Stone v. Liberty Mutual Insurance

Present:   All the Justices

THOMAS M. STONE
                         OPINION BY JUSTICE A. CHRISTIAN COMPTON
v.   Record No. 960412                December 16, 1996

LIBERTY MUTUAL INSURANCE COMPANY

       UPON A QUESTION OF LAW CERTIFIED BY THE UNITED STATES
              COURT OF APPEALS FOR THE FOURTH CIRCUIT


      Acting under the provisions of our Rule 5:42, the United

States Court of Appeals for the Fourth Circuit certified to this

Court a question of Virginia law, the answer to which is

determinative of a proceeding pending before the Fourth Circuit.

We accepted the certification by order entered in June 1996.

The question involves statutory interpretation and a motor

vehicle insurance coverage issue arising from an

uninsured/underinsured motorist endorsement to an insurance

policy.
      The record establishes the following facts.   Thomas M. Stone

was a part-time employee of Tidewater Pizza, Inc., in Virginia

Beach, for which he delivered pizzas.   In making deliveries,

Stone was responsible for providing his own transportation and

used his own vehicle.

      In October 1992, while Stone was lawfully operating his

vehicle in the scope of his employment, a collision occurred

between his vehicle and one operated by Carol Drye.   Stone

sustained serious personal injuries in the collision.

      Later, he recovered a judgment against Drye in the Circuit

Court of the City of Virginia Beach for $250,000 plus interest

and costs.   At the time of the collision, only $25,000 of
liability or other coverage was applicable to Drye's use of her

vehicle and available to satisfy Stone's judgment.

     In effect at the time of the collision was a "Business Auto"

policy of insurance issued by Liberty Mutual Insurance Company to

"Tidewater Pizza, Inc.," as the named insured.    The coverage

afforded under the policy included motor vehicle liability

insurance with a limit of $350,000 and, by endorsement, uninsured

motorist insurance, which included underinsured motorist

coverage, carrying the same limit.     For clarity, we shall use the

term "uninsured" to include both underinsured and uninsured

coverage.
     Subsequently, Stone filed in the Virginia Beach circuit

court a declaratory judgment action against Liberty Mutual

seeking a declaration that the insurer was liable to him for

$225,000 under the uninsured motorist coverage.    Following

removal of the case by the insurer to the United States District

Court for the Eastern District of Virginia, the parties

stipulated to the facts and submitted the coverage issue to the

district court on cross-motions for summary judgment.

     The district court sustained Stone's contention that the

insurer's policy issued to Tidewater conflicted with Code § 38.2-

2206, the uninsured motorist statute.    When the provisions of an

insurance policy conflict with the requirements of the uninsured

motorist statute, the statute controls and the policy provisions

are void and ineffective.   Bryant v. State Farm Mut. Auto. Ins.




                               - 2 -
Co., 205 Va. 897, 900, 140 S.E.2d 817, 819 (1965).    Thus, the

district court granted Stone's motion for summary judgment and

held he was entitled to uninsured coverage in the sum of $225,000

plus interest and costs.   The district court rejected an

alternative theory of coverage offered by Stone.

     The insurer appealed the former ruling of the district court

and Stone appealed the latter.    The Fourth Circuit agreed with

the district court on the latter ruling and has affirmed that

portion of the district court's order.   The issue generating the

former ruling is the subject of this certification.
     According to the policy's uninsured motorist coverage, the

insurer agrees to pay, up to the limit of liability, "all sums

the insured is legally entitled to recover as damages from the

owner or driver of an uninsured motor vehicle.   The damages must

result from bodily injury sustained by the insured . . . caused

by an accident."   Of course, Stone can recover against the

insurer only if he qualifies as an "insured" under the uninsured

coverage.

     The uninsured motorist endorsement provides coverage to two

classes of potential insureds.    First, the term "insured" is

defined as the named insured (Tidewater) "or any family member"

of the named insured.   Second, the term "insured" includes

"[a]nyone else occupying a covered auto."   For purposes of the

uninsured motorist coverage, the term "covered auto" is defined

to include "[o]nly those autos [Tidewater owns] which, because of



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the law in the state where they are licensed or principally

garaged, are required to have and cannot reject uninsured

motorists insurance."   There are two such vehicles listed in the

policy, a Ford and a Honda; Stone's vehicle is not listed in the

policy.

