Title: Graf v. State Farm Mut. Auto. Ins. Co.

State: maine

Issuer: Maine Supreme Court

Document:

MAINE SUPREME JUDICIAL COURT 
Reporter of Decisions 
Decision: 
2016 ME 153 
Docket: 
Som-15-11 
Submitted 
On Briefs: October 21, 2015 
Decided: 
July 14, 2016 
Reissued: 
October 13, 2016 
 
Panel: 
SAUFLEY, C.J., and ALEXANDER, MEAD, GORMAN, JABAR, and HJELM, JJ. 
 
 
ALBERTA GRAF 
 
v. 
 
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY 
 
 
SAUFLEY, C.J. 
[¶1]  Alberta Graf was injured when the car she was driving was struck 
from 
behind 
by 
an 
underinsured 
motorist. 
 
She 
claimed 
uninsured/underinsured motorist (UM/UIM) coverage and medical payments 
coverage under two separate State Farm Mutual Automobile Insurance 
Company policies.  Graf and State Farm agreed to arbitrate the amount of 
damages caused by the accident, but to leave to the court the dispute 
regarding the extent of coverage, if any, available to Graf through the 
identified policies.  An arbitration panel determined that the accident caused 
Graf $378,000 in damages, $125,000 of which were identified as medical 
costs.  The Superior Court (Somerset County, Mullen, J.) determined that Graf 
 
2 
had coverage under only one of the State Farm policies; deferred to the 
arbitration award as to her actual damages; established the amount owed by 
State Farm; and reduced the arbitration award accordingly upon entry of 
judgment.  We affirm the court’s determination that only one of the policies 
covered Graf, but we vacate the court’s decision regarding the amount due 
under that policy.1 
I.  BACKGROUND 
[¶2]  The parties do not dispute that on August 4, 2005, Alberta Graf 
was operating her personal vehicle when it was struck from behind by a 
vehicle operated by another motorist who was fully responsible for causing 
the accident.  At the time of the accident, that motorist had liability motorist 
coverage with Progressive Insurance Company in the amount of $50,000. 
[¶3]  Graf and her husband held two State Farm policies at the time of 
the accident.  The first (Policy 1) was in Graf’s husband’s name; provided 
$1,000,000 of UM/UIM coverage; provided $100,000 of medical payments 
coverage; and did not cover Graf’s vehicle.  The UM/UIM section contained a 
                                         
1  Graf also appeals from the court’s denial of her request for prejudgment interest and other 
interest, costs, disbursements, and fees.  The court’s denial of prejudgment interest was based on its 
conclusion that State Farm had already paid the policy limit and that there were no facts to show 
that State Farm acted in bad faith.  See 14 M.R.S. § 1602-B (2015); Simpson v. Hanover Ins. Co., 588 
A.2d 1183, 1186 (Me. 1991).  If the findings regarding policy limits are altered on remand, Graf may 
reassert her request. 
 
3 
provision entitled “When [UM/UIM Coverage] Does not Apply” that stated: 
“There is no coverage . . . for bodily injury to an insured [sustained] while 
occupying a motor vehicle owned by . . . you, your spouse or any relative if it is 
not insured for this coverage under this policy.”  The medical payments 
coverage under Policy 1 contained a similar provision.  The second policy 
(Policy 2) was in Graf’s name; provided $300,000 of UM/UIM coverage; 
provided $100,000 of medical payments coverage for medical expenses 
incurred for services furnished within three years of the accident; and 
covered Graf’s vehicle.  It provided: “The uninsured motor vehicle coverage 
shall be excess over and shall not pay again any medical expenses paid under 
the medical payments coverage.”  It also provided that medical payments 
coverage would be denied “to the extent workers’ compensation benefits are 
required to be payable.”   
[¶4]  In October 2009, Graf, with State Farm’s consent, settled her claim 
against the other motorist for his policy limits of $50,000 through Progressive 
Insurance.  In September 2011, Graf filed a three-count complaint against 
State Farm in the Superior Court (Somerset County) seeking coverage from 
State Farm pursuant to both policies.   
 
