Wise v. American Standard Ins. Co. of Wisconsin

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________

No. 11-3100
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Joseph B. Wise; Toni M. Wise, *
*
Appellant, *
* Appeal from the United States
v. * District Court for the
* Eastern District of Missouri.
American Standard Insurance Company *
of Wisconsin, *
*
Appellee. *
___________

Submitted: March 15, 2012
Filed: May 30, 2012
___________

Before RILEY, Chief Judge, SMITH and SHEPHERD, Circuit Judges.
___________

SMITH, Circuit Judge.

Joseph B. Wise and Toni M. Wise, husband and wife, ("the Wises") appeal
from the district court's grant of summary judgment in favor of American Standard
Insurance Company of Wisconsin ("American Standard"). The district court1
concluded that the Wises were not entitled to recover underinsured motorist (UIM)
coverage benefits under four American Standard policies because the tortfeasor's

1
The Honorable Audrey G. Fleissig, United States District Judge for the
Eastern District of Missouri.
vehicle was not an "underinsured motor vehicle" under the policies' plain language.
We affirm.

I. Background
On March 19, 2008, Joseph Wise was involved in an automobile accident in
Missouri when Charles Jackson's vehicle negligently collided with Joseph Wise's
vehicle. The automobile accident occurred during the course of Jackson's employment
with Macklin Hauling ("Macklin"). Joseph Wise's son, John Wise, was a passenger
in his father's vehicle at the time of the accident. Both Joseph and John Wise suffered
significant injuries. Empire Fire and Marine Insurance Company ("Empire") insured
Jackson and Macklin, providing $1,000,000 of automobile liability coverage. Empire
settled the Wises' injury claims on behalf of its insureds for the policy limit of
$1,000,000. American Standard and the Wises stipulate that the Wises' damages are
$1,500,000. Wise v. Am. Standard Ins. Co. of Wis., No. 4:10CV00668 AGF, 2011 WL
3880580, at *1 (E.D. Mo. Sept. 2, 2011).

Both Joseph Wise and Toni Wise were listed on the title as owners of the
wrecked vehicle. The Wises had an American Standard automobile liability policy
covering this vehicle, as well as three additional American Standard automobile
liability policies that each covered a different vehicle. "Each of the four policies
issued to [the Wises] provided for UIM coverage of up to $100,000 per person and
$300,000 per accident." Id. All four policies contain the following provision:

PART VI—GENERAL PROVISIONS

***

3. Two or More Cars Insured. The total limit of our liability under
all policies issued to you by us shall not exceed the highest limit
of liability under any one policy.

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 When this policy insures two or more cars, the coverages
apply separately to each car.

All four policies also contain a UIM Coverage Endorsement, which provides,
in relevant part:

We will pay compensatory damages for bodily injury which an insured
is legally entitled to recover from the owner or operator of an
underinsured motor vehicle. The bodily injury must be sustained by an
insured person and must be caused by an accident and arise out of the
use of the underinsured motor vehicle.

***

ADDITIONAL DEFINITIONS USED IN THIS ENDORSEMENT
ONLY

***

3. Underinsured motor vehicle means a motor vehicle which is
insured by a liability bond or policy at the time of the accident
which provides bodily injury liability limits less than the limits of
liability of this Underinsured Motorists coverage.

***

LIMITS OF LIABILITY

***

We will pay no more than [the $100,000/$300,000] maximums no
matter how many vehicles are described in the declarations, insured
persons, claims, claimants or policies or vehicles are involved in the
accident.

The limits of liability of this coverage will be reduced by:

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 1. A payment made or amount payable by or on behalf of any person
or organization which may be legally liable, or under any
collectible auto liability insurance[,] for loss caused by an
accident with an underinsured motor vehicle.

***

OTHER INSURANCE

If there is other similar insurance on a loss covered by this endorsement,
we will pay our share according to this policy's proportion of the total
limits of all similar insurance. But, any insurance provided under this
endorsement for an insured person while occupying a vehicle you do not
own is excess over any other similar insurance.

American Standard issued all four policies in Illinois, and the Wises are Illinois
residents. All of the policies were in effect on the date of the accident.

After the Wises settled with Empire, they demanded UIM coverage from
American Standard for $400,000—"the combined UIM coverage in each of the four
polices." Id. American Standard, however, refused the demand. The Wises filed suit
for breach of contract, loss of consortium, and vexatious refusal to pay. American
Standard removed the suit to federal district court based on diversity of citizenship.

