Title: Heiss v. Aetna Casualty and Surety Co.

State: arkansas

Issuer: Arkansas Supreme Court

Document:

465 S.W.2d 699 (1971) Martha U. HEISS, Exec. et al., Appellants, v. AETNA CASUALTY AND SURETY CO., Appellee. No. 5-5533. Supreme Court of Arkansas. April 19, 1971. Richard H. Mays, and Mahony & Yocum, El Dorado, for appellants. Shackleford & Shackleford, El Dorado, for appellee. BROWN, Justice. Appellants are Martha U. Heiss, executrix of the estate of Henry A. Heiss, and Dorthea T. Hall, individually and as executrix of the estate of T. M. Hall. Appellee is the carrier of an automobile insurance policy containing uninsured motorist provisions and issued to T. M. Hall. The latter, accompanied by Henry A. Heiss and Dorthea T. Hall, collided with an uninsured motorist. Mr. Hall and Mr. Heiss received fatal injuries and Dorthea T. Hall was seriously injured. Another passenger in the Hall car, W. J. Robertson, received minor injuries for which he was satisfactorily compensated and he is not a party to the appeal. The two estates and Mrs. Hall *700 were paid $2,000 each for medical which was the maximum under the medical coverage. Robertson was paid $565.20. Appellee then filed this suit in chancery court impleading the sum of $13,434.80. Appellee contended that it was entitled to deduct the medical payments from the $20,000 maximum contained in the uninsured motorist section of the policy. Whether that deduction, which was upheld by the chancery court, was proper is the issue on appeal. Part II, Coverage C Medical Payments insured T. M. Hall and all occupants of his vehicle for medical expenses in a maximum amount of $2,000 for each person. For that coverage the insurer charged nine dollars. Part IV, Coverage G Family Protection (Damages for Bodily Injury [uninsured motorist provisions]) carried a separate premium of $5.00 and contained this provision: It is undisputed (1) that all occupants of the Hall vehicle were insureds, (2) that the limits of the policy were $10,000 for each insured and $20,000 total for each accident, and (3) that all occupants of the Hall vehicle, except Robertson, suffered total damages far in excess of the maximums payable under the policy. The uninsured motorist clause contained this limitation of liability: Our uninsured motorist law is found in Ark.Stat.Ann. § 66-4003 (Repl.1966): Ark.Stat.Ann. § 75-1427 (Supp.1969), provides: *701 We take the position that the deduction for medical expenses recited in the uninsured motorist section is in derogation of the explicit requirement of our uninsured motorist statute and financial responsibility law set forth in § 66-4003 and § 75-1427, supra, which require limits of "not less than" $10,000 for injury to or death of one person and $20,000 for injury to or death of two or more persons. Although our court has not had occasion to pass on the question, it has been met squarely in other jurisdictions, as we shall now point out. Bacchus v. Farmers Insurance Group Exchange, 106 Ariz. 280, 475 P.2d 264 (1970). The Arkansas and Arizona statutes on uninsured motorists are almost identical. In Bacchus the insurer reduced the amount paid under the uninsured motorist provision by the amount it had already paid under the medical payments clause. In condemning the procedure the court said: Stephens v. Allied Mutual Insurance Co., 182 Neb. 562, 156 N.W.2d 133 (1968). Again the Nebraska statutes on uninsured motorists and financial responsibility are substantially the same as ours. In Stephens the court faced the same problem which is before us. In rejecting the insurer's attempt to use the medical payments as a setoff the court said: Tuggle v. Government Employees Ins. Co., 207 So. 2d 674 (Fla.1968). Again we have the same statutes as ours. Referring to the setoff clause in the uninsured motorist section, the court said: "The clause on its face is one to decrease uninsured motorist coverage beneath the statutory minimum, and one which means that under certain conditions (medical benefits in excess of $10,000) there will be no uninsured motorist coverage whatever." Robey v. Northwestern Security Ins. Co., 270 F. Supp. 466 (D.C.Ark.1967), and Boehler v. Insurance Company of North America, 290 F. Supp. 867 (D.C.Ark.1968), dealt with the setoff provision at hand. Those cases, decided without benefit of precedent from our court, held the setoff to be proper. Of course those decisions are persuasive but not binding on us. We think the more rational conclusion is that which we have reached and that it is in line with the trend of authorities and particularly in harmony with a number of decisions which have been announced since those two cases. With the exception of the two cited district court cases we have been cited to no precedent contrary to our holding, keeping in mind the particular facts, statutes, and contractual provisions in the case at bar. Appellee cites MFA Mutual Ins. Co. v. Wallace, 245 Ark. 230, 431 S.W.2d 742 (1968), and MFA Mutual Ins. Co. v. McKinley, 245 Ark. 326, 432 S.W.2d 484 (1968). The facts in those cases lend no precedent to the case at hand. Reversed. FOGLEMAN, J., concurring. FOGLEMAN, Justice. I do not disagree with the result reached on this particular policy in this particular case. The closing language of the majority opinion appears to so restrict it, but earlier language is so general that it would seem to me to apply to any such policy. Certainly the precedents relied upon are not so restricted. We must constantly keep in mind the fact that uninsured motorist insurance is not liability coverage on the uninsured motorist, but is indemnity to the