Tissell v. Liberty Mutual Insurance Co.

Callow, C.J.

(concurring)—Ada Tissell was named as an insured on an automobile policy issued to herself and her husband. The policy provided for $300,000 in liability coverage and $300,000 in underinsured motorist (UIM) coverage. Mrs. Tissell was injured when her husband negligently drove the family car off the road. She eventually died from the injuries.

The insurer paid Tissell's guardian $300,000 under the liability portion of the insurance policy. Tissell's guardian also claimed an additional $300,000 under the UIM portion of the policy. When the insurer refused to pay, the present lawsuit ensued.

The Tissells' insurance policy unambiguously excluded from the definition of an underinsured motor vehicle any vehicle covered under the liability portion of the policy. I disagree with the majority regarding the extent to which *115this exclusion violates RCW 48.22, the underinsured motorist statute and public policy.

It is helpful to set forth the pertinent provisions of the Tissells' insurance policy before discussing its interaction with the statute. The policy reads in part:

We will pay damages which a covered person is legally entitled to recover from the owner or operator of an underinsured motor vehicle because of:
1. Bodily injury sustained by a covered person and caused by an accident: and
The owner's or operator's liability for these damages must arise out of the ownership, maintenance or use of the underinsured motor vehicle.
We will pay under this coverage only after the limits of liability under any applicable liability bonds or policies have been exhausted by payment of judgments or settlements.
"Covered person" as used in this endorsement means:
1. You or any family member.
2. Any other person occupying your covered auto.
3. Any person for damages that person is entitled to recover because of bodily injury to which this coverage applies sustained by a person described in 1. or 2. above.
"Underinsured motor vehicle" means a land motor vehicle or trailer of any type:
2. To which a liability bond or policy applies at the time of the accident but this limit is not enough to pay the full amount the covered person is legally entitled to recover as damages.
However, "underinsured motor vehicle" does not include any vehicle or equipment:
1. Owned by or furnished or available for the regular use of you or any family member unless the covered person was neither operating nor occupying such vehicle at the time of the accident.
5. To which the liability coverage of this policy applies.
EXCLUSIONS
A. We do not provide Underinsured Motorists Coverage for property damage or bodily injury sustained by any person:
*1161. While operating or occupying any motor vehicle owned by or available for the regular use of you or any family member which is not insured for Liability coverage under this policy.

In Millers Cas. Ins. Co. v. Briggs, 100 Wn.2d 1, 665 P.2d 891 (1983), we held that a policy exclusion, similar to the one which denied UIM coverage to Tissell's liability covered car, neither violated the UIM statute nor the State's public policy. In Millers, however, the exclusion at issue was applied to "other insureds". The distinction between "named insureds and family members" and "other insured" is critical in understanding whether coverage exists.

As observed in Blackburn v. Safeco Ins. Co., 115 Wn.2d 82, 794 P.2d 1259 (1990), insurance contracts' UIM endorsements prescribe who is entitled to seek indemnification by specifically defining the term "insured" or "covered person". See 2 A. Widiss, Uninsured and Underinsured Motorist Insurance § 33.1, at 19 (2d ed. 1987). In many UIM policies, "covered persons" are divided into three classes:1

1. You or any family members (named insured);
2. Any other person while occupying your covered vehicle (other insured); and
3. Any person for damages that person is entitled to recover because of bodily injury to which this coverage applies sustained by a person described in 1 or 2 above.

The under insured motorist policy affords those "named insureds" under class 1 with first party coverage that applies at all times, whatever may be the insured's activity at the time of the accident. See Kowal v. Grange Ins. Ass'n, 110 Wn.2d 239, 245, 751 P.2d 306 (1988). Persons covered under class 2, occupying a covered vehicle *117("other insureds"), however, are covered only while occupying a covered motor vehicle. These "other insureds" have the option of contracting with an insurance company for their own UIM coverage under a policy which provides them with UIM coverage that applies at all times as a "named insured". Thus, insureds have the option to contract with an insurance company and pay a premium for UIM insurance that applies at all times, regardless of their status in a particular vehicle.

