Court Opinion

ID: 9606521
Source: CourtListenerOpinion
Date Created: 2023-08-22 02:50:34.447972+00
Date Added: 2024-06-11T14:57:16.955903
License: Public Domain

Brachtenbach, J.
This case concerns the validity of two exclusions in a State Farm Mutual Automobile Insurance Company's automobile insurance policy which would deny "underinsured" motorist coverage, in part, to its insureds, the plaintiffs Deborah C. Quinn Kyrkos and Kyriakos C. Kyrkos. The exclusions deny, to the extent of the financial responsibility law limits, underinsured motorist (UIM) coverage if a vehicle is owned or operated by a self-insured or is owned by any government, its political subdivisions or agencies.
Underinsured motorist coverage includes by statutory definition both uninsured and underinsured motorists. The UIM statute defines an underinsured motor vehicle. If no INSURANCE POLICY or LIABILITY BOND applies to the vehicle, it is underinsured. RCW 48.22.030(1).
State Farm's policy substantially modifies the statutory definition. By two exclusions, the policy says that even if there is no liability insurance policy or bond, there is no UIM coverage, to the extent of financial responsibility limits, if the vehicle is (1) owned or operated by a self-insurer, or (2) is owned by a government, its political subdivisions or agencies.
The relevant facts are stipulated. Plaintiff wife was injured in a collision between her car and a truck owned by the City of Seattle and driven by an employee acting within the scope and course of his employment.
There is no liability policy or bond which applies to the city vehicle. Under the State Farm policy, described hereafter, there was UIM coverage with $100,000/$300,000 limits. State Farm denied coverage to the extent of financial responsibility limits, $25,000/$50,000. Plaintiffs sued to compel arbitration. After declaring the exclusions null and void, the trial court held plaintiffs are entitled to arbitrate UIM benefits. We affirm.
*672The State Farm policy defines underinsured motor vehicle to mean:
1. a land motor vehicle, the ownership, maintenance or use of which is:
a. not insured or bonded for bodily injury liability at the time of the accident . . ..
Clerk's Papers, at 139.
However, the policy narrows substantially the statutory definition of an underinsured motor vehicle by these two exclusions:
An underinsured motor vehicle does not include a land motor vehicle:
3. owned or operated by a self-insurer, up to the extent that bodily injury limits of liability established by the financial responsibility law or any similar law are payable under a certificate of self-insurance;
4. owned by any government or any of its political subdivisions or agencies to the extent it is obligated to pay for the bodily injury ....
Clerk's Papers, at 140.
Thus, the policy first provides the coverage mandated by the statute, but then subtracts coverage, up to the limits of the financial responsibility law, if the owner is self-insured or is a government, its political subdivision or agency.
The mandatory coverage is part of the insurance policy. Touchette v. Northwestern Mut. Ins. Co., 80 Wn.2d 327, 328, 494 P.2d 479 (1972). The exclusions deny coverage when the statute, by its terms, requires coverage. Thus, the exclusions are void. Britton v. Safeco Ins. Co. of Am., 104 Wn.2d 518, 526, 707 P.2d 125 (1985).
State Farm argues, however, that the intent and purposes of the Legislature and our cases demonstrate the Legislature never intended to mandate UIM coverage in the case of self-insureds and governmental agencies, and the whole purpose of UIM coverage is to protect against financially irresponsible motorists. Touchette v. Northwestern Mut. Ins. Co., supra; Finney v. Farmers Ins. Co., 92 Wn.2d 748, 600 P.2d 1272 (1979); Blackburn v. Safeco Ins. Co., 115 Wn.2d 82, 794 P.2d 1259 (1990).
*673The cases do refer to protection against financially irresponsible motorists. However, it is the Legislature which has defined the circumstances in which such protection is mandated. Further, the Legislature has not authorized these exclusions in defining underinsured motorists even though it has amended the statute a number of times, including authorization of specific exclusions. RCW 48.22.030(2), (5), (6).
