Case Name: DIXIE INSURANCE COMPANY v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY
Court: Mississippi Supreme Court
Jurisdiction: Mississippi
Decision Date: 1992-12-31
Citations: 614 So. 2d 918
Docket Number: No. 89-CA-0565
Parties: DIXIE INSURANCE COMPANY v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY.
Judges: Before ROY NOBLE LEE, C.J., and PRATHER and SULLIVAN, JJ.
Reporter: Southern Reporter, Second Series
Volume: 614
Pages: 918–925

Head Matter:
DIXIE INSURANCE COMPANY v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY.
No. 89-CA-0565.
Supreme Court of Mississippi.
Dec. 31, 1992.
Rehearing Denied April 8, 1993.
John W. Land, Bryan Nelson Randolph Land & Weathers, Hattiesburg, for appellant.
Edward J. Currie, Jr., Steen Reynolds Dalehite & Currie, Michael F. Myers, Steen Reynolds Firm, Jackson, for appellee.
Before ROY NOBLE LEE, C.J., and PRATHER and SULLIVAN, JJ.

Opinion:
PRATHER, Justice, for the Court:
I. INTRODUCTION
The issue addressed in this appeal is whether the host driver's uninsured or un-derinsured motorist (UM) insurer, State Farm Mutual Automobile Insurance Company (State Farm), or the injured's own UM insurer, Dixie Insurance Company (Dixie), is entitled to take the liability insurance offset. The Copiah County Circuit Court upheld State Farm's contractual offset provision and ordered Dixie to pay $10,000 in UM coverage to its insured. Dixie appealed and raised the following issues:
Whether the insured, should have received $10,000 instead of $14,860.34 in UM compensation?
Whether State Farm, as the host driver's insurer, should have been required to exhaust its UM coverage before Dixie, as the injured's insurer, made any UM payment?
Whether, alternatively, State Farm and Dixie should have been allowed to prorate the $25,000 offset?
A. Facts
The parties stipulated to the facts recited here. On May 28, 1984, driver Glenn Hurst and guest-passenger Donald B. Cannon (and two other guest passengers) travelled toward Rockport, Texas, when Hurst negligently drove off the highway and wrecked. "As a proximate result of the accident the plaintiff [Cannon]' received injuries and other damages. Actual damages which [Cannon] has suffered as a proximate result of the accident exceed[ed] the sum of $35,-000.00."
Hurst's insurer, State Farm, provided liability coverage of $25,000 per person and $50,000 per accident and UM coverage of $25,000 per person and $50,000 per accident. Cannon's insurer, Dixie, provided UM coverage of $10,000. State Farm settled with Cannon, vis-a-vis liability coverage, and paid him $20,193.66. This payment, in addition to the settlement payments to Hurst's other guest passengers, exhausted State Farm's "per accident" limit.
B. Procedural History
On May 15, 1986, Cannon filed a complaint against State Farm and Dixie — demanding additional payment under the policies' UM-coverage provisions. Cannon explained that the $20,193.66 which he collected under the liability-coverage provision of Hurst's policy did not adequately compensate him. Cannon thus contended that he was entitled to $25,000 from State Farm and $10,000 from Dixie under UM-coverage provisions. See Miss.Code Ann. § 83-11-103(c)(iii) (1972).
On August 3, 1988, the trial judge determined that State Farm was liable for $25,-000.00 under its UM-coverage provision; however, the judge permitted State Farm to offset that amount ($25,000) by the amount ($20,193.66) which it had paid under its liability-coverage provision. The offset left State Farm with a balance of $4,806.34 of UM coverage. The judge based his decision on ¶ 3.A(l)(b) of State Farm's policy:
B. UNINSURED MOTOR VEHICLE-COVERAGE U1
(Damages for Bodily Injury or Property Damage Caused by Uninsured Motor Vehicles).
Limits of Liability....
