Case Name: Michael L. BURTON, Appellant, v. STATE FARM FIRE AND CASUALTY COMPANY, Appellee
Court: Alaska Supreme Court
Jurisdiction: Alaska
Decision Date: 1990-08-10
Citations: 796 P.2d 1361
Docket Number: No. S-3224
Parties: Michael L. BURTON, Appellant, v. STATE FARM FIRE AND CASUALTY COMPANY, Appellee.
Judges: Before MATTHEWS, C.J., RABINOWITZ, BURKE, COMPTON and MOORE, JJ.
Reporter: Pacific Reporter 2d
Volume: 796
Pages: 1361–1368

Head Matter:
Michael L. BURTON, Appellant, v. STATE FARM FIRE AND CASUALTY COMPANY, Appellee.
No. S-3224.
Supreme Court of Alaska.
Aug. 10, 1990.
Stephen M. Sims, Law Offices of Stephen M. Sims, Anchorage, for appellant.
Paul W. Waggoner, Law Offices of Paul Waggoner, Anchorage, for appellee.
Before MATTHEWS, C.J., RABINOWITZ, BURKE, COMPTON and MOORE, JJ.

Opinion:
OPINION
MOORE, Justice.
Michael Burton, the owner of a motor vehicle insurance policy issued by State Farm Fire and Casualty Co. ("State Farm"), was injured seriously while riding as a passenger in his insured vehicle. State Farm settled claims against Burton and the driver of Burton's vehicle in excess of the per occurrence limit of Burton's liability coverage. Burton then sought payment for his injuries under his underin-sured motor vehicle coverage. State Farm refused to pay on the ground that the policy's definition of underinsured motor vehicle excludes the insured vehicle. Burton challenged this exclusion as contrary to his reasonable expectations and various statutory provisions. The superior court dismissed Burton's claims and Burton appealed. We believe that the State Farm exclusion impermissibly limits the coverage State Farm offers and accordingly reverse.
I.
On February 26, 1985, Burton purchased insurance from State Farm for his new pickup truck. The policy provided both liability coverage and uninsured and under-insured motor vehicle coverage of $100,000 per person and $300,000 per occurrence. The policy also provided $25,000 in medical payments coverage and $10,000 in death and dismemberment coverage.
The liability coverage of Burton's policy protected Burton and permissive users of his truck from legal liability to others. The liability coverage did not extend to "any bodily injury to . any insured_" Burton's medical expenses were within the scope of his medical payments coverage. Damage to the truck was within the scope of Burton's collision coverage. The uninsured and underinsured motor vehicle coverage provided that Burton could recover from State Farm damages for bodily injury and property damage that he was "legally entitled to collect from the owner or driver of an uninsured motor vehicle or an under-insured motor vehicle." The policy specifically provided that uninsured and underin-sured motor vehicles did not include motor vehicles "insured under the liability coverage of the policy."
On July 28, 1985, Burton was a passenger in his truck which was being driven by Dan Jones. Jones negligently collided with another car. As a result of the collision, Burton sustained severe injuries. The record indicates that State Farm paid Burton $25,000 under the medical payments coverage and $5,000 under the dismemberment coverage of his policy.
A multiplicity of legal actions followed the collision. With Burton's approval, State Farm paid $265,000 to the occupants of the other vehicle in exchange for a release of their claims against Jones and Burton. State Farm paid Burton $35,000 plus costs and attorney's fees on his claim against Jones.
After these settlements, Burton commenced an action against State Farm for declaratory relief and damages under the underinsured motor vehicle coverage of his policy. Burton argued that since he was injured by a motor vehicle (his own) that was underinsured with respect to him (he received less than the $100,000 per person limit of his liability and underinsured motor vehicle coverages), he should receive an additional $65,000 from State Farm. Burton argued that the limiting language in the liability and underinsured motor vehicle coverages of his policy is contrary to public policy as expressed in Alaska's compulsory insurance statutes. AS 21.89.020; AS 28.-22. He also based his claim upon what he says were his reasonable expectations when buying the policy. The superior court dismissed Burton's claims. Burton appealed.