     According to the policy's liability coverage, the insurer

agrees to pay, up to the limit of liability, all sums "the

insured legally must pay as damages because of bodily injury

. . . to which this insurance applies, caused by an accident and

resulting from the ownership, maintenance or use of a covered

auto."    The term "covered auto" for liability purposes is defined

to include certain non-owned automobiles, that is, automobiles

Tidewater "d[id] not own, lease, hire or borrow which [were] used

in connection with [Tidewater's] business."   Stone's automobile

was not owned, leased, hired, or borrowed by Tidewater, but it

was being used in Tidewater's business.   However, the definition

of the term "insured" in the liability portion of the policy does

not include Stone.   In fact, according to the order of

certification, Stone "stipulated that he is not covered under the

liability provisions of the policy, and indeed, the exclusions

defining the term `insured' clearly operate to exclude him."
     Stone does not dispute that his automobile is not a "covered

auto" under the uninsured motorist provisions of the policy; the

only automobiles covered under those provisions are those

vehicles owned by Tidewater.   Stone argues, however, consistent




                                - 4 -
with the district court's ruling, that he was operating an

automobile to which the Liberty Mutual policy applied because he

was operating a "covered auto" under the liability provisions.

Thus, he says, the insurer was required under Code § 38.2-

2206(A), infra, to provide him uninsured motorist coverage since,

according to Stone, he was an "insured" under Code § 38.2-

2206(B), infra.   Stone contends that the policy violates

subsection (A) because although it specifically insures non-owned

automobiles under the liability provisions of the policy, it does

not provide uninsured motorist coverage to anyone occupying the

same non-owned automobiles.
     The insurer recognizes that it must provide uninsured

motorist insurance pursuant to subsection (A), but argues it can

limit who is an "insured" without violating the provisions of

subsection (B) of the statute.    Alternatively, the insurer

maintains that Stone is not entitled to benefits under the policy

because benefits are excluded under the liability provisions of

the policy given the fact that Stone was not legally liable for

the collision with Drye.

     Thus, the following question is framed for us by the Fourth

Circuit:   "Whether, under these facts, Stone was an insured as

defined in subsection 38.2-2206B; that is, does subsection 38.2-

2206B mandate that Stone is an insured under the uninsured

motorist endorsement of Tidewater's automobile policy

notwithstanding the policy's language?"



                                 - 5 -
     Elaborating, the Fourth Circuit states that the issue to be

decided is whether "Tidewater's policy with Liberty violated

subsection 38.2-2206A, as the district court concluded, because

Stone is an `insured' under subsection 38.2-2206B."   Continuing,

the Fourth Circuit observes that "[i]f Stone is an insured, then

he is entitled to receive uninsured benefits under the policy.

If the policy does not violate subsection 38.2-2206A and Stone is

not, therefore, entitled to receive uninsured motorist benefits

under the policy, then the judgment of the district court will be

reversed."
     Virginia's uninsured motorist statute, recently amended,

contained the following pertinent provisions at the time of this

controversy.   Code § 38.2-2206 (Repl. Vol. 1994).

     Subsection (A) provided that "no policy or contract of

bodily injury . . . liability insurance relating to the

ownership, maintenance, or use of a motor vehicle shall be issued

or delivered in this Commonwealth to the owner of such vehicle or

shall be issued or delivered by any insurer licensed in this

Commonwealth upon any motor vehicle principally garaged or used

in this Commonwealth unless it contains an endorsement or

provisions undertaking to pay the insured all sums that he is

legally entitled to recover as damages from the owner or operator

of an uninsured motor vehicle" within certain monetary limits.

Subsection (A) further provided that "[t]hose limits shall equal

but not exceed the limits of the liability insurance provided by




                               - 6 -
the policy. . . ."

     Subsection (B) provided that the term "`Insured' as used in

subsection[] A . . . of this section means the named insured and,

while resident of the same household, the spouse of the named

insured, and relatives of either, while in a motor vehicle or

otherwise, and any person who uses the motor vehicle to which the

policy applies, with the expressed or implied consent of the

named insured, and a guest in the motor vehicle to which the

policy applies or the personal representative of any of the

above."
     We must consider how far subsection (B) extends to insureds

of the second class under the policy, that is, "[a]nyone else

occupying a covered auto."   This is purely a question of

statutory interpretation:    Does Stone qualify under the statute

as an insured, notwithstanding the limiting language of the

policy?   We hold that he does not.

     An analysis of the statute in question must be made against

the following settled background.     The Virginia uninsured

motorist statute "is meant to protect an insured motorist, his

family and permissive users of his vehicle against the peril of

injury by an uninsured wrongdoer, not to provide `insurance

coverage upon each and every uninsured vehicle to everyone.'"

Bayer v. Travelers Indem. Co., 221 Va. 5, 8, 267 S.E.2d 91, 93

(1980) (quoting Nationwide Mut. Ins. Co. v. Harleysville Mut.
Cas. Co., 203 Va. 600, 603, 125 S.E.2d 840, 843 (1962)).




