MAINE SUPREME JUDICIAL COURT Reporter of Decisions
Decision: 2016 ME 153
Docket: Som-15-11
Submitted
On Briefs: October 21, 2015
Decided: July 14, 2016
Reissued: October 13, 2016
Panel: SAUFLEY, C.J., and ALEXANDER, MEAD, GORMAN, JABAR, and HJELM, JJ.
ALBERTA GRAF
v.
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY
SAUFLEY, C.J.
[¶1] Alberta Graf was injured when the car she was driving was struck
from behind by an underinsured motorist. She claimed
uninsured/underinsured motorist (UM/UIM) coverage and medical payments
coverage under two separate State Farm Mutual Automobile Insurance
Company policies. Graf and State Farm agreed to arbitrate the amount of
damages caused by the accident, but to leave to the court the dispute
regarding the extent of coverage, if any, available to Graf through the
identified policies. An arbitration panel determined that the accident caused
Graf $378,000 in damages, $125,000 of which were identified as medical
costs. The Superior Court (Somerset County, Mullen, J.) determined that Graf
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had coverage under only one of the State Farm policies; deferred to the
arbitration award as to her actual damages; established the amount owed by
State Farm; and reduced the arbitration award accordingly upon entry of
judgment. We affirm the court’s determination that only one of the policies
covered Graf, but we vacate the court’s decision regarding the amount due
under that policy.1
I. BACKGROUND
[¶2] The parties do not dispute that on August 4, 2005, Alberta Graf
was operating her personal vehicle when it was struck from behind by a
vehicle operated by another motorist who was fully responsible for causing
the accident. At the time of the accident, that motorist had liability motorist
coverage with Progressive Insurance Company in the amount of $50,000.
[¶3] Graf and her husband held two State Farm policies at the time of
the accident. The first (Policy 1) was in Graf’s husband’s name; provided
$1,000,000 of UM/UIM coverage; provided $100,000 of medical payments
coverage; and did not cover Graf’s vehicle. The UM/UIM section contained a
1 Graf also appeals from the court’s denial of her request for prejudgment interest and other
interest, costs, disbursements, and fees. The court’s denial of prejudgment interest was based on its
conclusion that State Farm had already paid the policy limit and that there were no facts to show
that State Farm acted in bad faith. See 14 M.R.S. § 1602-B (2015); Simpson v. Hanover Ins. Co., 588
A.2d 1183, 1186 (Me. 1991). If the findings regarding policy limits are altered on remand, Graf may
reassert her request.
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provision entitled “When [UM/UIM Coverage] Does not Apply” that stated:
“There is no coverage . . . for bodily injury to an insured [sustained] while
occupying a motor vehicle owned by . . . you, your spouse or any relative if it is
not insured for this coverage under this policy.” The medical payments
coverage under Policy 1 contained a similar provision. The second policy
(Policy 2) was in Graf’s name; provided $300,000 of UM/UIM coverage;
provided $100,000 of medical payments coverage for medical expenses
incurred for services furnished within three years of the accident; and
covered Graf’s vehicle. It provided: “The uninsured motor vehicle coverage
shall be excess over and shall not pay again any medical expenses paid under
the medical payments coverage.” It also provided that medical payments
coverage would be denied “to the extent workers’ compensation benefits are
required to be payable.”
[¶4] In October 2009, Graf, with State Farm’s consent, settled her claim
against the other motorist for his policy limits of $50,000 through Progressive
Insurance. In September 2011, Graf filed a three-count complaint against
State Farm in the Superior Court (Somerset County) seeking coverage from
State Farm pursuant to both policies.
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[¶5] On August 20, 2013,2 as the parties were preparing to go to trial,
Graf filed a motion for stay of proceedings due to an arbitration clause in the
policies, which the court (Nivison, J.) granted. See generally Uniform
Arbitration Act, 14 M.R.S. §§ 5927-5949 (2015). An arbitration hearing was
held on March 18, 2014.
[¶6] Before the hearing, the parties signed an arbitration agreement.