The parties filed cross-motions for summary judgment. Before the district
court, the Wises asserted that Missouri law governed the dispute. Applying Missouri
law, they contended that "the policies are ambiguous." Id. at *2. Specifically, they
argued that "the second sentence in the 'Other Insurance' provision appears to provide
UIM coverage, while the anti-stacking and set-off provisions indicate that such
coverage is not provided." Id. at *2 (footnote omitted). They further argued that the
second sentence in the "Other Insurance" provision was ambiguous regarding "the
term 'a vehicle you do not own' as applied to co-owners of a vehicle." Id. According

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to the Wises, "because they were co-owners of the [wrecked vehicle], neither owned
it." Id. As a result, "Joseph Wise was in a vehicle [that] he did not own." Id. The
Wises contended that the district court had to resolve all ambiguities in their favor,
"precluding American Standard from denying them UIM coverage under the set-off
provision and entitling them to stack the UIM coverage provided in their four
insurance policies." Id.

In response, American Standard argued that it was entitled to summary
judgment under either Illinois or Missouri law because the tortfeasor's car was not an
underinsured motor vehicle. American Standard noted that the tortfeasor's liability
limit exceeds the Wises' UIM limit even when the four policies are stacked.
Additionally, American Standard maintained "that under the unambiguous policy
language [it was] entitled to a set-off in the amount [the Wises] received from Empire,
and that [the Wises were] prohibited from stacking the UIM coverage provided in
their four insurance polices." Id.

The district court granted summary judgment in favor of American Standard.
First, the district court, applying Missouri law, concluded that "the accident did not
arise out of the use of an 'underinsured motor vehicle'" under the plain language of
the UIM Coverage Endorsement because "the tor[t]feasor's vehicle carried liability
insurance of $1,000,000. Such amount is both greater than [the Wises'] UIM coverage
of $100,000 for each policy, and greater than the aggregate UIM coverage of all four
policies, if [the Wises] were permitted to stack them." Id. at *4. Second, the district
court, reading the policy as a whole, concluded "that the phrase 'a vehicle you do not
own' in the second sentence of the Other Insurance provision of the policies" was not
ambiguous based on the Missouri Supreme Court's prior holding "that [a] plaintiff
. . . injured in a motor vehicle accident owned the car in question" even though he
"owned the car 'jointly with his father.'" Id. (quoting Lair v. Am. Family Mut. Ins. Co.,
789 S.W.2d 30, 32 (Mo. 1990)). Therefore, the court concluded that "the second
sentence of the Other Insurance provision does not apply to [Joseph Wise], and the

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anti-stacking and set-off provisions in the policies are not rendered ambiguous as to
[the Wises'] claims." Id. at *5.

II. Discussion
On appeal, the Wises argue that the district court erroneously found that (1) the
tortfeasor's vehicle was not an "underinsured motorist vehicle," leaving the Wises
without benefits under the UIM policies; (2) the Wises could not "stack" their four
UIM policies; and (3) American Standard may "set-off" liability payments made to
the Wises from the four UIM policies.

"We review de novo the district court's grant of summary judgment based on
its interpretation of insurance policy provisions." Secura Ins. v. Horizon Plumbing,
Inc., 670 F.3d 857, 861 (8th Cir. 2012). A district court properly grants summary
judgment "if there is no genuine issue of material fact and the insurer[] [is] entitled
to judgment as a matter of law." Id. "State law governs the interpretation of insurance
policies when federal jurisdiction is based on diversity of citizenship." Id. For the
purposes of this appeal, we will assume, without deciding, that Missouri law governs
the dispute, as the Wises claim.

The four policies at issue define an "underinsured motor vehicle" as "a motor
vehicle which is insured by a liability bond or policy at the time of the accident which
provides bodily injury liability limits less than the limits of liability of this
Underinsured Motorists coverage." "Under [this] type of policy . . . , if the other
motorist pays as much or more to the insured for bodily injury as the insured has
underinsured coverage, then the insured is not permitted to recover under the
underinsured coverage." Melton v. Country Mut. Ins. Co., 75 S.W.3d 321, 325 (Mo.
Ct. App. 2002).

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 The Missouri Court of Appeals has noted that

[d]etermining whether the definition of an underinsured motor vehicle
is met is not a threshold issue to determine whether the insured is
entitled to underinsured motorist coverage. [Goza v. Hartford
Underwriters Inc. Co., 972 S.W.2d 371,] 375 [(Mo. Ct. App. 1998)].
"Where the definition of underinsured was identical to the one in the
[insurer's] policy and was found to be unambiguous . . . the insured can
still be entitled to [underinsured motor vehicle] benefits even though
that definition is not met if the policy's [underinsured motor vehicle]
provisions when read together give rise to such an ambiguity." Id.

Am. Family Mut. Ins. Co. v. Ragsdale, 213 S.W.3d 51, 54 (Mo. Ct. App. 2006)
(fourth, fifth, sixth, and seventh alterations in original).