4 
[¶5]  On August 20, 2013,2 as the parties were preparing to go to trial, 
Graf filed a motion for stay of proceedings due to an arbitration clause in the 
policies, which the court (Nivison, J.) granted.  See generally Uniform 
Arbitration Act, 14 M.R.S. §§ 5927-5949 (2015).  An arbitration hearing was 
held on March 18, 2014.   
[¶6]  Before the hearing, the parties signed an arbitration agreement.  
The agreement stated that the purpose of arbitration was to determine 
whether the accident caused Graf damages, and if so, in what amount.  In the 
agreement, the parties left “jurisdiction” with the Superior Court to decide any 
issues relating to the amount of UM/UIM coverage available to Graf after the 
arbitration panel determined the amount of damages caused by the accident.  
Specifically, the agreement stated, “The court shall . . . retain jurisdiction to 
decide any issues relating to the amount of UM/UIM coverage available to 
Alberta Graf if there is a dispute regarding the available coverage after the 
panel award.”  The agreement did not specifically direct the arbitration panel 
or the court to determine the amount of medical expenses incurred within 
three years after the accident or the amount of expenses required to be 
payable by workers’ compensation.   
                                         
2  Between 2011 and 2013 the parties prepared for trial, but in June 2013, Graf’s attorney 
withdrew and new counsel was retained.  
 
5 
[¶7]  The panel found that the accident caused Graf damages of 
$378,000.  It determined that $125,000 of these damages were attributable to 
unspecified medical bills.  After subtracting the $50,000 from the settlement 
with the other motorist, it reported that Graf’s net damages totaled $328,000.  
[¶8]  On April 28, 2014, State Farm filed a motion in the Superior Court 
to reduce the panel damage award to available coverage.  The court (Mullen, 
J.) held a hearing on October 6, 2014.  At the October 6 hearing, State Farm 
presented evidence to the court to show that some of Graf’s medical bills 
resulting from the accident had been paid by workers’ compensation or were 
for services obtained more than three years after the accident.  The court 
granted the motion to reduce the panel damage award, determining that Graf 
had UM/UIM coverage pursuant only to her own policy—Policy 2; that she 
was not entitled to medical payments coverage pursuant to either policy; and 
that, because the available uninsured coverage on her policy totaled $300,000 
and Graf had already received $50,000, she was entitled to a total of $250,000 
from State Farm.  Graf filed a timely notice of appeal.  See 14 M.R.S. §§ 1851, 
5945 (2015).   
 
6 
II.  DISCUSSION 
A. 
Standard of Review 
 
[¶9]  Generally, pursuant to the Uniform Arbitration Act, an arbitration 
award can be modified by the Superior Court only for certain limited reasons, 
and our review of the court’s action is similarly limited.  See 14 M.R.S. § 5939; 
Randall v Conley, 2010 ME 68, ¶ 11, 2 A.3d 328.  Here, however, the court did 
not question the accuracy of the panel’s determination regarding damages, 
and its judgment did not constitute a modification of an arbitration decision.  
Nor do the parties challenge the amount of damages determined through 
arbitration.  Rather, the parties agreed in the arbitration agreement to allow 
the court to “retain jurisdiction to decide any issues relating to the amount of 
UM/UIM coverage available to Alberta Graf.”   
[¶10]  Thus, the court acted as the original adjudicator when it 
interpreted the policies and reduced the amount available to Graf based on its 
conclusion that Graf was only insured under one of the policies.  Therefore, 
our standard of review for confirmation or modification of an arbitration 
award pursuant to statute is not applicable here.  See Randall, 2010 ME 68, 
¶ 11, 2 A.3d 328.   
 
7 
[¶11]  Instead, we review the trial court’s interpretation of the 
insurance policies de novo.  Travelers Indem. Co. v. Bryant, 2012 ME 38, ¶ 8, 38 
A.3d 1267.  “If the language of [a] policy is unambiguous, we apply its plain 
meaning.”  Dickau v. Vt. Mut. Ins. Co., 2014 ME 158, ¶ 13, 107 A.3d 621.  We 
also review the trial court’s statutory interpretation de novo.  Strout v. Cent. 
Me. Med. Ctr., 2014 ME 77, ¶ 10, 94 A.3d 786.   
[¶12]  Graf argues that the court erred in determining (1) that Policy 1 
excluded coverage for injury sustained in a vehicle not covered by the policy; 
(2) that the UM/UIM statute, 24-A M.R.S. § 2902 (2015), entitled State Farm to 
offset any judgment entered by the court with the $50,000 settlement Graf 
received from the other motorist, after the arbitration panel had already offset 
its award with the settlement amount; and (3) that the language in Policy 2 
prevented her from recovering both UM/UIM coverage and medical payments 
coverage.  We address each of these arguments in turn. 
B. 
Policy 1 
[¶13]  Graf argues that the court erred in determining that a valid 
“other-owned vehicle” exclusion in Policy 1 prevents her entitlement to 
$1,000,000 of coverage under the policy.  Graf is included as an insured party 
 