The agreement stated that the purpose of arbitration was to determine
whether the accident caused Graf damages, and if so, in what amount. In the
agreement, the parties left “jurisdiction” with the Superior Court to decide any
issues relating to the amount of UM/UIM coverage available to Graf after the
arbitration panel determined the amount of damages caused by the accident.
Specifically, the agreement stated, “The court shall . . . retain jurisdiction to
decide any issues relating to the amount of UM/UIM coverage available to
Alberta Graf if there is a dispute regarding the available coverage after the
panel award.” The agreement did not specifically direct the arbitration panel
or the court to determine the amount of medical expenses incurred within
three years after the accident or the amount of expenses required to be
payable by workers’ compensation.
2
Between 2011 and 2013 the parties prepared for trial, but in June 2013, Graf’s attorney
withdrew and new counsel was retained.
5
[¶7] The panel found that the accident caused Graf damages of
$378,000. It determined that $125,000 of these damages were attributable to
unspecified medical bills. After subtracting the $50,000 from the settlement
with the other motorist, it reported that Graf’s net damages totaled $328,000.
[¶8] On April 28, 2014, State Farm filed a motion in the Superior Court
to reduce the panel damage award to available coverage. The court (Mullen,
J.) held a hearing on October 6, 2014. At the October 6 hearing, State Farm
presented evidence to the court to show that some of Graf’s medical bills
resulting from the accident had been paid by workers’ compensation or were
for services obtained more than three years after the accident. The court
granted the motion to reduce the panel damage award, determining that Graf
had UM/UIM coverage pursuant only to her own policy—Policy 2; that she
was not entitled to medical payments coverage pursuant to either policy; and
that, because the available uninsured coverage on her policy totaled $300,000
and Graf had already received $50,000, she was entitled to a total of $250,000
from State Farm. Graf filed a timely notice of appeal. See 14 M.R.S. §§ 1851,
5945 (2015).
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II. DISCUSSION
A. Standard of Review
[¶9] Generally, pursuant to the Uniform Arbitration Act, an arbitration
award can be modified by the Superior Court only for certain limited reasons,
and our review of the court’s action is similarly limited. See 14 M.R.S. § 5939;
Randall v Conley, 2010 ME 68, ¶ 11, 2 A.3d 328. Here, however, the court did
not question the accuracy of the panel’s determination regarding damages,
and its judgment did not constitute a modification of an arbitration decision.
Nor do the parties challenge the amount of damages determined through
arbitration. Rather, the parties agreed in the arbitration agreement to allow
the court to “retain jurisdiction to decide any issues relating to the amount of
UM/UIM coverage available to Alberta Graf.”
[¶10] Thus, the court acted as the original adjudicator when it
interpreted the policies and reduced the amount available to Graf based on its
conclusion that Graf was only insured under one of the policies. Therefore,
our standard of review for confirmation or modification of an arbitration
award pursuant to statute is not applicable here. See Randall, 2010 ME 68,
¶ 11, 2 A.3d 328.
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[¶11] Instead, we review the trial court’s interpretation of the
insurance policies de novo. Travelers Indem. Co. v. Bryant, 2012 ME 38, ¶ 8, 38
A.3d 1267. “If the language of [a] policy is unambiguous, we apply its plain
meaning.” Dickau v. Vt. Mut. Ins. Co., 2014 ME 158, ¶ 13, 107 A.3d 621. We
also review the trial court’s statutory interpretation de novo. Strout v. Cent.
Me. Med. Ctr., 2014 ME 77, ¶ 10, 94 A.3d 786.
[¶12] Graf argues that the court erred in determining (1) that Policy 1
excluded coverage for injury sustained in a vehicle not covered by the policy;
(2) that the UM/UIM statute, 24-A M.R.S. § 2902 (2015), entitled State Farm to
offset any judgment entered by the court with the $50,000 settlement Graf
received from the other motorist, after the arbitration panel had already offset
its award with the settlement amount; and (3) that the language in Policy 2
prevented her from recovering both UM/UIM coverage and medical payments
coverage. We address each of these arguments in turn.
