Taylor v. Travelers Indem. Co. of America

MARTONE, Justice,

dissenting.

¶ 34 The fundamental issue here is whether the tortfeasors against whom underin-sured motorist coverage is purchased include one’s spouse, with whom the claimant either made decisions about limits, or had an opportunity to do so. It is a difficult question, because, for the most part, just as policyholders buy liability insurance to protect their assets from the claims of third parties, they buy underinsured motorist coverage to protect themselves against injuries caused by underinsured third parties. I do not believe most policyholders consider the possibility that the third party might be the person with *322whom they either made decisions about limits, or had the opportunity to do so. We buy underinsured motorist coverage to protect ourselves against the poor choices other people make when they buy liability insurance in limits too low to cover our losses. It seems unlikely that anyone would expect that the claimant would have any role in the selection of limits and at the same time be a UIM claimant.

¶35 So when the majority asks “[w]hy would the legislature permit an insurer to exclude such a risk when the only reason for the consumer to buy UM and UIM is to protect against injury to his or her own family and guests as well as to the named insured himself?”, ante, at ¶ 17, the answer is likely to be that the plaintiff is, at the very least, a person who acquiesced in the limits chosen. Ordinarily, insurance does not cover that which is in the control of the insured.

¶ 36 On the other hand, suppose the claimant were not the wife of the named insured but instead the child of the named insured, a person who could not possibly have participated in or acquiesced in decisions about limits. The case in favor of coverage becomes much stronger, and yet under Travelers’ approach there would still be no coverage. The majority properly notes this gap in coverage. A policyholder could buy reasonable limits for liability, uninsured motorist, and underinsured motorist, and yet family members may be left out in the cold in the event of catastrophic loss.

¶ 37 The majority says that this difficult issue is resolved by reference to A.R.S. § 20-259.01(G). But that subsection merely defines underinsured motorist coverage. It does not purport to define the extent of that coverage. These are words of description, not applicability. On the other hand, our opinion in Duran v. Hartford Insurance Co., 160 Ariz. 223, 772 P.2d 577 (1989), is directly on point. In Duran, the insurance company paid the claimant the full limit of the grandmother’s liability coverage. Here, Travelers paid the full limit of the insured’s, liability policy. In both Duran and in the case before us, the injuries exceeded those limits. In Duran, we held the claimant had no claim for underinsured motorist coverage “because ‘when an allegation of being ‘underinsured’ is predicated on the amount of liability insurance in the same policy that provides the [UIM] insurance under which the claim is made ... the underinsured coverage may not be ‘stacked’ so as to in effect increase the liability coverage purchased by the named insured.’ ” 160 Ariz. at 224, 772 P.2d at 578.

¶38 So how does the majority avoid this result here? It does so because Taylor had to share in the liability limits with other claimants. It allows Taylor to recover UIM but reduces that coverage by any amount received on the liability portion of the policy. It does not allow Taylor to recover her full damages. But this is inconsistent with the idea that drives the decision in the first place. The majority says that coverage is required under A.R.S. § 20-259.01(G) whenever the total damages exceed the total applicable liability limits and there are no exceptions. Ante, at ¶ 10. Well, Taylor’s damages exceed the total applicable liability limits and yet she is not allowed to recover those damages under the UIM policy. She is not treated as other legitimate liability and UIM claimants are treated.

¶ 39 In its attempt to distinguish this case from Duran, the majority says “[t]he full amount of liability insurance purchased was paid out to Lisa Duran.” Ante, at ¶ 26. But the full amount of liability insurance purchased was paid out in this case too. So the majority states that it is not enough for the carrier to pay the full liability limits — those limits must all be paid to the claimant. If there are no other claimants, and the full liability limits are paid to the claimant, there is no underinsured motorist coverage, even though the claimant’s injuries exceed the liability limits. On the other hand, if there are multiple claimants, and the claimant must share in the full liability limits with others, then there is underinsured motorist coverage but it is reduced by any payments made under the liability portion of the policy.1

*323¶ 40 I believe there are two logical ways to go with this case. If we adhere strictly to Duran, then Taylor loses. She cannot recover on both the liability and UIM portions of her policy. But if we think that Duran is wrongly decided, then we should not try to distinguish it in ways that do not matter, but simply overrule it. To do that, however, we would have to say that A.R.S. § 20-259.01(G) requires us to do so. And if it does require that result, there is no principled way to reduce the claimant’s recovery for uncompensated damages on the UIM coverage by payments under the liability coverage. Under § 20-259.0KG), she is entitled to whatever amount is available under the liability coverage as well as the full extent of the UIM policy to cover her actual damages. In short, if the claimant’s status as a policyholder is insufficient to deprive her of underinsured motorist coverage at all, then why would her status as a liability claimant limit her rights as a UIM claimant?

¶41 If I shared the majority’s view that A.R.S. § 20-259.01(G) rendered the policy exclusion invalid, I would allow Taylor to recover against the UIM coverage that part of her total loss that was not satisfied by the liability payment. Because, however, I cannot bring myself to hold that A.R.S. § 20-259.01(G) does any more than define UIM coverage, I conclude that Travelers’ policy exclusion is not in conflict with the statute. I respectfully dissent.

. In this case, the UIM limit is the same as the liability limit. But for this, the outcome might have been wholly inconsistent with the majority’s attempt to distinguish Duran. For example, the Taylors might have opted to purchase less than the maximum UIM coverage offered. Had they *323purchased UIM coverage in any amount less than $183,500 (the amount she recovered under the liability coverage), having shared the liability coverage with other claimants or not, Taylor would have been precluded from any UIM recovery because, according to the majority, "an insured is covered up to the face amount of the applicable UIM insurance, less any sums recovered under the liability coverage of the same policy.” Ante, at 111.