For evaluating UIM coverage exclusions, we have developed an extensive body of jurisprudence over the past 20 years. These cases fall into two categories. The first line of cases involves those situations where the exclusion is directly contrary to specific language in the statute. "The specific contract terms of the policy must be read along with the statute to see if the terms are void and unenforceable." Blackburn, at 88. When language in the policy explicitly conflicts with the statute, the offending language is stricken.
The second line of UIM cases addresses the situation where an exclusion is neither permitted nor foreclosed by the UIM statute. In those cases, this court has typically undertaken a careful analysis of the public policies underlying the UIM statute. An exclusion will be permitted if it comports with the declared public policies of the UIM statutory scheme. Blackburn, at 86; see also Millers Cas. Ins. Co. v. Briggs, 100 Wn.2d 1, 7-8, 665 P.2d 891 (1983). For example, in Lovato v. Liberty Mut. Fire Ins. Co., 109 Wn.2d 43, 742 P.2d 1242 (1987), we approved an exclusion which limited UIM coverage to the United States and its territories. The exclusion was permitted because "nothing in the UM/ UIM státute, RCW 48.22.030, indicates a public policy contrary to this territorial limitation." Lovato, at 47. We have employed this public policy analysis on numerous occasions. See, e.g., Blackburn, at 84 (holding that exclusion for covered vehicle was valid); Millers Cas., at 7-8 (finding that excluding insured vehicle from UIM coverage comports with public policy); Kenworthy v. Pennsylvania Gen. Ins. Co., 113 Wn.2d 309, 779 P.2d 257 (1989) (holding that policy provision requiring insured to share arbitration costs impermissibly "whittled away" at the statutory UIM coverage); Britton, at *674528 (evaluating policy exclusion in terms of public policy); Mutual of Enumclaw Ins. Co. v. Wiscomb, 97 Wn.2d 203, 213, 643 P.2d 441 (1982) (Wiscomb II) (family exclusion violates statute's stated public policy); Touchette, at 335 (public policy of UIM statute overrides insurance contract exclusion). "Exclusions rest on diverse grounds, and each exclusion must be analyzed in terms of the policies which are said to support it." Mutual of Enumclaw Ins. Co. v. Wiscomb, 95 Wn.2d 373, 382, 622 P.2d 1234 (1980) (Wiscomb I).
In effect, these cases establish a 2-part inquiry: (1) does the proposed exclusion conflict with the express language of the UIM statute?; and if not, (2) is the exclusion contrary to the UIM statute's declared public policy? An exclusion will be sustained only where both inquiries can be answered in the negative. We now turn to the exclusions in the State Farm policy.
The self-insurance exclusion fails the first part of the above test because it seeks to narrow the definition of under-insured motorist beyond the specific parameters set out in the UIM statute. From the statute's plain language, there is no doubt that the City comes within the underinsured motorist definition. See Public Employees Mut. Ins. Co. v. Mucklestone, 111 Wn.2d 442, 443, 758 P.2d 987 (1988). At the time of the accident, the City carried no "liability bond or insurance policy" for its vehicles. RCW 48.22.030(1). State Farm urges a broad understanding of the term "insurance policy" so as to include self-insurance. However, such a reading is specifically foreclosed by RCW Title 48, which defines "insurance" as "a contract whereby one undertakes to indemnify another or pay a specified amount upon determinable contingencies." RCW 48.01.040. When a statute is unambiguous, its meaning must be derived from the actual language chosen by the Legislature. Everett Concrete Prods., Inc. v. Department of Labor & Indus., 109 Wn.2d 819, 822, 748 P.2d 1112 (1988). By its very nature, self-insurance does not involve this type of third party arrangement. See Jones v. Henry, 542 So. 2d *675507, 509 (La. 1989) ("Self-insurance ... is a misnomer. It is not insurance, but instead is one of four methods by which a person can satisfy the [financial responsibility statute]. . . . Consequently, the certificate of self-insurance cannot be considered a 'policy' for the purposes of uninsured motorist coverage requirements under [the statute]"). Because the self-insurance exclusion conflicts with the specific language of the UIM statute, we hold that it is void and unenforceable.