B. Policy 1
[¶13] Graf argues that the court erred in determining that a valid
“other-owned vehicle” exclusion in Policy 1 prevents her entitlement to
$1,000,000 of coverage under the policy. Graf is included as an insured party
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under Policy 1; the question is whether the policy exclusion for accidents
occurring in other-owned vehicles is valid and prevents coverage in this case.
[¶14] Policy exclusions are enforced as long as they are unambiguous,
do not conflict with the UM/UIM statute, and are not against public policy. See
Gross v. Green Mountain Ins. Co., 506 A.2d 1139, 1141-43 (Me. 1986). The
“other-owned vehicle” exclusion in Policy 1 provides: “There is no coverage . . .
for bodily injury to an insured while occupying a motor vehicle owned by or
leased to you, your spouse or any relative if it is not insured for this coverage
under this policy.” We have previously considered almost identical
“other-owned vehicle” exclusions, and have consistently determined that they
do not conflict with the UM/UIM statute and are not against public policy. See
Estate of Galipeau v. State Farm Mut. Auto. Ins. Co., 2016 ME 28, ¶¶ 11-15, 132
A.3d 1190; Lewis v. Concord Gen. Mut. Ins. Co., 2014 ME 34, ¶ 12 n.9, 87 A.3d
732; cf. Tibbetts v. Dairyland Ins. Co., 2010 ME 61, ¶¶ 22-24, 999 A.2d 930.
Contrary to Graf’s assertion, this language unambiguously excludes coverage
for injury that occurs in a vehicle not covered under the policy.3
3 Graf argues that because the policy language is found under a heading “When [UM/UIM
Coverage] Does Not Apply,” the exclusion only applies when one has not opted into UM/UIM
coverage. She further argues that the language is ambiguous. We are not persuaded. If the
provision only applied to an insured who was not entitled to UM/UIM coverage in the first place,
there would be no reason to list the exclusion. As the policy language is not reasonably susceptible
to different interpretations, it is not ambiguous. Cambridge Mut. Fire Ins. Co. v. Vallee, 687 A.2d 956,
957 (Me. 1996).
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[¶15] Because the exclusion is not ambiguous, does not conflict with
the UM/UIM statute, and is not against public policy, the exclusion is valid.
The court did not err in denying coverage under Policy 1.
C. Offset of the Other Motorist’s Payment
[¶16] Graf argues that it was improper for the court to offset available
coverage with the $50,000 of settlement proceeds because the arbitration
panel had already offset the damages award with the same settlement
amount.
[¶17] “In the event of payment to any person under uninsured vehicle
coverage . . . the insurer shall be entitled to the proceeds of any settlement or
recovery from any person legally responsible for the bodily injury . . . .”
24-A M.R.S. § 2902(4). When the total damages are greater than the amount
of UM/UIM coverage, we have previously determined that this language
mandates that insurers offset the amount of coverage available in the UM/UIM
policy, rather than the amount of damages incurred, by the amount actually
paid by the tortfeasor. Farthing v. Allstate Ins. Co., 2010 ME 131, ¶ 7, 10 A.3d
667. We have explained that the reason for doing so is that “[t]he goal of the
UM statute [i]s to provide an injured insured the same recovery [that] would
have been available had the tortfeasor been insured to the same extent as the
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injured party.” Tibbetts, 2010 ME 61, ¶ 12, 999 A.2d 930 (quotation marks
omitted). Thus, it was proper to offset the amount of available coverage with
the other motorist’s payment, with the coverage then applied against the total
damages determined by the arbitration panel.
[¶18] Mathematically, however, the offset applies only once. After the
issue of medical payments coverage, addressed below, has been resolved, the
court will determine the remaining damages and compare that to the total
UM/UIM coverage available to determine how to offset the other motorist’s
payment. Because Graf has received $50,000 of the $300,000 she was entitled
to pursuant to Policy 2’s UM/UIM coverage, she will only be able to recover a
maximum of $250,000 in UM/UIM coverage.