In contrast to Mrs. Tissell, who was a "named insured", the Millers case involved claimants who were "other insureds" under the policy from which they sought UIM benefits. In Millers, an intoxicated driver caused a single-car accident which killed one passenger and injured another. Millers, 100 Wn.2d at 2. After the insurer paid the limits of the driver's liability coverage, the claimants sued to recover under the driver's UIM coverage. Millers, 100 Wn.2d at 3.

The Millers court articulated several reasons that justified the denial of that policy's UIM coverage to these "other insured" claimants. As to the first reason, Millers implied that RCW 48.22.030(2)'s2 language manifested a *118legislative intent that the statute contemplated two distinct motor vehicles. In reaching this conclusion, we relied on Breaux v. Government Employees Ins. Co., 369 So. 2d 1335 (La. 1979) which interpreted a statute substantially similar to our statute. Millers, 100 Wn.2d at 5-6. As noted by Millers, the Louisiana court reasoned that

[a]s to coverage under the uninsured motorist provisions of a particular policy, the statute thus contemplates two distinct motor vehicles: the motor vehicle with respect to which uninsured motorist coverage is issued and the "uninsured or underinsured" motor vehicle. In addition, as to each policy containing uninsured motorist coverage, the statute distinguishes between the person insured under the policy in question and the owner or operator of the uninsured or under-insured motor vehicle.

Millers, 100 Wn.2d at 6 (quoting Breaux, 369 So. 2d at 1338).

The uninsured motorist statute, by definition, stated a 2-car rule. There cannot be a single vehicle which is both insured and uninsured. When the Legislature amended the statute to include underinsured motorists, it retained similar language, but now the circumstances, the concept and the interpretation can be different. Under the statute and common sense, one car can be both insured and underinsured.

The distinctions relating to public policy reasons articulated in Millers, an "other insured", as applied to Tissell, a "named insured", explain why interpreting the statute to require a 2-car rule does not foresee all the circumstances that require a different interpretation of the UIM statute. The Millers court offered three distinctions between the uninsured and underinsured motorist statutes and claims arising thereunder for upholding the policy exclusion and denying coverage:

*119First, . . . the injured party has not paid a premium for coverage to this insurer. Thus, there is no danger the insurer will gain a windfall if it is not forced to pay under both provisions of the policy. Second, unlike uninsured motorist coverage, the honoring of this kind of exclusion in underinsured motorist coverage does not leave the injured party completely without compensation. He has already received some compensation pursuant to the liability coverage of the policy. Third, assuming the injured party has automobile insurance of his own, he should be able to collect additional amounts as a result of that policy's underinsured motorist coverage.

Millers, 100 Wn.2d at 7 (quoting Comment, Washington's Underinsured Motorist Statute: Balancing the Interests of Insurers and Insureds, 55 Wash. L. Rev. 819, 827 (1980). The court emphasized that the passengers in Millers could have obtained underinsured coverage from their own insurers. Millers, 100 Wn.2d at 8.3

Mrs. Tissell's status as a "named insured" separates her in several important respects from the claimants in Millers. Unlike the claimants in Millers, this insurer was paid a separate premium for UIM coverage that covers her as a "named insured". Unlike the claimants in Millers, Mrs. Tissell has not already been compensated under both the negligent driver's liability policy and her own UIM policy. Unlike the claimants in Millers, Mrs. Tissell did not have an opportunity to protect herself by purchasing other UIM coverage; the policy at issue concerns Mrs. Tissell's UIM coverage. The public policy factors articulated in Millers favor recovery for Mrs. Tissell.

The majority ignores the reasons underlying the decision in Millers and misstates the holding in Millers. The majority states that Millers stands "only for the rule that a victim who is not the insured can be excluded from recovery against the UIM portion of a policy where he is compensated by that policy's liability coverage." Majority, at 112. The majority leaves out the crux of Millers: a victim who is not a named insured can be excluded from recovering *120against the UIM portion of a policy where he is compensated by the policy's liability coverage.

