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Progressive Casualty Insurance Co. v. MMG Insurance Co.

Supreme Court of Vermont

August 1, 2014

Progressive Casualty Insurance Company
MMG Insurance Company

Editorial Note:

This Opinion is subject to motion for reargument or formal revision before publication. See V.R.A.P. 40

On Appeal from Superior Court, Chittenden Unit, Civil Division. Geoffrey W. Crawford, J.

Daniel L. Burchard of McCormick, Fitzpatrick, Kasper & Burchard, P.C., Burlington, for Plaintiff-Appellant.

John D. Willey, Jr. of Boylan Associates, P.C., Springfield, for Defendant-Appellee.

Present: Reiber, C.J., Dooley, Skoglund, Burgess and Robinson, JJ. ROBINSON, J., dissenting.


Reiber, C.J.

[¶1] In this insurance coverage dispute, we revisit an issue that we first confronted in 2003. In Colwell v. Allstate Insurance Co., we recognized an anomaly in our then-existing uninsured/underinsured motorist (UM/UIM) law for accidents involving multiple victims. 2003 VT 5, 175 Vt. 61, 819 A.2d 727. Because the law at that time required a strict " limits to limits" comparison, a party could be denied the benefits of a UIM policy that he purchased even though he did not recover the " limits" of a tortfeasor's liability policy. Thus, in some multi-victim cases, a party was better off if injured by an uninsured, rather than underinsured, tortfeasor. Given the plain language of the statute, we left it to the Legislature to decide whether, and how, to address this issue. Id. ¶ 15. The Legislature responded by amending 23 V.S.A. § 941(f) to specifically address UIM recovery in multi-victim accidents. We are now asked to interpret this provision in the context of a single-car accident with multiple victims.

[¶2] Plaintiff Progressive Casualty Insurance Company insured the vehicle involved in the accident here. 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 exclusions unenforceable 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.

[¶3] The facts are undisputed. In September 2008, Casey Brown was seriously injured as a passenger in a single-car accident. The driver was solely responsible for the accident. The car was owned by Brown's mother and insured by Progressive. Progressive's policy (the " host-vehicle" policy) provided liability coverage with a combined single limit of $500,000 and UM/UIM coverage with a combined single limit of $500,000. Progressive paid out the liability limit of the host-vehicle policy. Because Brown was one of several seriously injured passengers, he received only $247,672.50 in liability coverage. This amount did not fully compensate Brown for his injuries, and he filed a claim for UIM benefits.

[¶4] Three policies provided potential UIM coverage. Brown had his own vehicle, which was insured through Progressive with UIM limits of $500,000 (Brown-Bellinger policy). Brown also had coverage through a MMG Insurance Company policy with UIM limits of $1,000,000. As indicated above, the parties disagreed whether there was additional UIM coverage available to Brown under the host-vehicle policy. MMG and Progressive contributed $200,000 each to settle Brown's UIM claim, reserving the right to bring a declaratory judgment action to determine each insurer's actual obligation. Progressive then filed this suit, and the parties filed cross-motions for summary judgment.

[¶5] In its motion for summary judgment, Progressive argued that there was no UIM coverage available to Brown under the host-vehicle policy because of the policy's " owned-vehicle" and " covered-auto" exclusions. These exclusions state that an " 'underinsured motor vehicle' does not include any vehicle that is either ... owned by or available for the regular use of you or a relative; [or] ... that is a covered auto." As stated above, Brown's mother owned the host vehicle and the car was covered by her Progressive policy. Progressive argued that the language of its exclusions was unambiguous and enforceable. Based on these arguments, Progressive maintained that it should have paid only one-third of the $400,000 settlement with Brown ($133,333.33) rather than the $200,000 that it actually contributed.[1]

[¶6] MMG argued that the policy exclusions were not enforceable because they purported to eliminate UIM coverage mandated by statute. It cited 23 V.S.A. § 941(f), as amended in 2005, which 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.