D. Policy 2
[¶19] Graf is an insured party under Policy 2, and she is entitled to
UM/UIM coverage under that policy. The relevant question here is whether
Graf is also entitled to any medical payments coverage under Policy 2,
separate from UM/UIM coverage.
[¶20] Pursuant to the policy, Graf is entitled to $100,000 of medical
payments coverage “for services furnished within three years of the date of
the accident.” That section also provides: “There is no coverage . . . to the
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extent workers’ compensation benefits are required to be payable.” The
UM/UIM coverage provides: “The uninsured motor vehicle coverage shall be
excess over and shall not pay again any medical expenses paid under the
medical payments coverage.”
[¶21] The language at issue here—that “coverage shall be excess over
and shall not pay again”—requires the medical payments coverage to be
determined first and precludes the duplication of payment. See Ostransky v.
State Farm Ins. Co., 566 N.W.2d 399, 401 (Neb. 1997) (“State Farm’s position is
clear: No insured can recover for medical expenses under the underinsured
motorist coverage if such expenses have already been paid by the medical
payment coverage.”). Thus, pursuant to the policy, any damages that fall
within the $100,000 medical payments coverage should be paid first and
remaining damages should be paid from the UM/UIM coverage.4
4 The math would work as follows. Graf has up to $100,000 of medical payments coverage for
medical costs that fall within the policy descriptions, and she has up to $250,000 in available
UM/UIM coverage (policy limits of $300,000 less the other motorist’s payment of $50,000). See
Farthing v. Allstate, 2010 ME 131, ¶ 7, 10 A.3d 667. Graf’s damages total $378,000, which is actually
less than the potential maximum of her available payments and coverage of $400,000 ($100,000 in
medical payments coverage and $300,000 from the combined payments of the other motorist and
the UM/UIM coverage). If all of the medical costs fall within the medical payments coverage, Graf
would be entitled to $100,000 in medical payments coverage. That would leave $278,000 in
remaining damages to be paid from the other motorist and the UM/UIM coverage. Because she has
received $50,000 from the other motorist and $100,000 from the medical payments coverage, her
remaining damages of $228,000 could be fully covered by her UM/UIM coverage. She would
receive $328,000 total from State Farm ($100,000 in medical payments and $228,000 in UM/UIM
coverage) and $50,000 total from the other motorist, fully covering her total damages of $378,000.
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[¶22] The arbitration panel did not determine the amount of medical
expenses that were incurred within three years after the accident or whether
any of these expenses were required to be payable by workers’ compensation.
Instead, the parties presented to the court the limited issue of whether the
medical bills identified by the arbitration panel were covered by the medical
payments provision because they fell within the period of coverage and were
not offset by workers’ compensation.5 Because the court found the medical
payments coverage not to be applicable, it did not reach this question, and the
issue must be remanded to the Superior Court to determine how much, if any,
of the $125,000 of arbitration-awarded medical expenses were incurred
within three years after the accident and were not required to be paid by
workers’ compensation. After the court makes this determination, the parties
should be able to calculate State Farm’s remaining obligation. If not, pursuant
to the original arbitration agreement, the court will determine the amount of
coverage available to Graf and enter judgment accordingly.
On the other hand, if none of the medical bills fall within the medical payments coverage, that
would leave $378,000 in damages to be paid from the other motorist and the UM/UIM coverage.
Thus, she would be entitled to a total of $250,000 from State Farm, augmenting the $50,000 from
the other motorist, for a total of $300,000.
5 The accident occurred in 2005, and Graf underwent surgery in 2011, beyond the point of
medical payments coverage. However, other medical costs may have been incurred within the
three-year limit.
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The entry is:
Judgment affirmed in part. Remanded to the
Superior Court for proceedings consistent with
this opinion.
On the briefs:
N. Laurence Willey, Jr., Esq., Willey Law Offices, Bangor, for
appellant Alberta Graf
James B. Main, Esq., Hoy & Main, P.A., Gray, for appellee
State Farm Mutual Automobile Insurance Company
Somerset County Superior Court docket number CV-2011-18
FOR CLERK REFERENCE ONLY