Title: Castillo v. Clearwater Insurance Company
Citation: N/A
Docket Number: 136, 2010
State: Delaware
Issuer: Delaware Supreme Court
Date: November 22, 2010

IN THE SUPREME COURT OF THE STATE OF DELAWARE 
 
ROLANDO RAFAEL CASTILLO 
§ 
 
 
 
 
 
 
 
§ 
 
Plaintiff Below, 
 
 
§  No. 136, 2010 
 
Appellant,  
 
 
§ 
 
 
 
 
 
 
§  Court Below – Superior Court 
 
v. 
 
 
 
 
§  of the State of Delaware, 
 
 
 
 
 
 
§  in and for New Castle County 
CLEARWATER INSURANCE 
 
§  C.A. No. 06C-08-069 
COMPANY, a Delaware  
 
 
§ 
Corporation, 
 
 
 
 
§ 
 
 
 
 
 
 
§ 
 
Defendant Below,  
 
§ 
 
Appellee. 
 
 
 
§ 
 
 
 
 
 
    Submitted:  October 6, 2010 
 
 
 
 
       Decided:  November 22, 2010 
 
Before HOLLAND, BERGER and JACOBS, Justices. 
 
 
Upon appeal from the Superior Court.  REVERSED. 
 
 
Timothy E. Lengkeek, Esquire (argued) and Natalie Wolf, Esquire, 
Young, Conaway, Stargatt & Taylor, LLP, Wilmington, Delaware, for 
appellant. 
 
Angela Pinto Ross, Esquire and Tara E. Bustard, Esquire, Doroshow, 
Pasquale, Krawitz & Bhaya, Wilmington, Delaware, and Jeffrey A. Krawitz, 
Esquire, 
(argued) 
Spector, 
Gadon 
& 
Rosen, 
P.C., 
Philadelphia, 
Pennsylvania, for appellee. 
 
 
HOLLAND, Justice: 
 
 
2
 
This is an action for underinsured benefits (“UIM”) brought by the 
plaintiff-appellant, Rolando Castillo (“Castillo”) against his insurance 
company, 
defendant-appellee, 
Clearwater 
Insurance 
Company 
(“Clearwater”).  Castillo, a resident of the State of Delaware, purchased an 
insurance policy from Clearwater (the “Clearwater Policy”), a Delaware 
corporation authorized to sell insurance to residents of the State of 
Delaware.   
In this appeal, Castillo argues that the Superior Court erroneously held 
that the Clearwater Policy validly excluded UIM coverage.  We have 
concluded that Castillo is correct.  Therefore, the judgment of the Superior 
Court must be reversed.  
Statement of Facts 
 
 
Castillo entered into an independent contractor agreement with 
International Motor Freight (“IMF”) in 2003.  As part of the agreement, 
Castillo was required to purchase “non-trucking liability insurance 
(minimum $300,000.00)” and provide proof of insurance to IMF.  Castillo 
purchased the required insurance from Clearwater. 
Under the agreement, Castillo transported goods using his truck, 
which was leased to IMF, and a trailer, owned by IMF, from northern New 
Jersey to the IKEA distribution center in Perryville, Maryland.  After 
 
 
3
delivering goods to IKEA, Castillo’s daily routine was to return to his home 
in Bear, Delaware, after parking the truck and trailer overnight at a location 
nearby.  The following morning, Castillo would then drive the truck and 
empty trailer from Delaware to northern New Jersey.  There, he would 
receive his daily loan and start the routine again.   
 
On December 7, 2005, after unloading his cargo at the IKEA 
distribution center in Perryville, Maryland, and on his way home to Bear, 
Delaware, Castillo sustained multiple traumatic injuries in a motor vehicle 
accident on Route 40.  Castillo also incurred a significant amount of medical 
bills and lost wages. 
 
IMF’s insurance carrier, National Interstate, indicated IMF’s policy 
did not apply to the accident because IMF did not own the vehicle.  The 
underlying tortfeasor tendered his insurance policy limits and executed an 
affidavit of no other insurance.  Castillo filed a UIM claim with Clearwater 
that was denied. 
Superior Court Proceeding 
The Clearwater Policy provided coverage for a 2002 Volvo truck 
tractor, which was registered and insured pursuant to title 18, section 3902 
of the Delaware Code.  Endorsement Number Six, titled “Uninsured 
Motorist Insurance Endorsement,” provides that: 
 
 
4
A. 
COVERAGE 
 
We will pay compensatory damages which an “insured”, is 
legally entitled to recover from the owner or operator of an 
“Uninsured Motor Vehicle” because of “Bodily Injury”: 
 
(1) 
Sustained by an “insured”; and 
 
(2) 
Caused by an “accident”.   
 
B. 
WHO IS INSURED 
 
(1) 
“Named Insured”. 
 