Moreover, the majority's fixation on the UIM statute's public policy of "full compensation" is misplaced. In protecting the innocent victim of an auto accident, UIM insurance provides a source of indemnification when the tortfeasor does not provide adequate protection. Washington's UIM coverage has been described as a layer of excess coverage that "floats" on the top of recovery from other sources. Elovich v. Nationwide Ins. Co., 104 Wn.2d 543, 549-50, 707 P.2d 1319 (1985). Thus, UIM coverage is a second layer of coverage for the injured party.

The majority opinion improperly translates the statutory purpose of assuring a dual layer of recovery into an overriding policy of ensuring "full compensation for accident victims". Majority, at 108, 111, 112. Our prior cases dispute this analysis. This court has approved limitations on UIM coverage which are not specifically articulated in the UIM statute, even though such limitations deny "full compensation" to an accident victim. The majority's concern for "full compensation" begs the real question presented—whether the ability of a "named insured" to purchase additional liability coverage justifies an exclusion which denies the "named insured" UIM protection when injured by the negligence of another person insured under the same policy. The purpose of underinsured motorist insurance is to provide the insured with a second floating layer of protection in every case in which the insured is "legally entitled to recover" damages from a negligent tortfeasor. RCW 48.22-.030. See also Elovich. It is the UIM statute's policy to assure a second floating layer of compensation. Elovich, 104 Wn.2d at 549-50.

Mrs. Tissell, as a "named insured", should be allowed to recover from her husband's liability insurance and her own UIM insurance. Where coverage is in terms of "the insured", courts consider the contract between the insurer and several insureds to be separable; that is, there is a separate contract with each insured. See Standard Fire *121Ins. Co. v. Blakeslee, 54 Wn. App. 1, 5, 771 P.2d 1172 (case involving obligation of insurer for liability of dentist and professional service corporation as insureds), review denied, 113 Wn.2d 1017 (1989); Unigard Mut. Ins. Co. v. Spokane Sch. Dist. 81, 20 Wn. App. 261, 266, 579 P.2d 1015 (1978) (case involving obligation of insurer under accident policy for fire set by minor child of insured). Accord, Federated Am. Ins. Co. v. Strong, 102 Wn.2d 665, 669, 689 P.2d 68 (1984) (applying Unigard reasoning to automobile insurance policy). See also 43 Am. Jur. 2d Insurance § 191, at 274 (1982) (where several persons are insured under one policy, the rights and obligations of one insured are not necessarily dependent upon those of another insured, and the insurer may undertake separate and distinct obligations to the various insureds).

The insured cannot efficiently insure against the negligence of other "named insureds". Extension of the 2-car rule to "named insureds" would require an insured who desires to protect against the risk of injury caused by the negligence of another "named insured" to purchase more liability insurance. Liability insurance protects the insured against liability to all third, parties, not just other "named insureds". Only a fraction of the premium an insured would have to pay to obtain additional liability coverage would be attributable to the risk of injury due to the negligence of a "named insured"; the majority of the premium would cover the potential additional liability to third parties. The average insurance consumer would seldom be aware of the risk of undercompensation if we required an extension of the 2-car rule. In all probability, very few insurance purchasers would alter their purchasing decisions in response to such a decision. In any event, it is for the Legislature, not this court, to determine the amount of liability insurance the responsible automobile driver must carry. I would hold that the public policy underlying the UIM statute prevents insurers from applying the 2-car rule to named insureds.