3. Bodily and Property Damage A. Any amount payable under this section for bodily injury shall be reduced by:
(1) any amount paid or payable to or for the insured:
(b) for bodily injury under the liability coverage of this policy....
The judge then ordered Dixie to pay Cannon $10,000 under its UM coverage for its insured. The following is a summary of the judge's order:
Policy Coverages • Payment Amount of Coverage
State Farm liability $20,193.66 $25,000.00
State Farm UM 4,806.34 25,000.00
Dixie UM 10,000.00 10,000.00
Totally coverage $35,000.00
Dixie moved to amend the order and, alternatively, requested a new trial. The judge denied the motion, and Dixie appealed.
II. ANALYSIS
As a threshold issue, the Court must verify Hurst's status as a UM before addressing the issue of whose UM coverage should be tapped and to what extent. Under Mississippi law, "stacking is allowed for the purpose of qualifying the tortfeasor as [a UM]." Wickline v. U.S. Fidelity & Guar. Co., 530 So.2d 708, 713 (Miss.1988). As explained in Wickline:
If [a person] is injured while riding as a passenger, the [UM] coverage of the vehicle in which he is riding, in addition to that of his own vehicles, is "applicable to the injured person."
530 So.2d at 713. If the aggregated or "stacked" amount exceeds the tortfeasor's bodily injury liability coverage, the tortfea-sor qualifies as a UM and the injured party may recover under the UM policy provision. Id.
As a matter of policy,
On numerous occasions this Court has observed that [UM] insurance is designed to provide innocent injured motorists a means of compensation for injuries which they receive at the hands of an UM . and this Court has further noted that the Uninsured Motorist Act must be liberally construed to achieve this purpose.
Id. at 711 (citations omitted). In Cossitt v. Federated Guar. Mut. Ins. Co., 541 So.2d 436, 440 (Miss.1989), this Court explained that determination of whether a person is "uninsured" is made solely by comparing policy limits — that is, the liability limit of the tortfeasor compared to the UM limit applicable to the injured party. See also Washington v. Georgia American Ins. Co., 540 So.2d 22, 25 (Miss.1989). Thus, where a tortfeasor and an injured guest passenger carry liability insurance with matching limits, "the insured is not entitled to [UM] coverage under the statute, but it entitled to the liability limits . under the tortfeasor's liability policy."
In this case, both parties agree that Hurst qualifies as a UM. Using the Wick-line rule, Cannon's UM limit of $10,000 added to Hurst's UM limit of $25,000 exceeds Hurst's bodily injury liability limit of $25,000. Thus, Cannon may recover under the un(der)insured-coverage provisions applicable to him. Since the parties agree on the amount of Cannon's damages, the question becomes one of determining which amounts from which policies should compose Cannon's award.
A. Whether the plaintiff should have received $10,000 instead of $14,860.34 in UM compensation from both policies?
Dixie claims that the compensation scheme had the effect of allowing Cannon more UM coverage than the combined Dixie and State Farm policies offered. Dixie asserts that Cannon was paid an amount equivalent to $39,806.34 in UM coverage when only $35,000.00 was provided. However, State Farm was ordered to pay UM coverage of $25,000, [less an offset entitlement, from liability payment of $20,193.66, or a balance of $4,806.34.] Dixie was ordered to pay UM coverage of $10,000. Thus, Dixie contends that Cannon received an excess payment of UM coverage as follows:
$35,000.00 (State Farm Liability Coverage)
4,806.34 (State Farm UM Coverage) 10,000.00 (Dixie UM Coverage)
$39,806.34 TOTAL
Dixie's claim that Cannon has been paid "an amount equivalent to $39,806.34 in [UM] coverage" is devoid of factual support. Cannon received $14,806.34 in UM coverage out of an available $35,000. The tortfeasor's bodily injury liability coverage provided only $20,193.66 of Cannon's total compensation, not $25,000. Thus, Cannon's actual receipt totaled $35,000 — not $39,806.34.