II.
Burton maintains that the provision in his policy that liability coverage does not extend to an insured's bodily injuries (a "household exclusion") denies him the coverage he expected and that is required by statute. State Farm has paid claims in excess of the $300,000 per occurrence limit of Burton's liability coverage. Regardless whether the exclusion is valid or consistent with his reasonable expectations, State Farm is not bound to pay anything beyond the per occurrence limit of Burton's liability coverage. We will not grant declaratory judgment of a moot question. Greater Anchorage Area Borough v. City of Anchorage, 504 P.2d 1027, 1035-36 (Alaska 1972). We therefore do not consider Burton's arguments concerning this exclusion in his policy.
III.
Burton argues that State Farm provided him with less underinsured motor vehicle coverage than it is required to provide by statute. We agree.
Alaska law defines an "underinsured motor vehicle" as:
a motor vehicle licensed for highway use with respect to ownership, operation, maintenance, or use for which there is a bodily injury or property damage insurance policy or a bond applicable at the time of an accident and the amount of insurance or bond
(B) has been reduced by payments to persons other than an insured, injured in an accident, to less than the limit for uninsured and underinsured coverage of the insured's policy.
Burton's truck was an underinsured motor vehicle as that term is defined in AS 28.40.-100(a)(17) (now AS 28.40.100(a)(16)) because the amount of insurance available to Burton was "reduced by payments to persons other than' [Burton] . to less than the limit for uninsured and underinsured coverage of [Burton's] policy." AS 28.40.-100(a)(17).
Insurance companies offering automobile liability insurance must offer uninsured and underinsured motor vehicle coverage with limits at least equal to those of the liability coverage. AS 21.89.020(c). The purpose of this coverage is to protect "the persons insured under the policy who are legally entitled to recover damages from the . operator of an . underinsured motor vehicle because of bodily injury . arising out of the . use of the . under-insured motor vehicle." AS 28.22.010(a)(3) (same language now in AS 28.22.101(e)). Burton falls within the scope of this protection. He was injured by the use of an underinsured motor vehicle, his own, and was entitled to recover from the operator, Jones. State Farm was required to provide the statutory minimum coverage unless Burton waived it in writing. AS 21.89.-020(e).
The statute also provides that the uninsured and underinsured coverage does not protect an insured while occupying an uninsured vehicle owned by the insured or a relative. AS 28.22.130(1) (now AS 28.22.-231(1)). A clear implication of this provision is that if an insured is occupying an insured vehicle owned by him, he is protected by his underinsured motor vehicle coverage. Were this not the case, an insured could buy no automobile insurance covering his own pain and suffering and lost income in the event he is injured while occupying his own vehicle.
Insurers are not permitted to issue policies containing provisions that reduce the scope of coverage below the legal minimum. Hillman v. Nationwide Mut. Fire Ins. Co., 758 P.2d 1248, 1251-52 (Alaska 1988). Although AS 28.22.500 (now AS 28.22.301) allows insurers to include in their policies other exclusions "that do not violate the requirements of this chapter or other applicable laws," we must construe this section togéther with the rest of the Mandatory Motor Vehicle Insurance Act so that all of the statute's sections have meaning and none conflict. Furthermore, if a specific section conflicts with a general section, the specific section controls. In re Estate of Hutchinson, 577 P.2d 1074, 1075 (Alaska 1978). We do not believe that the legislature intended AS 28.22.500 to allow insurers to rewrite the definition of under-insured motor vehicle contained in AS 28.-40.100(a)(17). Here, the State Farm policy did not provide coverage in cases where the insured vehicle was an underinsured vehicle. The statute permits no such exclusion.
IV.