[¶7] MMG asserted that because Brown did not recover $500,000 in liability coverage (given the payments made to other passengers), the vehicle was underinsured under § 941(f)(2), and Progressive was therefore obligated to provide up to $500,000 in UIM coverage to Brown. MMG maintained that Progressive's exclusions frustrated the purpose of the statute by purporting to make the host-vehicle UIM coverage " purchased by the owner for the benefit of the insured passenger" unavailable to him. Thus, according to MMG, Progressive owed Brown $252,327.50 in UIM benefits.[2]

[¶8] The trial court agreed with MMG. It found that 23 V.S.A. § 941(f)(2) clearly invalidated the owned-vehicle exclusion in the multiple-claimant setting. It construed the statute to require " gap" coverage from the host-vehicle policy for the difference between the amount paid in liability benefits and the stated UM/UIM limit. The court found that any policy arguments about the economic purpose of UM/UIM coverage must give way to the plain language of the statutory amendment. In reaching its conclusion, the court considered Hubbard v. Metropolitan Property & Casualty Insurance Co., 2007 VT 121, 182 Vt. 501, 944 A.2d 891, a case that similarly involved a single-car accident and a request for both liability and UIM coverage under the same policy. The court found that Hubbard provided only the most general guidance because it did not involve multiple claimants and it did not apply the amended version of § 941(f). Ultimately, the court granted summary judgment to MMG and ordered Progressive to provide $252,327.50 in UIM coverage, the difference between the liability coverage ($500,000) and the liability payment provided ($247,672.50). This appeal followed.

[¶9] Progressive argues that the court erred in reaching its decision, and that it is entitled to summary judgment in its favor. It maintains that enforcement of its exclusions is consistent with Hubbard and the purpose of Vermont's UIM statute because no gap in coverage will result. According to Progressive, the trial court's conclusion is at odds with the purpose of the UIM statute and leads to absurd results.

[¶10] [1, 2] We review the court's summary judgment decision de novo, applying the same standard as the trial court. Hubbard, 182 Vt. 501, 2007 VT 121, ¶ 6, 944 A.2d 891. Summary judgment is appropriate if the material facts are undisputed and any party is entitled to judgment as a matter of law. Id. ; V.R.C.P. 56. The issue here is whether Progressive's policy exclusions violate § 941. See Sanders v. St. Paul Mercury Ins. Co., 148 Vt. 496, 507, 536 A.2d 914, 921 (1987) (explaining that courts should give effect to the plain meaning of an insurance policy absent ambiguity, a statutory violation, or inherently unfair or misleading language). Looking at the language of § 941, as well as the reason and spirit of the law, we agree with Progressive that its policy exclusions are consistent with the law and enforceable. See In re Wal*Mart Stores, Inc., 167 Vt. 75, 84, 702 A.2d 397, 403 (1997) ( " [I]n determining legislative intent, we look ... to the whole statute, the subject matter, its effects and consequences, and reason and spirit of the law." (quotations omitted)).

[¶11] We begin with the purpose of our UM/UIM statute, which we have repeatedly stated is " to provide the prudent motorist with maximum insurance coverage when involved in an accident with a marginally insured (or uninsured) motorist." Feeley v. Allstate Ins. Co., 2005 VT 87, ¶ 8, 178 Vt. 642, 882 A.2d 1230 (mem.) (citations omitted); see also Hubbard, 182 Vt. 501, 2007 VT 121, ¶ 7, 944 A.2d 891 (stating that Vermont law requires UM/UIM coverage " to protect the insured from the misfortune of being involved in an accident with a fiscally irresponsible driver" (brackets omitted)).[3] UM/UIM coverage is essentially " self-insurance," e.g., " [b]y purchasing the mandated UM/UIM coverage, the insured is guaranteed at least that amount of recovery regardless of a lower level of liability insurance purchased by a tortfeasor." Hubbard, 182 Vt. 501, 2007 VT 121, ¶ 10, 944 A.2d 891. Such coverage is " portable," meaning that it follows the person who purchased it and provides him or her ...

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