In Ragsdale, the tortfeasor's automobile insurance policy provided $100,000
coverage. Id. at 53. The plaintiffs had insurance for their personal vehicles under two
policies, "each having underinsured motorist coverage in the amount of $100,000."
Id. The plaintiffs "made a $200,000 demand upon [their insurer]." Id. The Missouri
Court of Appeals found that "an isolated reading of the definition of 'underinsured
motor vehicle' forbids coverage." Id. at 55–56. However, reading the insurance
provisions together, the court concluded that the "Other Insurance clause" of the
policies was ambiguous. Id. at 56. After determining that "the excess clause of the
Other Insurance provision [was] ambiguous," the court held that it "must allow
stacking of policies in consideration of the ambiguity the Other Insurance clause
creates with respect to the anti-stacking provision." Id. at 57. The court also found
that "the same ambiguity prohibits [the insurer] from setting-off monies received by
the [insureds] from [the tortfeasor's] liability policy or workers' compensation benefits
against the underinsured motorist coverage in light of the ambiguity the Other
Insurance clause creates with respect to the set-off provisions of the policies." Id.

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 Similarly, in Chamness v. American Family Mutual Insurance. Co., the
tortfeasor "had bodily injury liability insurance coverage in the amount of
$100,000.00 per person and $300,000.00 per occurrence." 226 S.W.3d 199, 201 (Mo.
Ct. App. 2007). At the time of the accident, the plaintiff and her husband were not
living together, but they were "both insured under two automobile insurance policies"
that covered different vehicles. Id. "Both policies provid[ed] for underinsured
motorist insurance coverage for bodily injury in the amount of $100,000.00 per
person and $300,000.00 per accident." Id. The insurer argued that the plaintiff could
not recover "under the unerinsured motorist coverage endorsement of either policy
because her collision with [the tortfeasor] did not occur with an underinsured motor
vehicle, as [the tortfeasor's] bodily injury liability coverage equaled the underinsured
motorist coverage of each of [the] [p]laintiff's insurance policies." Id. at 202. In
response, the plaintiff asserted that an ambiguity in the policies "entitled [her] to
underinsured motorist coverage under both policies"; permitted her "to stack the
$100,000.00 of underinsured motorist coverage provided by each policy"; and
prevented the insurer from "set[ting]-off the amount recovered from [the tortfeasor's]
insurance company." Id.

On appeal, the Missouri Court of Appeals addressed the stacking issue first. Id.
Analyzing "the other insurance clause," the court determined that "the policies'
language is ambiguous as to whether the accident occurred while [the] [p]laintiff was
occupying a vehicle 'you do not own.' Construing this language in favor of [the]
[p]laintiff, [the court] f[ound] [that] the second sentence of the other insurance clause
applied to her." Id. at 204. Then, the court applied Ragsdale and held that "[b]ecause
the second sentence of the other insurance clause appears to provide coverage over
and above any other applicable coverage but the anti-stacking and set-off language
indicates that such coverage is not provided, the insurance policies' language is
ambiguous." Id. at 207. The court construed this ambiguity in the plaintiff's favor. Id.
"Because [the court] . . . determined that the second sentence of the other insurance
provision create[d] an ambiguity with respect to the anti-stacking provisions, [the

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court] . . . allow[ed] [the] [p]laintiff to stack the $100,000.00 of underinsured motorist
coverage provided by each policy." Id. at 208. Finding that the "[p]laintiff's second
point on appeal [was] dispositive, [the court] f[ound] it unnecessary to address [the]
[p]laintiff's first point on appeal"—i.e., whether the plaintiff was entitled to
underinsured motorist coverage under both policies. Id. (emphasis added).

In the present case, the Wises are not entitled to recover under the UIM policies
even if they are stacked, thereby distinguishing the present case from Ragsdale and
Chamness. The amount of the tortfeasor's liability insurance—$1,000,000—is both
greater than the Wises' UIM coverage of $100,000 for each policy and greater than
the aggregate—or stacked—UIM coverage for all four policies—$400,000. Thus, the
district court correctly concluded that the Wises are not entitled to recover under the
UIM policies because stacking them still does not result in an amount exceeding the
tortfeasor's liability insurance.2

III. Conclusion
Accordingly, we affirm the judgment of the district court.
______________________________

2
As the district court noted, "American Standard's UIM Coverage Endorsement
clearly states that a vehicle will be considered underinsured when its liability
coverage is less than the insured's UIM coverage." Wise, 2011 WL 3880580, at *4.
In the present case, "the tor[t]feasor's vehicle carried liability insurance of
$1,000,000. Such amount is both greater than Plaintiffs' UIM coverage of $100,000
for each policy, and greater than the aggregate UIM coverage of all four policies, if
Plaintiffs were permitted to stack them." Id. As a result, "the accident did not arise out
of the use of an 'underinsured motor vehicle.'" Id.

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