Case Title: Victor v. State Farm Fire and Cas. Co.

Citation: 908 P.2d 1043

Docket Number: S-6524

State: alaska

Court: Alaska Supreme Court

Date: 1996-01-05T00:00:00Z

Document:
908 P.2d 1043 (1996) Martin D. VICTOR, III; Patricia Victor, Plaintiffs, v. STATE FARM FIRE AND CASUALTY COMPANY, Defendant. No. S-6524. Supreme Court of Alaska. January 5, 1996. Raymond A. Nesbett, Raymond A. Nesbett, P.C., Anchorage, for Plaintiffs. *1044 David S. Carter, Hughes, Thorsness, Gantz, Powell & Brundin, Anchorage, Pamela A. Okano, Reed McClure, Seattle, Washington, for Defendant. Before MOORE, C.J., and RABINOWITZ, MATTHEWS, COMPTON and EASTAUGH, JJ. MATTHEWS, Justice. This case comes to us on certification from the United States District Court for the District of Alaska. We agreed to answer the following question: The District Court's statement of facts and discussion of applicable law which accompanied the certification request is set forth in the appendix. Briefly, the facts are as follows: Martin Victor was injured in an automobile accident. He stopped his vehicle suddenly in order to avoid a wheel thrown from a trailer towed by a vehicle driven by Ronald Smith. In the process of making this emergency stop, Victor's vehicle was struck from behind by a vehicle driven by Norman Lichter. Victor settled a claim for his personal injuries against Lichter for $50,000. Smith was uninsured. Victor sued Smith and received a default judgment in excess of $300,000. Victor has uninsured motor vehicle coverage of $100,000 per person written by State Farm Fire & Casualty Company. He sued State Farm to collect this coverage in superior court; the case was removed to the United States District Court, which ordered the parties to arbitrate Victor's claim in conformity with policy language. The arbitrators determined that Victor incurred damages totalling $293,626.80 and that Smith was 75% at fault and Lichter 25% at fault. State Farm then tendered $41,469.55, claiming that this was full payment based on Victor's $100,000 policy limit, less an offset for the $50,000 Victor had received from his settlement with Lichter, and $8,530.45 which State Farm had paid Victor under his medical payments coverage. Victor claims that the $50,000 paid by Lichter should be deducted from his total damages, $293,626.80, not from the $100,000 policy limit. We conclude that the State Farm policy involved in this case requires that the amount paid by Lichter be deducted from Victor's damages, not from his policy limits. As the Alaska Mandatory Motor Vehicle Insurance Act does not preclude coverage broader than that required under the Act, it is unnecessary to independently construe the meaning of AS 28.22.211(b)(2).[1],[2] *1045 We set out here the relevant provisions of the uninsured and underinsured endorsement to the policy: State Farm argues that the language under the Limits of Liability heading in clause 7, "any amount payable under this coverage," refers to the limit of liability referred to in clause 1 under the same heading. Victor argues, on the other hand, that the questioned phrase refers to the language of the general insuring clause under Coverage U: "We will pay damages ... an insured is legally entitled to collect from the owner or driver of an uninsured motor vehicle...." In our view Victor has the better argument for a number of reasons. First, structurally, clauses 7 and 1 under the Limits of Liability heading are parallel. Both modify the Coverage U insuring clause, but neither modifies, or is subordinate to, the other. This suggests that the reduction clause in clause 7 applies to "damages ... an insured is legally entitled to collect" described in the general insuring clause rather than to the policy limits described in clause 1. Similar reasoning was employed by the Court of Appeals of Maryland in McKoy v. Aetna Casualty & Surety Co., 281 Md. 26, 374 A.2d 1170, 1172-73 (1977): Finally, the underlying purpose of reduction clauses such as that contained in clause 7 is to prevent double recoveries. 2 Irvin E. Schermer, Automobile Liability Insurance § 26.02 (1994) (citing numerous cases) (emphasis added). This purpose is furthered by our interpretation of clause 7 and would not be furthered by an interpretation requiring a reduction from policy limits where total damages exceed policy limits. For the above reasons we interpret the State Farm policy to require deduction of the $50,000 Lichter settlement from the total damages award rather than from policy limits. The United States District Court's Statement of Facts and Applicable Law which accompanied the Certification is as follows: See Docket No. 63, Exhibit E, pp. 18-20. [1] AS 28.22.121(a) provides in relevant part: "A policy that grants the coverage required for a motor vehicle liability policy may also grant lawful coverage in excess of or in addition to the coverage specified for a policy and the excess or additional coverage is not subject to the provisions of this chapter." The only purpose for barring coverage beyond that mandatorily required would be to prevent a double recovery to reduce the temptation for fraudulent claims. See Werley v. United Servs. Auto. Ass'n, 498 P.2d 112, 116-17 (Alaska 1972). There is no risk of a double recovery here. [2] Our focus is thus on the State Farm policy rather than on the Mandatory Motor Vehicle Insurance Act. That state courts have the power to reformulate certified questions is widely recognized. A leading text states: In one of its earliest uses of certification, the Fifth Circuit found out, seven years after it had first ordered questions certified, that it had asked the state court the wrong question. To guard against a recurrence of this it is now the common practice of many courts, when certifying, to emphasize that the particular phrasing used in the certified question is not to restrict the state court and that the state court is free to reformulate the questions as it see fit. State courts have availed themselves of this freedom whether or not it is expressly stated in the certificate. 17A Charles A. Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice & Procedure § 4248, at 177-178 (1988). Other commentators state: Regardless of the clarity of the record, facts, and issues certified, the answering court must have the power to reformulate the questions posed. Although the court should not answer questions unrelated to the case at hand, the answering court should have the same freedom to analyze the factual circumstances that it would have if the entire case were before the court. Indeed, the ability of the answering court to reshape or add to the issues is necessary to further the goals of certification. The answering court may be best situated to frame the question for precedential value and to control the development of its laws. Corr & Robbins, Interjurisdictional Certification and Choice of Law, 41 Vand.L.Rev. 411, 426 (1988).