insured against the perils of injury by an uninsured motorist. MFA Mutual Ins. Co. v. Bradshaw, 245 Ark. 95, 431 S.W.2d 252. See also Southern Farm Bur. Ins. v. Daniel, 246 Ark. 849, 440 S.W.2d 582 (May 5, 1969). We must also remember that the parties to the insurance contract are limited in the terms of the contract only by statute and public policy. We have said that acceptance by an insured of such a policy including uninsured motorist coverage is deemed to be approval of all reasonable conditions and limitations expressed therein which are not contrary to public policy. MFA Mutual Ins. Co. v. Bradshaw, supra. We must also remember that our statutes do not make the uninsured motorist coverage mandatory. They only require that the coverage be offered. They do not require that medical payments coverage be included or offered. Consequently, the freedom of the parties to contract with reference to medical payments is wholly unrestricted. Such payments can be limited in any way the parties see fit. As pointed out by Drummond in "Uninsured Motorist Coverage A Suggested Approach to Consistency," 23 Ark.L.Rev. 167, 181, the clause used in this policy says absolutely nothing about reduction of uninsured motorist coverage. The reduction under the clause before us only relieves the insurer from payment of that part of the damages which the insured may be entitled to recover from the uninsured tort-feasor which represents an amount paid or payable under medical payments coverage. The example given by Drummond at page 182 of his article is so clearly expository of the application of the policy clause we *703 are considering, I take the liberty of quoting his language, viz: Drummond's summary of the effect of the clause seems so clearly a correct interpretation that I also set it out, as follows: This case comes before us on appeal from a denial of a motion for summary judgment by appellants, and an order dismissing their counterclaims. It was stipulated that Heiss was conscious for some period prior to his death which occurred within 1½ hours after the collision; that he left a widow who suffered mental anguish and loss of consortium; that he also left three children; that he was an engineer employed at a salary of $40,000; and that he had a life expectancy of 16.81 years. It was stipulated that Hall received various injuries, that he left surviving a widow whose life expectancy was 27.81 years and one child, and that he had a life expectancy of 14.14 years. It seems highly unlikely that the damages to either appellant would be so small as to reduce recoverable damages below the policy limits, but the application of the requisite standard should be a matter for the trial court upon remand. For various reasons, I do not consider the cases cited in the majority opinion applicable. For instance, in Stephens v. Allied Mutual Insurance Co., 182 Neb. 562, 156 N.W.2d 133, 26 A.L.R.3d 873 (1968), the clause was voided upon the premise that the coverage required by the statute of that state "is in the nature of a substitute liability policy," a premise that has been rejected by us. It is also based upon two separate and independent contractual provisions for which a separate premium is charged and collected. In the case before us the affidavit of appellee's actuary is uncontradicted. He states that in computing the premium charged for uninsured motorist coverage under its policy the clause in question is taken into consideration, and that an increased premium rate for uninsured motorist coverage would result from payment of medical expense losses in addition to uninsured motorist coverage. This explanation is consistent with Drummond's *704 theory as to the effect of the clause. Furthermore, in that case the Nebraska court relied to some extent upon decisions that an insurer may not limit its liability under uninsured motorist coverage by setoffs or limitations through "other insurance" clauses, such as reduction claimed with respect to workman's compensation or other insured motorist coverage, a position we have not taken. As a matter of fact, we have taken a contrary position as to "other insurance" coverage in MFA Mutual Ins. Co. v. Wallace, 245 Ark. 230, 431 S.W.2d 742, where we refused to follow decisions of federal district courts in Arkansas. We should have a consistency in the philosophy of our decisions on uninsured motorist coverage. While Wallace is certainly not controlling in this case before us, a result based upon Stephens certainly constitutes the adoption of an inconsistent philosophy. Bacchus v. Farmers Insurance Group Exchange, 106 Ariz. 280, 475 P.2d 264 (1970) follows Stephens as a precedent. Another factor entered into Bacchus, however, in that a different policy clause was under consideration. In that policy, the medical payments were classified as advancements to be repaid in the form of a setoff against other insurance available under another provision of the same policy. There again, it is clear that separate premiums were paid for the two coverages, with no indication that either premium rate was in any respect dependent upon or related to the other coverage. In Tuggle v. Government Employees Ins. Co., 207 So. 2d 674, 24 A.L.R.3d 1343 (Fla. 1968), decided by a 3-2 division, the Florida court emphasized the fact that the two classes of coverage "were contracted separately, with independent premiums." I would remand the case for further proceedings consistent with Drummond's interpretation hereinabove set out and reserve questions as to other such clauses and as to other factual backgrounds until they are really necessarily in issue.