NATIONWIDE MUTUAL INSURANCE COMPANY
v.
RHONDA LYNN SCOTT, ET AL.
Record No. 850389
Supreme Court of Virginia
January 15, 1988William F. Stone, Jr. (Stone & Worthy, on briefs), for appellant.
L. Dale McGhee (Philpott & McGhee, P.C., on brief), for appellee Rhonda Lynn Scott.
No briefs or arguments for appellees Dale Lynn Bower and Linwood Mark Truman.
Present: All the Justices
A trial court decision construing the statute which includes "underinsured motorist" coverage in "uninsured motorist" endorsements in automobile insurance policies is affirmed because the General Assembly did not intend the underinsurance coverage to be offset by the aggregate of obligations due a claimant under multiple liability policies insuring multiple vehicles.
Plaintiff suffered severe and permanent injuries while a passenger in a vehicle involved in a two-car collision. Both drivers carried liability insurance, in the amounts of $50,000 and $25,000 respectively; plaintiff was covered by underinsured motorist coverage in the amount of $100,000 per person per accident. Both drivers' liability insurance carriers conceded liability and agreed to pay the full policy limits. Plaintiff's insurance company subsequently claimed to owe her only $25,000 (the difference between the limits of the drivers' policies and plaintiff's underinsurance coverage limits). Plaintiff filed a declaratory judgment action asking the trial court to determine her insurance company's potential liability. Plaintiff reasoned that because she was underinsured as to the drivers by $50,000 and $75,000 respectively, her insurance carrier was obligated to pay the full $100,000. In a letter opinion, the trial court ruled that plaintiff's insurance company was liable to her for any amount above the liability coverage available to her not to exceed $100,000. Plaintiff later acquired a judgment against the drivers for $1,000,000, and plaintiff's insurance company was granted an appeal based on its liability as stated in the letter opinion.
1. Prior to 1982, a person carrying uninsured motorist coverage who was injured by an insured motorist carrying less coverage, was limited in recovery by the amount of the tortfeasor's policy.
2. Code | 38.2-2206 (A) and (B) (formerly Code | 38.1-381(b) and (c)) corrects that anomaly by defining an underinsured motor vehicle as one whose applicable coverage is less than the total amount of uninsured motorist coverage afforded any person injured through the operation of that vehicle, and provides that the uninsured motorist endorsement obligates the insurer to pay for bodily injury or property damage to the extent that the vehicle causing injury is underinsured.
3. Where damages result from acts of a sole tortfeasor, the injured person's insurance carrier has an obligation under uninsured motorist coverage to pay only the difference between the tortfeasor's liability coverage and the injured person's underinsurance policy limit.
4. The argument that the trial court's construction of the statute provides the injured person with a "windfall" fails because it requires a finding that the General Assembly's 1982 amendments intended to limit an injured claimant's total recovery from all insurance sources to the amount fixed in the underinsured motorist endorsement.
5. The legislative purpose of the 1982 amendments was to increase the total protection afforded by insurance to claimants injured or damaged by negligent motorists.
6. The amended statute provides that the uninsured motorist endorsement obligates the insurer to pay a claimant damages caused by the operation of an underinsured motor vehicle to the extent such vehicle is underinsured, and that a motor vehicle is underinsured to the extent that liability coverage on such vehicle is less than the uninsured motorist coverage available to the claimant on account of the operation of such vehicle.
7. Had the General Assembly intended the underinsurance endorsement obligation to be offset by the aggregate of obligations due a claimant under multiple liability policies insuring multiple vehicles, it would have included the plural form in its definition of the term "underinsured."
Appeal from a judgment of the Circuit Court of Henry County. Hon. Kenneth M. Covington, judge presiding.
POFF
POFF, J., delivered the opinion of the Court.
The sole issue framed on this appeal is whether the trial court correctly construed the statute requiring the inclusion of "underinsured motorist" coverage in the "uninsured motorist" endorsement in automobile insurance policies.
The facts are stipulated. On May 13, 1983, plaintiff Rhonda Lynn Scott suffered severe and permanent injuries in a collision between two automobiles, one driven by Linwood Mark Truman and the other by Dale Lynn Bower. Both drivers had liability insurance. The limit for a single personal injury claim was $50,000 in Bower's policy and $25,000 in Truman's policy. Nationwide Mutual Insurance Company (Nationwide) had issued a policy in which Scott was an insured under an uninsured motorist endorsement that afforded underinsured motorist coverage of $100,000 per person per accident.