B. Whether State Farm, as the host driver's insurer, should have been required to exhaust its UM coverage before Dixie made any UM payment or, in the alternative, whether State Farm and Dixie should have been allowed to pro-rate the $25,000 offset?
Dixie urges that its policy of insurance is the injured party's own insurer and that State Farm, as the host driver's UM insurer, would be the primary insurer. Mississippi Farm Bureau Mut. Ins. Co. v. Garrett, 487 So.2d 1320,1321 (Miss.1986). Dixie's position is that the host driver's insurer (State Farm) should pay before the excess insurer (Dixie) would be ordered to pay. In this case, Dixie asserts that State Farm should be required to pay the full $10,000 UM coverage before Cannon can resort to his own UM coverage. "Primary/excess insurance principles deal with who pays first." Appellant's Brief at 7.
This argument addresses the problem that has arisen in interpreting language in an insurance policy (other than life insurance), referred to as "other insurance" clauses, which were designed to prevent claims by overinsuring. The problem arises when multiple insurance coverages exists. The practice of the insurers is described in the following manner:
There are three basic types of other insurance clauses which regulate how liability is to be divided when multiple coverage exists. The first, a. "pro-rata" clause, limits the liability of an insurer to a proportion of the total loss. The second, an "escape" clause, seeks to avoid all liability. The third, an "excess" clause . provides that the insurance will only be excess. See 8 J. Appleman, Insurance Law and Practice § 4911 (Cum.Supp.1973); 7 Am.Jur.2d Automobile Insurance § 200-02 (2d ed. 1963).
Carriers Ins. Co. v. American Policyholders' Ins. Co., 404 A.2d 216 (Me.1979); see also 76 A.L.R.2d 502 (1961); 46 A.L.R.2d 1163, 1167 (1956); 69 A.L.R.2d 1122 (1960). The insurance industry has tried, by draft ing specific policy provisions, to place the initial loss on other applicable insurers.
"[Cjourts have had to consider language in insurance policies denying coverage for a loss because of the existence of one or more additional policies." This situation, which is both common and exceedingly difficult to resolve, was humorously described by the Third Circuit Court of Appeals.
Restaurateurs are familiar with the good-natured struggles which often ensue when guests attempt to pick up the tab for their dinner companions. It may be fanciful to assume that it was to avoid similar unseemly displays when the time came to pay a casualty loss that insurance companies incorporated "other insurance clauses" in their policies. Certainly, there is one dramatic difference between those generous diners, would-be hosts, and the insurers — the diner pleads for the opportunity to pay the bill; the insurer's use of the "other insurance" clause is designed to confer that honor on the other company.
Alleman, Resolving the "Other Insurance". Dilemma: Ordering Disputes Among Primary and Excess Policies," 1981 Kan.L.Rev. 75.
This Court has resolved coverage questions by applying the Mississippi Motor Vehicle Safety Responsibility Act (Miss.Code Ann. § 83-11-101, et seq. (1972) as amended), and the language of the particular insurance policy involved, together with policy considerations. See Thiac v. State Farm Automobile Ins. Co., 569 So.2d 1217 (Miss.1990); Cossitt v. Nationwide Mut. Ins. Co., 551 So.2d 879 (Miss.1989); Brown v. Maryland Cas. Co., 521 So.2d 854 (Miss. 1987); State Farm Mut. Automobile Ins. Co. v. Kuehling, 475 So.2d 1159 (Miss. 1985); Government Employees Ins. Co. v. Brown, 446 So.2d 1002 (Miss.1984).