                                - 7 -
     Turning to the statute, we construe the plain language of

subsection (A) as merely reciting those circumstances under which

policies providing bodily injury liability insurance, issued in

the Commonwealth upon vehicles principally garaged or used in the

State, must contain endorsements agreeing to pay "the insured"

certain sums that such insured is legally entitled to recover

from the owner or operator of an uninsured motor vehicle.   As the

insurer contends, nothing in that subsection purports to require

that all the same vehicles and insureds be covered under both

liability and uninsured motorist coverages of the same policy.

The subsection does expressly recite that the limits of uninsured

motorist coverage shall be equal to but not exceed the limits of

liability insurance, but it does not require other similarities

of coverage.

     The focus in this case must be on subsection (B) of the

statute.    Given the facts, the crucial statutory language, which

defines the term "insured," describes the extent to which

uninsured motorist coverage is mandated by the statute to

insureds of the second class.   An insured is "any person who uses

the motor vehicle to which the policy applies, with the expressed

or implied consent of the named insured, and a guest in the motor

vehicle to which the policy applies or the personal

representative of any of the above."

     Dissecting the clauses, we look first to the term "motor

vehicle."   The language does not say "a," "any," "every," or



                                - 8 -
"all."   In two places, it provides "the" motor vehicle to which

the policy applies.   Stone was not using either of "the" motor

vehicles to which the policy applies, the Ford or the Honda; he

was using his own motor vehicle.   Thus, the statute only

requires, as to insureds of the second class, that uninsured

motorist coverage be provided to those who are in either of the

motor vehicles listed in the policy, as opposed to "any" vehicle

to which the policy might apply.
     Second, and more importantly, we look to the language

providing that the person who uses the motor vehicle must do so

"with the expressed or implied consent of the named insured."

Obviously, when the General Assembly employs this language, it is

resorting to language relating to the omnibus clause found in

Code § 38.2-2204(A), which deals with liability insurance

covering motor vehicles (policy must contain a provision insuring

any person using the motor vehicle "with the expressed or implied

consent of the named insured").

     When construing such language, we repeatedly have held that

a named insured generally cannot give permission to use a vehicle

that the named insured does not own.   For example, in Nationwide
Mut. Ins. Co. v. Cole, 203 Va. 337, 341, 124 S.E.2d 203, 206

(1962), the Court said that "in order for one's use and operation

of an automobile to be within the meaning of the omnibus coverage

clause requiring permission of the named insured, the latter

must, as a general rule, own the insured vehicle or have such an




                               - 9 -
interest in it that he is entitled to the possession and control

of the vehicle and in a position to give such permission."

Accord Virginia Auto Mut. Ins. Co. v. Brillhart, 187 Va. 336,

343, 46 S.E.2d 377, 380 (1948).

     But Stone contends that because he was operating a "covered

auto" within the meaning of the liability provisions of the

policy, he therefore qualified as an "insured" under the

uninsured motorist statute in that he was using a motor vehicle

to which the policy applies within the mandate of subsection (B).

Stone argues that the employer, Tidewater, impliedly gave Stone

permission to operate Stone's vehicle when he was using it in the

scope of the employer's business.   We reject these contentions.
     The "expressed or implied consent" language of the

subsection modifies "the motor vehicle to which the policy

applies" clause.   If the legislature, in the uninsured motorist

statute, had meant to include as insureds of the second class

occupants of non-owned vehicles, then the General Assembly surely

would have used language like it uses at the end of Code § 38.2-

2204(A), which deals with the sort of permission needed when one

is operating a non-owned vehicle.   That statute refers to

"permission or consent of the owner" of a non-owned vehicle, and

deems permission or consent of "the custodian" to be the

permission of the owner.   The uninsured motorist statute contains

no such expansive language.

     Simply put, "the vehicle" referred to in subsection (B)



                              - 10 -
includes only owned, not non-owned vehicles.   Thus, there is no

statutory mandate that requires the courts to ignore the

insurer's policy language as written.

     Accordingly, the certified question is answered in the

negative.

JUSTICE KOONTZ, with whom JUSTICE LACY joins, dissenting.

     I respectfully dissent.   The Virginia uninsured motorist

statute is remedial in nature and is to be liberally construed so

that its intended purpose, to protect the innocent victims of

negligent uninsured/underinsured motorists, may be accomplished.

