Opinion ID: 886552
Heading Depth: 1
Heading Rank: 6

Heading: Underinsured Motorist Definition

Text: ¶ 30 Mitchell maintains that the limits comparison underinsured motorist definition contravenes the insured's reasonable expectation that coverage will be available in the event that a tortfeasor does not provide adequate indemnification. State Farm responds that Montana public policy does not prohibit limiting underinsured motorist coverage and, therefore, the limits comparison underinsured motorist definition is valid. ¶ 31 Initially, we note that the combined uninsured/underinsured motorist coverage provision lends itself to confusion. To determine whether the underinsured motorist definition is valid in Montana, we consider the underinsured motorist definition independently. Montana public policy considerations that favor adequate compensation for accident victims apply to underinsured motorist coverage. Bennett v. State Farm Mut. Auto. Ins. Co. (1993), 261 Mont. 386, 389, 862 P.2d 1146, 1149. Moreover, Montana law recognizes that an insurance consumer reasonably expects that underinsured motorist coverage will provide additional coverage when the insured's damages exceed what is available from the tortfeasor. Hardy v. Progressive Specialty Ins. Co., 2003 MT 85, 315 Mont. 107, 67 P.3d 892; Bennett, 261 Mont. at 389, 862 P.2d at 1149. ¶ 32 In Transamerica Ins. Group v. Osborn (1986 D.Mont.), 627 F.Supp. 1405, 1406-407, an underinsured motor vehicle was defined as: a land motor vehicle or trailer of any type to which a bodily injury liability bond or policy applies at the time of the accident but its limit for bodily injury liability is less that the limit of liability for this coverage. The United States District Court concluded that the underinsured motorist definition transgressed the reasonable expectation created by the declarations page representation that $50,000 of additional coverage would be available if Osborn's damages exceeded the bodily injury liability available from the tortfeasor. Osborn, 627 F.Supp. at 1412. ¶ 33 In Hardy v. Progressive Specialty Ins. Co ., we held that a limits comparison underinsured motorist definition violated the insurance consumer's reasonable expectation that underinsured motorist coverage provided additional coverage. The definition provided: Underinsured motor vehicle means a land motor vehicle or trailer of any type to which a bodily injury liability bond or policy applies at the time of the accident, but the sum of all applicable limits of liability for bodily injury is less than the coverage limit for Underinsured Motorist Coverage shown on the Declarations Page. Hardy, ¶ 8. Pursuant to the common law definition of underinsured motorist coverage, the declarations page, and the consumer's reasonable expectation, we concluded that the underinsured motorist coverage provided indemnification in the event that the tortfeasor's liability was insufficient to compensate the insured for his damages. We held that the underinsured motorist definition in that policy was void. Hardy, ¶ 29. ¶ 34 We acknowledge that the Mitchell policy is identical to neither the policy in the Hardy nor the policy in Osborn. In Hardy and Osborn, a separate premium was paid for underinsured motorist coverage that was provided independently of the uninsured motorist coverage. The underinsured motorist coverage in Mitchell's policies are a part of the uninsured motorist coverage, no separate premium was paid for underinsured motorist coverage, and the declarations pages do not list underinsured motorist coverage separately. However, those distinctions do not alter the consumer's reasonable expectation that underinsured motorist coverage provides additional coverage, up to the coverage limit, which is expressed on the declarations page in terms of uninsured coverage, when the tortfeasor provides insufficient liability coverage. The underinsured motorist definition in Mitchell's policies contravenes that expectation. Consequently, we conclude that the underinsured motorist definition violates Montana public policy.