This Court has consistently held that an insurer may not diminish the mandated statutory requirements. Mississippi Farm Bureau Mut. Ins. Co. v. Garrett, 487 So.2d 1320, 1323 (Miss.1986); State Farm Mut. Automobile Ins. Co. v. Kuehling, 475 So.2d 1159, 1161 (Miss.1985); Talbot v. State Farm Mut. Automobile Ins. Co., 291 So.2d 699, 703 (Miss.1974). Likewise, our cases provide for the freedom of the insurer and the insured to contract so long as the mandatory statutory requirements are not circumvented. Casualty Reciprocal Exchange v. Federal Ins. Co., 608 So.2d 1258, 1259 (Miss.1972); Wickline v. United States Fidelity & Guar. Co., 530 So.2d 708, 717 (Miss.1988).
This Court addressed "other available insurance" policy language in Mississippi Farm Bureau Mut. Ins. Co. v. Garrett, 487 So.2d 1320, 1323 (Miss.1986), in light of our UM statute and prior case law. There, this Court upheld the contractual language between the insurer and the insured. Likewise, in the instant case, the trial ' court upheld similar contractual language and this Court now affirms.
Pursuant to the holding of State Farm Mutual Auto. Ins. Co. v. Kuehling, 475 So.2d 1159, 1163 (Miss.1985), a policy may, by its language, "provide[] for offsets of the [UM] coverage by amounts paid by the tortfeasor's carrier...." Applying that rule to this case, one could say that, to the extent of $20,193.66, State Farm provided liability insurance of $25,000 and cannot be considered wholly uninsured. Subtracting or offsetting, $20,193.66 from $25,000, the court correctly arrived at an uninsured liability due from State Farm of $4,806.34.
Dixie, however, had a similar offset provision in its policy. Dixie contends that, at any rate, the trial judge should have required State Farm to exhaust its UM coverage before requiring Dixie to make any payment. Nothing in Mississippi law requires such an arrangement where a policy provision provides otherwise.
Because Dixie's policy only allows it to offset amounts actually paid by it, Dixie is not entitled to the benefit of the offset first. Chicago Ins. Co. v. Lumberman's Mut. Cas. Co., 503 So.2d 916 (Fla.App. 1987); Georgia Farm Bureau Mut. Ins. Co. v. State Farm Mut. Automobile Ins. Co., 255 Ga. 166, 336 S.E.2d 237 (1985). The trial court correctly held that the primary insurer was entitled to offset first.
As to the argument that pro-ration of their coverages should have been allowed, Dixie argues that to permit the primary insurer to offset the liability coverage allows State Farm to escape liability under its UM coverage. Dixie, therefore, argues alternatively that State Farm and it should be allowed to pro-rate the amount of UM coverage.
In view of the Garrett analysis, this Court holds that the trial judge acted properly in denying pro-ration of the offset provision of the primary insurer's policy of insurance. Because Dixie's policy only allows it to offset amounts actually paid under any liability coverage, Dixie is not entitled to offset the liability policy limits. The trial judge's decision is affirmed.
AFFIRMED.
ROY NOBLE LEE, C.J., HAWKINS, P.J., and PITTMAN, BANKS and ROBERTS, JJ., concur.
McRAE, J., dissents by separate written opinion, joined by DAN M. LEE, P.J., and SULLIVAN, J.
. Mississippi statutory law on automobile insurance has defined the terms "insured" and "uninsured" as follows:
(b) The term "insured" shall means the named insured and . a guest in such motor vehicle to which the policy applies.... The definition of the term "insured" given in this section shall apply only to the uninsured motorist portion of the policy.
(c) The term "uninsured motor vehicle" shall mean:
(i) A motor vehicle as to which there is no bodily injury liability insurance; or
(iii) An insured motor vehicle, when the liability insurer of such vehicle has provided limits of bodily injury liability for its insured which are less than the limits applicable to the injured person provided under his uninsured motorist coverage....
Miss.Code Ann. § 83-11-103 (Supp.1980) (emphasis added). The highlighted language causes the term "uninsured" motorist to embrace the "underinsured" motorist, as well. See Wickline v. U.S. Fidelity & Guar. Co., 530 So.2d 708, 712 (Miss.1988).