Burton argues that because the exclusion is invalid he is entitled to $100,000 of underinsured motorist protection. Since Burton received $35,000 from State Farm under his liability coverage, he claims State Farm is liable to him for $65,000. State Farm responds that Burton is entitled to only $50,000 in underinsured motorist coverage without the invalid exclusion from which all of the payments Burton has received, totalling $60,000, should be deducted. State Farm observes that $50,000 is the statutory minimum liability coverage. AS 28.22.010(a)(2)(A) (same minimum now in AS 28.22.101(d)(1)). Although State Farm is required to offer underinsured motor vehicle coverage in the amount of liability coverage, AS 21.89.020(c), coverage in excess of statutory mínimums is not subject to statutory requirements. AS 28.22.-030(a) (now AS 28.22.121(a)). State Farm reasons that our decision invalidating the State Farm exclusion therefore should apply only to the first $50,000 of Burton's coverage.
State Farm correctly states the majority rule that when an exclusion is invalidated, the insurer's liability is limited to the statutory minimum. See, e.g., Arceneaux v. State Farm Mut. Auto. Ins. Co., 113 Ariz. 216, 550 P.2d 87, 89 (1976); DeWitt v. Young, 229 Kan. 474, 625 P.2d 478, 483 (1981). This rule was developed primarily in cases involving exclusions to liability coverage. The statutory minimum liability coverage is a dollar amount prescribed by statute. AS 28.22.010(a)(2)(A). This case is somewhat different. State Farm is required to offer uninsured and underinsured motorist coverage in the amount of liability coverage purchased voluntarily. AS 21.89.-020(c). Therefore, the statutory minimum of underinsured motor vehicle insurance coverage is the actual amount of liability insurance purchased. Because Burton bought $100,000 in liability insurance, he is entitled to underinsured motor vehicle coverage satisfying the statutory requirements in the amount of $100,000, less the deductions provided in his policy.
The parties disagree whether payments under Burton's medical payments coverage should be deducted. Burton's policy clearly provides that the amount payable under underinsured motorist coverage for bodily injury "shall be reduced by any amount paid or payable to or for the insured under . the liability coverage . [or] the medical payments coverage...." Nothing in the medical payments coverage of the policy contradicts this. Although the "conditions" section of the policy provides that "medical payments . coverage payments are not recoverable by us," this provision refers only to State Farm's right of subro-gation, which is not at issue here. This provision does not conflict with the provision reducing an insured's underinsured motorist coverage by the amount paid under his medical payments coverage. Thus, Burton should receive $100,000 reduced by the $35,000 he received under his liability coverage and the $25,000 he received for medical payments, or $40,000.
The decision of the superior court is REVERSED and the case REMANDED for further proceedings consistent with this opinion.
. We thus have no occasion to address Burton's argument that the exclusion is contrary to his reasonable expectations at the time he purchased the policy.
. AS 28.40.100(a)(17) (now AS 28.40.100(a)(16)). All of AS 28.22 and certain other statutory provisions concerning insurance were repealed by Ch. 70, § 17, SLA 1984 effective January 1, 1989. A new AS 28.22 differing from the old in many respects was enacted in Ch. 108, § 1, SLA 1989 effective June 14, 1989. We apply the law that was in effect on February 26, 1985, the day Burton purchased his policy, but observe that our holding today may be relevant in interpreting AS 28.22 as it now exists.
.This conclusion is consistent with decisions in a number of other jurisdictions. Eg. Rodman v. State Farm Mut. Auto. Ins. Co., 208 N.W.2d 903, 909-10 (Iowa 1973); Carmichael v. Government Employees Ins. Co., 54 A.D.2d 140, 388 N.Y.S.2d 354, 356 (App.Div.1976); Bowsher v. State Farm Fire and Cas. Co., 244 Or. 549, 419 P.2d 606, 608 (1966) (overruled by statute, 1967 Or.Laws ch. 482, § 3 (codified as amended.at Or. Rev.Stat. § 742.504(2)(e)(A) (1989))).