Finally, I disagree with the majority's holding that the family member exclusion violates the public policy in *122favor of full compensation for accident victims. Majority, at 112. Likewise, I disagree with the majority's statement that " Wiscomb [Mutual of Enumclaw Ins. Co. v. Wiscomb, 95 Wn.2d 373, 622 P.2d 1234 (1980), adhered to on rehearing, 97 Wn.2d 203, 643 P.2d 441 (1982)] stands for the rule that that is no justification for departing from a policy of full compensation for victims." Majority, at 113. As previously discussed, the majority's fixation on full compensation is misplaced. I agree, however, with the majority that the family member exclusion at issue is void—instead of the vague notion of "full compensation", I find the reasoning of Wiscomb controlling. In Wiscomb we stated:

[T]he intended purpose of the financial responsibility act is for the benefit of owners and drivers of motor vehicles . . . and, more fundamentally, [it is] designed to give monetary protection to that ever changing and tragically large group of persons who, while lawfully using the highways themselves, suffer serious injury through the negligent use of those highways by others.
(Italics ours.) LaPoint [v. Richards, 66 Wn.2d 585], at 590[, 403 P.2d 889 (1965)]. . . .
. . . This same public policy has been carried over into the new underinsured motorist statute . . ..
The family or household exclusion clause strikes at the heart of this public policy. This clause prevents a specific class of innocent victims, those persons related to and living with the negligent driver, from receiving financial protection under an insurance policy containing such a clause. In essence, this clause excludes from protection an entire class of innocent victims for no good reason.
. . . The family or household exclusion, by contrast, is directed at a class of innocent victims who have no control over the vehicle's operation and who cannot be said to increase the nature of the insurer's risk. An exclusion which denies coverage when certain victims are injured is violative of public policy.

Wiscomb, 97 Wn.2d at 207-09. As these excerpts from Wiscomb clearly point out, a policy of "full compensation" was not the basis for invalidating the family exclusion.

I would find that the same policy considerations, discussed in Wiscomb, apply to the UIM family exclusion in Tissell's case. Hence, the family exclusion at issue is void.

*123In conclusion, the two insurance policy exclusions are void and Mrs. Tissell's estate should recover.

Utter, Brachtenbach, Dolliver, Andersen, and Durham, JJ., and Pearson, J. Pro Tem., concur with Callow, C.J.

Reconsideration denied January 9, 1991.

This definition of "covered persons" is widely used by the insurance industry. See INSURANCE SERVICES OFFICE PERSONAL AUTO POLICY PORTFOLIO: Underinsured Motorist Coverage Form PP 03 11 (ed. 6-80), reprinted in 2 A. Widiss, Uninsured and Underinsured Motorist Insurance app. H (2d ed. 1987).

Washington's underinsured motorist statute mandates that

"(1) 'Underinsured motor vehicle' means a motor vehicle with respect to the ownership, maintenance, or use of which either no bodily injury or property damage liability bond or insurance policy applies at the time of an accident, or with respect to which the sum of the limits of liability under all bodily injury or property damage liability bonds and insurance policies applicable to a covered person after an accident is less than the applicable damages which the covered person is legally entitled to recover.

"(2) No new policy or renewal of an existing policy insuring against loss resulting from liability imposed by law for bodily injury, death, or property damage, suffered by any person arising out of the ownership, maintenance, or use of a motor vehicle shall be issued with respect to any motor vehicle registered or principally garaged in this state unless coverage is provided therein or supplemental thereto for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of underinsured motor vehicles, hit-end—run motor vehicles, and phantom vehicles because of bodily injury, death, or property damage, resulting therefrom, except while operating or occupying a motorcycle or motor-driven cycle, and except while operating or occupying a motor vehicle owned or available for the regular use by the named insured or any *118family member, and which is not insured under the liability coverage of the policy. . . .

"(3) Except as to property damage, coverage required under subsection (2) of this section shall be in the same amount as the insured's third party liability coverage unless the insured rejects all or part of the coverage as provided in subsection (4) of this section. . . .'' RCW 48.22.030.

The Millers court also noted a commonsense understanding of underinsurance and stated that if the Millers passengers were permitted to recover, it would in effect be converting UIM coverage into liability insurance. Millers, 100 Wn.2d at 8.