farm’s primary UIM coverage of $50,000. We affirm.

State Farm Mutual Auto Insurance Co. v. Powers, 169 Vt. 230, 732 A.2d 730 (1999) endorsed the majority view that the offset applies first to the primary coverage. Id. at 240-41, 732 A.2d at 737-38. Vermont Mutual urges us instead to prorate the $100,000 credit. By their proposed allocation method, they would receive the proportion of the credit that their UIM coverage bears to the total UIM coverage, or roughly $86,000 of the $100,000 offset in this case. Vermont Mutual argues that our decision in Powers does not control and that public policy considerations favor pro rata allocation. We reject these arguments.

Powers decided that the insurer providing primary UM/UIM coverage is entitled to offset its coverage with any payment obtained from the tortfeasor. Vermont Mutual’s fairness argument—that it should be rewarded with a greater portion of the offset because it assumed a higher risk in issuing a higher limit policy—is without merit. The denial of any offset to the excess insurer is a logical corollary to the lack of risk it faces until the primary policy is exhausted.

In order to be fair, in this context, we need only be consistent. Consistency allows insurers to accurately assess the risk associated with the policies they issue. Our decision that the insurer who stands first in line to pay should also stand first in line to collect is consistent with Powers and with the majority of jurisdictions that have addressed the issue.

We explicitly hold today that primary UM/UIM insurers are entitled to offset their coverage by the full amount of a tortfeasor’s liability payment. Any remaining offset inures to the excess insurer’s benefit.