(2) 
Anyone else “occupying” a “covered auto”.1 
 
Castillo filed a Motion for Partial Summary Judgment, seeking a 
declaratory judgment from the Delaware Superior Court that Clearwater was 
obligated to provide UIM benefits under the Clearwater Policy.  In its 
opposition to that motion, Clearwater argued the Clearwater Policy did not 
apply for several reasons.  First, Clearwater relied upon an endorsement 
titled “Truckers – Insurance for Non-Trucking Use,” which provided as 
follows: 
Liability Coverage for a covered “auto” described in the 
Schedule is changed as follows: 
 
 
1. 
The following exclusions are added: 
 
 
 
This insurance does not apply to: 
                                          
 
1 Del. Code Ann. tit. 18, § 3902. 
 
 
5
 
a. 
A covered “auto” while used to carry 
property in any business. 
 
b. 
A covered “auto” while used in the 
business of anyone to whom the 
“auto” is rented. 
 
Second, Clearwater relied upon Endorsement Number Four, which provided 
as follows: 
PROPERTY 
 
The transportation of property by “auto” for the generation of 
economic gain or commercial benefit is defined as “business 
property,” and such transportation is outside the scope of 
coverage afforded in this policy. 
 
Third, Clearwater argued that the title of the certificate provided with the 
policy limited coverage.  The certificate was titled “Certificate of Non-
Trucking Automobile Liability Insurance.”  
 
The Superior Court ruled that the Clearwater Policy was valid and 
characterized that Policy as “a contract whose scope was limited,” as 
distinguished from a UIM exclusion, which the Superior Court recognized 
would be invalid under title 21, section 3902.  Because the Superior Court 
found there were material issues of fact in dispute, however, it initially 
declined to dismiss Castillo’s complaint.   
 
The parties then filed a proposed Stipulation and Final Order (the 
“Stipulated Order”) with the Superior Court.  The Stipulated Order provided 
 
 
6
that the parties agreed there were no issues of material fact; that Castillo was 
operating his vehicle pursuant to a lease agreement with International Motor 
Freight (“IMF”), was in the business of IMF and under IMF’s direction, 
control and dispatch at the time of the December 7, 2005 accident; and that 
the Superior Court decision was a final decision that resolved the entire case 
in favor of Clearwater and against Castillo. The Stipulated Order, was 
entered as a final judgment by the Superior Court.   
Statute Mandates Coverage 
 
Underinsured motor vehicle coverage is treated the same as uninsured 
coverage (“UM”) under title 18, section 39022 of the Delaware Code, which 
provides as follows: 
No policy insuring against liability arising out of the ownership, 
maintenance or use of any motor vehicle shall be delivered or 
issued for delivery in this State with respect to any vehicle 
registered or principally garaged in this State unless coverage is 
provided therein or supplemental thereto for the protection of 
persons insured thereunder who are legally entitled to recover 
damages from owners or operators of uninsured or hit-and-run 
vehicles for bodily injury, sickness, disease, including death, or 
personal property damage resulting from the ownership, 
maintenance or use of such uninsured or hit-and-run motor 
vehicle.3 
 
                                          
 
2 State Farm Mut. Auto. Ins. Co. v. Washington, 641 A.2d 449, 450-51 (Del. 1994).   
3 Del. Code Ann, tit. 18, § 3902. 
 
 
7
Unless rejected in writing by the insured, every liability policy sold pursuant 
to title 18, section 3902 must include UM/UIM coverage.4   
Prior Precedents 
This Court first construed section 3902 in the context of a UM/UIM 
coverage exclusion over thirty years ago.  In State Farm Mut. Auto. Ins. Co. 
v. Abramowicz,5 the issue was whether a policy provision requiring actual 
physical contact between the insured’s vehicle and an uninsured motor 
vehicle was a valid exclusion.6  We began our analysis by noting that 
“[p]rotection against injuries and damages caused by uninsured motorists is 
an area widely regulated by statute,” which “in one sense is so clear that 
construction is not required.”7  We concluded that the physical contract 
requirement was invalid under section 3902, holding that “[i]nsurance policy 
provisions designed to reduce or limit [UM] coverage to less than that 
prescribed by statute are void.”8 
 
Ten years later in Frank v. Horizon Assurance Co,9 this Court had to 
determine whether an other motor vehicle (“OMV”) exclusion was valid.10  
                                          
 
4 State Farm Mut. Auto. Ins. Co. v. Washington, 641 A.2d at 450.   
5 State Farm Mut. Auto. Ins. Co. v. Abramowicz, 386 A.2d 670 (Del. 1978).   
6 Id. at 671.   
7 Id. at 671-73.   
8 Id. at 672-73. 
9 Frank v. Horizon Assurance Co., 553 A.2d 1199 (Del. 1989).   
10 Id. at 1200.   
 