 See Lipscombe v. Security Ins. Co., 213 Va. 81, 83, 189 S.E.2d

320, 322-23 (1972); Nationwide Mutual Insurance Co. v. Sours, 205

Va. 602, 606, 139 S.E.2d 51, 54-55 (1964).   We are required to

look to the words used in the statute to determine its meaning

and to give effect only to the meaning so determined.   See Rose

v. Travelers Indemnity Co., 209 Va. 755, 758, 167 S.E.2d 339, 342

(1969).

     When the accident in question occurred, Code § 38.2-2206

provided in pertinent part that:
     A. [N]o policy or contract of bodily injury or
     property damage liability insurance relating to the
     ownership, maintenance, or use of a motor vehicle shall
     be issued or delivered in this Commonwealth to the
     owner of such vehicle or shall be issued or delivered
     by any insurer licensed in this Commonwealth upon any
     motor vehicle principally garaged or used in this
     Commonwealth unless it contains an endorsement or
     provisions undertaking to pay the insured all sums that
     he is legally entitled to recover as damages from the
     owner or operator of an uninsured motor vehicle with
     limits not less than the requirements of § 46.2-472.
     Those limits shall equal but not exceed the limits of



                               - 11 -
     the liability insurance provided by the policy. . . .

     B. "Insured" as used in [subsection] A . . . means the
     named insured and, while resident of the same
     household, the spouse of the named insured, and
     relatives of either, while in a motor vehicle or
     otherwise, and any person who uses the motor vehicle to
     which the policy applies, with the expressed or implied
     consent of the named insured . . . .


(Emphasis added.) 1

     There is no dispute that the liability provisions of

Liberty's policy extended liability coverage to Stone's vehicle. 2

 Accordingly, subsection (A) required Liberty's policy to also

provide uninsured motorist coverage with limits equal to those of

the liability policy, if Stone, as a user of that vehicle at the

time of the accident, met one of the definitions of an "insured"

contained in subsection (B).
     On the facts of this case, the majority correctly identifies

the crucial statutory language in subsection (B) defining

"insured" to be "any person who uses the motor vehicle to which

the policy applies, with the expressed or implied consent of the

named insured."

     Contrary to the initial conclusion reached by the majority,

however, this phrase does not limit "the motor vehicle" to one

"listed in the policy."   The express language "to which the

     1
      Subsequent amendments to this statute are not pertinent to
the issue in this case.
     2
      The declarations page of the liability policy specifically
identifies non-owned vehicles while being used in Tidewater's
business as "COVERED AUTOS."



                               - 12 -
policy applies" modifies "the motor vehicle."   There can only be

two interpretations of the phrase "the policy" when subsection

(B) is read, as it must be, in context with subsection (A).     This

phrase can only mean "the uninsured motorist policy" or "the

liability policy."   The former interpretation must be rejected

because it would render the entire statute meaningless.      This is

so because the mandate of subsection (A) for uninsured motorist

coverage for an "insured" would never be invoked by a definition

of insured under subsection (B) that is restricted to a user of a

motor vehicle that already has uninsured motorist coverage.

Rather, it is manifest that the legislature intended this phrase

to refer to the liability coverage provision described in

subsection (A), so that the phrase means "the motor vehicle to

which the liability policy applies."

       Finally, the majority suggests that the statute's

requirement that use of the vehicle must be "with the expressed

or implied consent of the named insured" eliminates non-owned

vehicles from subsection B because a named insured cannot give

permission to use a vehicle that the named insured does not own.

Nothing in the statute suggests that such an interpretation was

intended by the legislature to limit the mandate of subsection

(A).

       To accomplish the mandate that the insurer issue no

liability insurance policy upon any motor vehicle principally

used in this Commonwealth unless it contains an endorsement or



                               - 13 -
provisions for uninsured motorist coverage in equal limits, the

legislature expressly used the phrase "with the express or

implied consent of the named insured" to modify the definition of

insured in subsection (B).    Thus, the legislature recognized that

there are instances, such as the present case, where a "named

insured," i.e., the person or entity contracting for liability

coverage, would not be the owner of all the vehicles to which the

policy applies.   Here, Stone was using a vehicle to which

Liberty's liability policy applies because he was using it in

connection with Tidewater's business, and he was doing so with

the consent of Tidewater, the "named insured."
     For these reasons, in my view, at the time of the accident

in question, Stone was an "insured" as defined by subsection (B)

of the statute and, thus, notwithstanding the limiting provisions

of the uninsured motorist endorsement of Tidewater's automobile

policy with Liberty, Code § 38.2-2206 mandated that Stone be

provided coverage as an insured under the uninsured motorist

endorsement of that policy.   Accordingly, I would answer the

certified question in the affirmative.




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