Opinion ID: 2331458
Heading Depth: 2
Heading Rank: 1

Heading: Self Insurance and UIM

Text: ¶ 20. We begin by addressing whether § 941(f)'s mandate for UIM coverage extends to self insurers. Because § 941(f)(UIM) and 23 V.S.A. § 801(c) (self insurance) are parts of Vermont's motor vehicle financial responsibility system, they must be considered together to discern the Legislature's intent regarding mandatory UIM coverage. Bd. of Trustees of Kellogg-Hubbard Library, Inc. v. Labor Relations Bd., 162 Vt. 571, 574, 649 A.2d 784, 786 (1994) (statutes that are closely related because they deal with the same subject matter or have a similar purpose must be construed with reference to each other). ¶ 21. Vermont's financial responsibility law requires all drivers and owners of automobiles in the state to maintain some form of insurance for liability claims arising from motor vehicle accidents. 23 V.S.A. § 800(a); see also id. § 809 (waiver of proof of financial responsibility shall not be construed to relieve an operator of his or her responsibility to comply with the mandatory insurance requirement set forth in 23 V.S.A. § 800). The statute prescribes either an insurance policy, surety bond, or in lieu thereof, evidence of self insurance. 23 V.S.A. § 800(a). Section 801 authorizes three methods to prove compliance with § 800(a)'s mandatory insurance requirement: (1) a policy of insurance, (2) a surety bond, or (3) a certificate of self insurance. Id. § 801(a), (c). Self insurance, authorized by § 801(c), did not exist at the time of the original provision's adoption in 1927. See 1927, No. 81, § 2. The Legislature authorized self insurance in a 1955 amendment to the statute. See 1955, No. 124, § 1. Except as to amount, the language of § 801(c) remains identical to the 1955 amendment, which allows self insurance in lieu of an insurance policy or bond. 23 V.S.A. § 801(c). In lieu of means instead. See Webster's New International Dictionary 1427 (2d unabr. ed.1961). Instead means equivalent or as a substitute. See id. at 1287. Thus, the Legislature's amendment in 1955 was intended to equate self insurance with a policy of insurance or surety bond. See also 23 V.S.A. § 800(a) (allowing self insurance in lieu of mandatory liability policy or surety bond). ¶ 22. Bell Atlantic argues that the language of § 801(c) limits a self insurer to liability coverage only and does not contemplate UIM coverage. It is true that a self insurer's responsibility under the plain language of § 801(c) is to obtain a certificate of self insurance protecting the driver of the self-insured vehicle against claims where the driver is the tortfeasor. See Champlain Cas. Co. v. Agency Rent-A-Car, Inc., 168 Vt. 91, 97, 716 A.2d 810, 814 (1998) (§ 801(c) provides a relationship between the self-insurer and the tortfeasor and describes it as insurance against the tortfeasor's loss). The pertinent question is not what § 801(c) says alone, however, but whether the Legislature intended § 941(f) to require those who choose to self insure to provide UIM coverage. The answer, we conclude, is unequivocally yes. ¶ 23. Thirteen years after the Legislature adopted self insurance as the third method of proving financial responsibility, it addressed the problem of uninsured motorists by enacting what is now § 941(f) 1967, No. 374 (Adj.Sess.), § 1. Like the present version, Act No. 374 provided that [n]o policy insuring against liability arising out of the use, ownership, or maintenance of an automobile may be issued or delivered in Vermont without an uninsured motorist provision. Id. As explained above, the Legislature added the underinsurance provision in 1980. Bell Atlantic asks this Court to construe the statute to exclude self insurers because § 941(f) refers to a policy of insurance and self insurers do not issue policies. To conclude Bell Atlantic's interpretation of § 941(f) is the correct one, we would have to agree that the Legislature intended § 941(f) to exclude from its protection all motorists insured through self-insurance plans or surety bonds. That construction of § 941(f) is incompatible with the Legislature's intent to equate self insurance with a commercial insurance policy. Cf. Wright v. Smallwood, 308 S.C. 471, 419 S.E.2d 219, 220-21 (1992) (legislative mandate that all automobile insurance policies provide uninsurance coverage requires self insurers to provide uninsurance coverage because self insurance is a substitute for an insurance policy). Moreover, it frustrates the broad remedial purpose underlying the UM/UIM requirement. See Monteith, 159 Vt. at 382, 618 A.2d at 490. Self insurance should not be a way to avoid claims of those persons the Legislature intended to protect through the motor vehicle financial responsibility laws. Nat'l Farmers Union Prop. & Cas. Co. v. Bang, 516 N.W.2d 313, 317 (S.D. 1994). Bell Atlantic has not offered any rationale for making the distinction between commercial insurers and self insurers that it suggests here, and we cannot discern one from the statutory language. Consequently, we conclude that § 941(f) directs mandatory UM/UIM coverage in all forms of motor vehicle insurance, including self insurance, so that all motorists have minimum protection from financially irresponsible drivers. ¶ 24. Interpreting § 941(f) to require UIM coverage for all insured motor vehicles regardless of the form of insurance is consistent with decisions in other states. [1] Construing a statute equating self insurance with a commercial insurance policy, the South Dakota Supreme Court held that self insurers must provide UIM coverage, which the South Dakota legislature required in all motor vehicle insurance policies. Id. In a decision relating to UM coverage, the New Jersey Supreme Court determined that the legislative requirement to carry uninsured motorist coverage applied to self insurers. Christy v. City of Newark, 102 N.J. 598, 510 A.2d 22, 27 (1986). It explained: So strong is the public policy favoring UM coverage that in the absence of an unmistakable legislative declaration to the contrary, we are certain that the foregoing principle applies to any legislatively-authorized self-insurance fund.... Id. at 27-28. In Hartford Insurance Co. v. Hertz Corp., 410 Mass. 279, 572 N.E.2d 1 (1991), the Massachusetts Supreme Judicial Court held self insurers must provide UIM coverage. It reasoned that the broad remedial purpose of UIM would not be served if an automobile owner could avoid maintaining underinsured motorist coverage by becoming self-insured under a motor vehicle liability bond. [2] 572 N.E.2d at 5; see also Heavens v. Laclede Gas Co., 755 S.W.2d 331, 332-33 (Mo.Ct.App.1988) (self insurers must provide UM; holding otherwise would allow self insurers to circumvent statutory mandate for UM coverage). We therefore hold that self insurers must provide UIM coverage like other insurers.