 
8
In that case, the insurance company denied UM coverage on the basis that 
the insured was injured in a vehicle owned by the insured, but not listed as a 
covered vehicle under the policy.11  The carrier argued that restrictions or 
conditions on UM coverage were valid because UM coverage is not required 
under Delaware law.12  The insured argued that an insurance carrier may not 
restrict UM coverage where the right to reject UM coverage is not exercised 
by the insured.13   
 
In Frank, this Court held that the exclusion at issue was invalid 
because UM coverage is mandatory under title 18, section 3902, unless 
affirmatively waived in writing.14  We noted that any restrictions to UM 
coverage must be specifically authorized by statute.15  We also held that UM 
coverage is personal to the insured (as opposed to being dependent on the 
vehicle the insured was in at the time of injury), noting that the public policy 
of this state prohibits UM coverage restrictions based on the manner in 
which the insured is injured.16   
                                          
 
11 Id. at 1201. 
12 Id. at 1202. 
13 Id.  
14 Id.  
15 Id. at 1205. 
16 Id. at 1204-05.  
 
 
9
The holdings in Abramowicz and Frank were reaffirmed and applied 
by this Court in State Farm Mut. Auto. Ins. Co. v. Washington17 and Hurst v. 
Nationwide Mut. Ins. Co.18  Fifteen years ago, in Hurst, a UIM case, this 
Court held that “insurance policy provisions designed to reduce or limit the 
coverage to less than that prescribed by the Delaware statute, 18 Del. C. § 
3902, are void.  Consequently, any restriction in the scope of coverage 
section 3902 requires must be specifically authorized by statute.”19  In 
support of that proposition, we cited the relevant language contained in title 
18, section 3902(b) of the Delaware Code, which is the portion of section 
3902 regulating UIM coverage.  In Hurst, we once again stated that 
“uninsured motorist coverage is personal to the insured and not vehicle 
specific” and that it is “inimicable to the purpose of Section 3902 to make 
recovery of supplemental uninsured coverage contingent upon the manner in 
which the claimant is injured.”20   
Castillo argues that, taken together, section 3902 and the holdings in 
our prior cases stand for the following: 
(1)  
UM/UIM is mandatory for all vehicle registered in 
Delaware, unless rejected in writing;  
                                          
 
17 State Farm Mut. Auto. Ins. Co. v. Washington, 641 A.2d 449 (Del. 1994). 
18 Hurst v. Nationwide Mut. Ins. Co., 652 A.2d 10 (Del. 1995).   
19 Id. at 12.  
20 Id. at 14.  
 
 
10
 
(2) 
Policy provisions that reduce or eliminate UM/UIM 
coverage are void, unless the exclusion is specifically 
authorized by 18 Del. C. § 3902; and 
 
(3) 
UM/UIM is personal to the insured and not dependent on 
the vehicle the insured was occupying when he or she 
was insured. 
 
We agree that each of these propositions asserted by Castillo are correct 
statements of Delaware law.  
Clearwater Exclusion Invalid 
 
Clearwater successfully argued in the Superior Court that the issue 
was not whether the exclusion was valid, but whether the Clearwater Policy, 
which it characterized as a “commercial policy” with a “limited” scope, was 
“triggered.”  That characterization is inconsistent with our prior cases that 
have construed the statutory mandate in section 3902.  That section does 
distinguish between “commercial policies” and “car insurance,” but it does 
not authorize the issuance of a “limited” policy without UM/UIM coverage.  
Section 3902 requires that every policy have UM/UIM coverage, unless it is 
rejected in writing.  
 
Our prior cases hold that section 3902 makes UM/UIM coverage 
mandatory for all vehicles registered in Delaware, unless that coverage is 
rejected in writing.  Castillo did not reject UM/UIM in writing.  Where, as 
here, the insured did not reject UM/UIM, thus making it mandatory, the 
 
 
11
question becomes whether the General Assembly specifically authorized the 
exclusion contained in the Clearwater Policy.   The policy language at issue 
in this case is contained in Endorsement Number Four, and reads as follows: 
The transportation of property by “auto” for the generation of 
economic gain or commercial benefit is defined as “business 
property,” and such transportation is outside the scope of 
coverage afforded in this policy. 
 
The effect of that language is not materially different from the 
“carrying passengers for a fee” exclusion held invalid because the General 
Assembly did not authorize such an exclusion.21  In Jeanes v. Nationwide 
Ins. Co.,22 the Court of Chancery held that an insurance policy excluding 
coverage when the insured was “carrying passengers for a fee” (the insured 
was injured while driving a DART bus) was invalid because UM coverage is 
designed to be personal to the insured and not restricted to a certain 
vehicle.23  
In this case, the General Assembly has not specifically authorized an 
exclusion for transporting business property.  Accordingly we hold that, the 
                                          
 
21 See Jeanes v. Nationwide Ins. Co., 532 A.2d 595, 598-599 (Del. Ch. 1987). 
22 Jeanes v. Nationwide Ins. Co., 532 A.2d 595 (Del. Ch. 1987). 
23 Id. at 598.  See also Cropper v. State Farm Mut. Auto. Ins. Co., 671 A.2d 423, 426-27  
(Del. Super. Ct. 1995), aff’d 676 A.2d 907 (Del. 1995), where the Superior Court held 
that an insurance policy clause excluding government-owned vehicles from the definition 
of an uninsured motor vehicle was invalid under Delaware law because it “limits the 
scope of uninsured motorist protection to less than that prescribed by statute.” 
 
 
 
12
exclusion of UM/UIM insurance coverage from the Clearwater Policy is 
invalid.  
Conclusion  
 
The judgment of the Superior Court is reversed.