Title: Burch v. Allstate Insurance Company
Citation: 1998 OK 129, 70OBJ46, 977 P.2d 1057
Docket Number: 
State: Oklahoma
Issuer: Oklahoma Supreme Court
Date: December 22, 1998

Burch v. Allstate Insurance Company Annotate this Case Burch v. Allstate Insurance Company 1998 OK 129 977 P.2d 1057 70 OBJ 46 Case Number: 88546 Decided: 12/22/1998 Modified: 01/19/1999 Supreme Court of Oklahoma LINDA J. BURCH, Plaintiff-Appellant, v. ALLSTATE INSURANCE COMPANY, Defendant-Appellee. [977 P.2d 1058] CERTIFIED QUESTION FROM A FEDERAL COURT. ¶0 Linda Burch ("Linda" or "plaintiff") brought an action in the United States District Court for the Western District of Oklahoma against her uninsured motorist carrier, Allstate Insurance Company ("Allstate" or "defendant"), to recover all damages sustained in an automobile accident in which her husband was at fault. Following the accident, she elected not to sue her husband; the statute of limitations on her claim against him expired on or about the day she filed suit against the defendant. Defendant refused to pay the full amount of damages, arguing that its obligation was limited to that portion of the claim which exceeded the tortfeasor's liability coverage limit. The district court entered judgment in defendant's favor, and plaintiff appealed. The United States Court of Appeals for the Tenth Circuit certified to this court a question of law regarding the extent of insurer's obligation under Oklahoma's uninsured motorist statute. CERTIFIED QUESTION ANSWERED. Tye H. Smith, Oklahoma City, Oklahoma, and Sidney A. Martin II, Tulsa, Oklahoma, Carr & Carr, for Appellant. George D. Davis, McKinney, Stringer &Webster, P.C., Oklahoma City, Oklahoma, for Appellee. Rex K. Travis, Oklahoma City, and Renee Williams, Tulsa, for Oklahoma Trial Lawyers Association, amicus curiae. OPALA, J. ¶1 The United States Court of Appeals for the Tenth Circuit ("certifying court") certified the following question pursuant to the Uniform Certification of Questions of Law Act, "When an insured's damages in an automobile accident exceed a tortfeasor's liability limits and the insured seeks payment for damages directly from its underinsured motorist (UIM) carrier, is the UIM carrier liable for the entire amount of the insured's claim when the liability and UIM coverage are provided by the same carrier but the statute of limitations period has expired on the liability claim? ¶2 We answer in the affirmative. Under the provisions of ¶3 Having determined that UM coverage is primary, we answer the precise question posed by holding that under the unique facts of this case (in which both the liability and the uninsured motorist coverage are provided by the same carrier and the statute of limitations has run on the insured's tort claim against the negligent party), the UM carrier's statutorily mandated obligation as a provider of primary insurance coverage is not altered. Except where the insured affirmatively destroys the insurer's subrogation rights, a UM carrier is directly and primarily liable to its insured for the entire loss to be indemnified; it must seek recovery of paid indemnity through an exercise of its right to subrogation. I ¶4 On April 14, 1992, Linda Burch was riding as a passenger in her own automobile, which was being driven by her husband, Herbert. Herbert rear-ended another vehicle, and Linda was injured. At the time of the accident, Linda's car was covered with respect to both liability and uninsured motorist claims under a single policy of automobile insurance issued by Allstate Insurance Company. The policy's liability limits were $100,000/$300,000, but those limits "stepped down" to $10,000/$20,000 when the injured party was a named insured under the policy, as Linda was in this case. The UM limits were also $100,000/$300,0000 with no step-down provision. ¶5 Without ever filing suit against Herbert, and within one day of the expiration of the statute limiting the time to bring her tort claim against him, Linda brought suit against Allstate in the United States District Court for the Western District of Oklahoma, alleging bad faith and indemnifiable loss under the UM policy. In an auto accident case when the tort-feasor has collectible liability insurance coverage with stated limits, and the statute of limitations on plaintiff's claim against the tort-feasor has expired, is the UM carrier obligated to pay those amounts of plaintiff's damages that would have been covered by the tort-feasor's liability coverage limits? ¶6 [977 P.2d 1060] Relying upon this court's decision in Buzzard v. Farmers Insurance Co. ("Buzzard"), II AN UNINSURED MOTORIST CARRIER IS OBLIGATED FOR ALL OF ITS INSURED'S LOSS FROM THE FIRST DOLLAR UP TO THE POLICY LIMITS. ¶7 Allstate contends Buzzard v. Farmers Insurance Co. ¶8 Linda argues ¶9 In Buzzard, the plaintiffs' son was killed when his automobile was struck by a City of Norman truck. The City of Norman carried liability insurance in the amount of $50,000 per claimant. The plaintiffs' damages exceeded the liability insurance limits, and the City was hence underinsured with respect to the plaintiffs' damages. Plaintiffs presented their UM claim to their insurer, Farmers Insurance Co.