Conceding liability and recognizing the nature and extent of Scott's damages, both drivers' liability insurance carriers were willing to pay Scott the full policy limits. Nationwide was willing to pay $25,000, the difference between its underinsured motorist coverage and the aggregate of the liability coverage provided by the other two policies. Disagreeing with Nationwide's position, Scott filed a declaratory judgment action asking the trial court to "determine the full amount of potential liability of Nationwide". Scott reasoned that she was underinsured as to Bower by $50,000 and as to Truman by $75,000 and that, because the total of $125,000 was more than the $100,000 underinsured coverage provided by Nationwide's policy, Nationwide was obligated to pay the full amount of that coverage if she could prove damages in excess of $175,000.
In a letter opinion construing Code | 38.1-381(b) and (c), the trial court ruled that "the coverage for each vehicle must be considered separately and that the accumulated amount of under-insurance would be required of the insurer, not to exceed the limits of the policy." Incorporating that ruling in a final order entered February 28, 1985, the trial court declared that "Nationwide is liable to the plaintiff for the amount of any joint judgment she might recover [against the joint tortfeasors] above the liability coverage available to her not to exceed the sum of $100,000." Because Scott later acquired a judgment against Bower and Truman for $1,000,000, Nationwide is aggrieved by the order entered in the declaratory judgment proceeding, and we awarded Nationwide an appeal.
The "underinsured motorist" provisions at issue here were not added to the statute requiring automobile liability insurance policies to contain an "uninsured motorist" endorsement until 1982. Until then, it was possible that a person injured by an uninsured motorist had greater insurance protection than he would have had if the tortfeasor had been insured. Thus, a person insured under an uninsured motorist endorsement providing $100,000 in coverage could recover damages from the insurer for personal injuries up to that amount if the tortfeasor was uninsured. But if the tortfeasor had a liability insurance policy providing coverage of only $25,000 per person, the injured person's insurance protection was limited to that policy and to that amount.
In 1982, the General Assembly added language to former Code | 38.1-381(b) and (c) (now, Code | 38.2-2206(A) and (B)), designed to correct the anomaly. As amended by Acts 1982, c. 638, paragraph (b) provided that the uninsured motorist endorsement
shall obligate the insurer to make payment for bodily injury or property damage caused by the operation or use of an underinsured motor vehicle to the extent such vehicle is underinsured, as defined in (c) below. The amendment to paragraph (c) provided:
A motor vehicle is underinsured when, and to the extent that, the total amount of bodily injury and property damage coverage applicable to the operation or use of such vehicle . . . is less than the total amount of uninsured motorist coverage afforded any person injured as a result of the operation or use of such vehicle.
The parties agree that, if Bower had been the sole tortfeasor, Nationwide's obligation would have been only $50,000, that is, the difference between Bower's liability coverage and Nationwide's underinsured policy limit. In light of the quantum of the jury's damage award, the effect of the declaratory judgment is to enable Scott to collect $100,000 from Nationwide in addition to the $75,000 due her under the liability policies issued to Bower and Truman.
Nationwide argues that it owes only $25,000, that is, the difference between its underinsured policy limit and the aggregate of liability insurance available to Scott. Hence, Nationwide insists, the trial court's construction of the statute provides Scott a $75,000 "windfall from Defendant Nationwide by reason of the fact that her serious injuries were occasioned by the negligence of two drivers rather than only one." As Nationwide construes the statute, the General Assembly intended the 1982 amendments to limit an injured claimant's total recovery from all insurance sources to the amount of coverage fixed in the underinsured motorist endorsement.
We disagree. Given the language employed, we believe the legislative purpose was to increase the total protection afforded by insurance to claimants injured or damaged by negligent motorists. In paraphrase, the statute as amended provides that the uninsured motorist endorsement obligates the insurer to pay a claimant damages caused by the operation of an underinsured motor vehicle to the extent such vehicle is underinsured, and that, definitionally, a motor vehicle is underinsured to the extent that liability coverage on such vehicle is less than the uninsured motorist coverage available to the claimant on account of the operation of such vehicle. If, as Nationwide contends, the General Assembly had intended the obligation under an underinsurance endorsement to be offset by the aggregate of obligations due a claimant under multiple liability policies insuring multiple vehicles, it would have included the plural as well as the singular form in its definition of the term "underinsured".
The provisions of the statute are part of Nationwide's contract of insurance, and we will not consider language in Nationwide's policy that, arguably, is inconsistent with the statute as we have construed it. See Rose Travelers Indemnity Co., 209 Va. 755, 758, 167 S.E.2d 339, 342 (1969). We agree with the trial court's ruling, and we will affirm the judgment.
Affirmed.
Affirmed.