8 
under Policy 1; the question is whether the policy exclusion for accidents 
occurring in other-owned vehicles is valid and prevents coverage in this case.   
[¶14]  Policy exclusions are enforced as long as they are unambiguous, 
do not conflict with the UM/UIM statute, and are not against public policy.  See 
Gross v. Green Mountain Ins. Co., 506 A.2d 1139, 1141-43 (Me. 1986).  The 
“other-owned vehicle” exclusion in Policy 1 provides: “There is no coverage . . . 
for bodily injury to an insured while occupying a motor vehicle owned by or 
leased to you, your spouse or any relative if it is not insured for this coverage 
under this policy.”  We have previously considered almost identical 
“other-owned vehicle” exclusions, and have consistently determined that they 
do not conflict with the UM/UIM statute and are not against public policy.  See 
Estate of Galipeau v. State Farm Mut. Auto. Ins. Co., 2016 ME 28, ¶¶ 11-15, 132 
A.3d 1190; Lewis v. Concord Gen. Mut. Ins. Co., 2014 ME 34, ¶ 12 n.9, 87 A.3d 
732; cf. Tibbetts v. Dairyland Ins. Co., 2010 ME 61, ¶¶ 22-24, 999 A.2d 930.  
Contrary to Graf’s assertion, this language unambiguously excludes coverage 
for injury that occurs in a vehicle not covered under the policy.3 
                                         
3  Graf argues that because the policy language is found under a heading “When [UM/UIM 
Coverage] Does Not Apply,” the exclusion only applies when one has not opted into UM/UIM 
coverage.  She further argues that the language is ambiguous.  We are not persuaded.  If the 
provision only applied to an insured who was not entitled to UM/UIM coverage in the first place, 
there would be no reason to list the exclusion.  As the policy language is not reasonably susceptible 
to different interpretations, it is not ambiguous. Cambridge Mut. Fire Ins. Co. v. Vallee, 687 A.2d 956, 
957 (Me. 1996). 
 
9 
[¶15]  Because the exclusion is not ambiguous, does not conflict with 
the UM/UIM statute, and is not against public policy, the exclusion is valid.  
The court did not err in denying coverage under Policy 1. 
C. 
Offset of the Other Motorist’s Payment 
[¶16]  Graf argues that it was improper for the court to offset available 
coverage with the $50,000 of settlement proceeds because the arbitration 
panel had already offset the damages award with the same settlement 
amount.   
[¶17]  “In the event of payment to any person under uninsured vehicle 
coverage . . . the insurer shall be entitled to the proceeds of any settlement or 
recovery from any person legally responsible for the bodily injury . . . .”  
24-A M.R.S. § 2902(4).  When the total damages are greater than the amount 
of UM/UIM coverage, we have previously determined that this language 
mandates that insurers offset the amount of coverage available in the UM/UIM 
policy, rather than the amount of damages incurred, by the amount actually 
paid by the tortfeasor.  Farthing v. Allstate Ins. Co., 2010 ME 131, ¶ 7, 10 A.3d 
667.  We have explained that the reason for doing so is that “[t]he goal of the 
UM statute [i]s to provide an injured insured the same recovery [that] would 
have been available had the tortfeasor been insured to the same extent as the 
 
10 
injured party.”  Tibbetts, 2010 ME 61, ¶ 12, 999 A.2d 930 (quotation marks 
omitted).  Thus, it was proper to offset the amount of available coverage with 
the other motorist’s payment, with the coverage then applied against the total 
damages determined by the arbitration panel.   
[¶18]  Mathematically, however, the offset applies only once.  After the 
issue of medical payments coverage, addressed below, has been resolved, the 
court will determine the remaining damages and compare that to the total 
UM/UIM coverage available to determine how to offset the other motorist’s 
payment.  Because Graf has received $50,000 of the $300,000 she was entitled 
to pursuant to Policy 2’s UM/UIM coverage, she will only be able to recover a 
maximum of $250,000 in UM/UIM coverage. 
D. 
Policy 2 
[¶19]  Graf is an insured party under Policy 2, and she is entitled to 
UM/UIM coverage under that policy.  The relevant question here is whether 
Graf is also entitled to any medical payments coverage under Policy 2, 
separate from UM/UIM coverage. 
[¶20]  Pursuant to the policy, Graf is entitled to $100,000 of medical 
payments coverage “for services furnished within three years of the date of 
the accident.”  That section also provides: “There is no coverage . . . to the 
 