("Farmers"), within a month of the accident. Farmers took the position that it did not have to pay anything on the UM claim until the liability insurance benefits had been "exhausted" by settlement or judgment. Plaintiffs then settled the claim with the City of Norman for $50,500 and signed a covenant not to sue. Farmers now refused to pay on the UM policy because the plaintiffs' covenant not to sue had destroyed their subrogation rights against the City. The court held that a UM carrier cannot withhold payment on the UM policy until liability benefits have been exhausted. The UM carrier must promptly investigate, place a value on the damage claim and pay UM benefits without regard to whether liability benefits have been paid. The court then went on to describe what damages a UM carrier is obligated to pay, stating that its obligation is to pay "that amount of injury or damage which exceeds the liability limits of the tortfeasor." ¶10 Two decisions by the Oklahoma Court of Civil Appeals ¶11 The second pronouncement by the Court of Civil Appeals, decided this year, is Smith v. American Fidelity Insurance Cos. ¶12 Both Kavanaugh and Smith assumed Buzzard was dispositive on the outer limit of a UM carrier's liability to its insured. We disagree. ¶13 We turn next to the text of §3636, the statute creating uninsured motorist coverage. ¶14 The dissent argues that in enacting §3636 (D), the Legislature explicitly limited the use of UM coverage as a substitute for liability coverage to the situation in which the liability carrier becomes insolvent within one year after the date of the accident. The dissent is mistaken. Subsection (D) merely deals with an insolvent insurer as a special subclass of available UM insurance from indemnitors who become insolvent. It does not support the dichotomous treatment of claims generated by uninsured and underinsured tortfeasors. ¶15 The pre-Buzzard Court of Civil Appeals case of Roberts v. Mid-Continent Casualty Co., ¶16 We agree. When §3636 was amended in 1979, the Legislature prohibited the reduction of a §3636 claim by a set-off of benefits from the tortfeasor's liability policy. ¶17 Allstate argues that the broader purpose of UM coverage is simply "to place plaintiff in the position she would be in if the tort-feasor had proper liability insurance," not to create a duplicate pool of insurance. In a situation where a vehicle is classified as uninsured solely because its liability coverage is inadequate to satisfy a damage claim, Allstate argues, UM coverage merely "adds to" existing liability coverage, but does not replace it. Allstate contends that the statutory language of §3636 reveals no legislative intent to make UM coverage the sole source of recovery for all of a plaintiff's damages. ¶18 We agree that UM coverage was not intended to be the sole source of recovery for all of a plaintiff's damages and our holding today does not make it so. Allstate fails to take into account that if liability coverage is indeed "duplicated" by a "first-dollar damages" construction of §3636, such duplication is only a temporary expedient to facilitate prompt payment to the insured. This clearly is contemplated by §3636. Our holding - - that the UM carrier is directly and primarily liable to its insured for the entire loss to be indemnified, except where the insured affirmatively destroys the insurer's subrogation right, does not make the UM carrier the final indemnitor for the injured party's loss. The UM carrier is statutorily subrogated to the rights of its insured against the tortfeasor and the tortfeasor's liability carrier, if any there be, and must seek recovery of paid indemnity through an exercise of its right to subrogation. The particular facts of this case (in which both the liability and the uninsured motorist coverage are provided by the same carrier and the statute of limitations has run on the insured's tort claim against the negligent party) provide no reason to exclude Allstate from the application of the general rule we pronounce today. ¶19 CERTIFIED QUESTION ANSWERED. ¶20 KAUGER, C.J., OPALA, WILSON, WATT, JJ., and CHAPEL, S.J. (sitting by designation in lieu of SIMMS, J., who certified his disqualification), concur; ¶21 SUMMERS, V.C.J., and HODGES, LAVENDER, and HARGRAVE, JJ., dissent. FOOT