11 
extent workers’ compensation benefits are required to be payable.”  The 
UM/UIM coverage provides: “The uninsured motor vehicle coverage shall be 
excess over and shall not pay again any medical expenses paid under the 
medical payments coverage.”  
[¶21]  The language at issue here—that “coverage shall be excess over 
and shall not pay again”—requires the medical payments coverage to be 
determined first and precludes the duplication of payment.  See Ostransky v. 
State Farm Ins. Co., 566 N.W.2d 399, 401 (Neb. 1997) (“State Farm’s position is 
clear: No insured can recover for medical expenses under the underinsured 
motorist coverage if such expenses have already been paid by the medical 
payment coverage.”).  Thus, pursuant to the policy, any damages that fall 
within the $100,000 medical payments coverage should be paid first and 
remaining damages should be paid from the UM/UIM coverage.4   
                                         
4  The math would work as follows.  Graf has up to $100,000 of medical payments coverage for 
medical costs that fall within the policy descriptions, and she has up to $250,000 in available 
UM/UIM coverage (policy limits of $300,000 less the other motorist’s payment of $50,000).  See 
Farthing v. Allstate, 2010 ME 131, ¶ 7, 10 A.3d 667.  Graf’s damages total $378,000, which is actually 
less than the potential maximum of her available payments and coverage of $400,000 ($100,000 in 
medical payments coverage and $300,000 from the combined payments of the other motorist and 
the UM/UIM coverage).  If all of the medical costs fall within the medical payments coverage, Graf 
would be entitled to $100,000 in medical payments coverage.  That would leave $278,000 in 
remaining damages to be paid from the other motorist and the UM/UIM coverage.  Because she has 
received $50,000 from the other motorist and $100,000 from the medical payments coverage, her 
remaining damages of $228,000 could be fully covered by her UM/UIM coverage.  She would 
receive $328,000 total from State Farm ($100,000 in medical payments and $228,000 in UM/UIM 
coverage) and $50,000 total from the other motorist, fully covering her total damages of $378,000. 
 
12 
[¶22]  The arbitration panel did not determine the amount of medical 
expenses that were incurred within three years after the accident or whether 
any of these expenses were required to be payable by workers’ compensation.  
Instead, the parties presented to the court the limited issue of whether the 
medical bills identified by the arbitration panel were covered by the medical 
payments provision because they fell within the period of coverage and were 
not offset by workers’ compensation.5  Because the court found the medical 
payments coverage not to be applicable, it did not reach this question, and the 
issue must be remanded to the Superior Court to determine how much, if any, 
of the $125,000 of arbitration-awarded medical expenses were incurred 
within three years after the accident and were not required to be paid by 
workers’ compensation.  After the court makes this determination, the parties 
should be able to calculate State Farm’s remaining obligation.  If not, pursuant 
to the original arbitration agreement, the court will determine the amount of 
coverage available to Graf and enter judgment accordingly. 
                                                                                                                                   
On the other hand, if none of the medical bills fall within the medical payments coverage, that 
would leave $378,000 in damages to be paid from the other motorist and the UM/UIM coverage.  
Thus, she would be entitled to a total of $250,000 from State Farm, augmenting the $50,000 from 
the other motorist, for a total of $300,000.  
5  The accident occurred in 2005, and Graf underwent surgery in 2011, beyond the point of 
medical payments coverage.  However, other medical costs may have been incurred within the 
three-year limit. 
 
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The entry is: 
Judgment affirmed in part.  Remanded to the 
Superior Court for proceedings consistent with 
this opinion.  
 
 
 
 
 
 
 
 
On the briefs: 
 
N. Laurence Willey, Jr., Esq., Willey Law Offices, Bangor, for 
appellant Alberta Graf 
 
James B. Main, Esq., Hoy & Main, P.A., Gray, for appellee 
State Farm Mutual Automobile Insurance Company 
 
 
 
Somerset County Superior Court docket number CV-2011-18 
FOR CLERK REFERENCE ONLY