Turning to the government-owned vehicle exclusion, it passes the first test because no language in the UIM statute specifically forecloses this policy provision. Therefore, we must consider whether it conflicts with the public policy behind the statute. The purposes of the UIM statute are broad and well known:
[The uninsured motorist statute] is but one of many regulatory measures designed to protect the public from the ravages of the negligent and reckless driver.. .. The statute is both a public safety and a financial security measure. Recognizing the inevitable drain upon the public treasury through accidents caused by insolvent motor vehicle drivers who will not or cannot provide financial recompense for those whom they have negligently injured, and contemplating the correlated financial distress following in the wake of automobile accidents and the financial loss suffered personally by the people of this state, the legislature for many sound reasons and in the exercise of the police power took this action to increase and broaden generally the public's protection against automobile accidents.
(Italics omitted.) Wiscomb II, at 208 (quoting Touchette v. Northwestern Mut. Ins. Co., 80 Wn.2d 327, 332, 494 P.2d 479 (1972)). In interpreting the UIM statute, it "should receive from the courts a construction that will effectuate its manifest purpose." Touchette, at 333.
State Farm contends that the government-owned vehicle exclusion comports with the statute's declared public policies. Specifically, the City of Seattle is eminently capable of paying any losses which might arise from an employee's negligence. Plaintiff counters that not all governments enjoy the City of Seattle's immense resources.
*676 Although State Farm's argument might be persuasive as applied to the City of Seattle, there is nothing before us which indicates that government entities in general possess similar financial resources. Governmental bodies like small towns, school districts, and local utility districts would be hard pressed to satisfy a judgment arising from a serious accident where liability can range into the millions of dollars. In order to ensure certain financial compensation, the UIM statute does not operate on a case-by-case basis. As the Supreme Court of Maine has explained:
It is true, as we recently stated in Lanzo v. State Farm Mut. Auto. Ins. Co., 524 A.2d 47, 50 (Me.1987), that the "legislative focus in enacting [UIM statute] was to provide recovery for injuries caused by financially irresponsible drivers." It is critical to note, however, that the Legislature mandated coverage for all uninsured motorists, without differentiating between the financially responsible and the financially irresponsible. Notwithstanding the motivation for the enactment of [UIM statute], coverage is mandated for all uninsured motor vehicles without regard to the fact that certain uninsured drivers may be financially responsible.
Young v. Greater Portland Transit Dist., 535 A.2d 417, 420 (Me. 1987).
The mere fact that a tortfeasor is a government entity does not guarantee its ability to compensate accident victims. As a result, we hold that the government-owned vehicle exclusion violates the UIM statute by decreasing coverage beyond the statutory minimum.1 We are supported in this conclusion by a majority of other jurisdictions, which have held that the government-owned vehicle exclusion is more restrictive than that allowed by statute. See, e.g., Martin v. State Farm Mut. Auto. Ins. Co., 755 S.W.2d 638, 640 (Mo. Ct. App. 1988); Young, at 420; Powell v. Allstate Ins. Co., 233 So. 2d 38 (La. Ct. App. 1970); see generally 2 No-*677Fault and Uninsured Motorist Automobile Insurance § 24.30[13][a] (1991).
Quite apart from the foregoing which is dispositive, the self-insurance statutes and the policy exclusion create other questions. The original self-insurance statute permits any "person" in whose name more than 25 vehicles are registered to qualify as a self-insurer. "Person" is defined in RCW 46.04-.405: " 'Person' includes every natural person, firm, copartnership, corporation, association, or organization." Elsewhere in RCW Title 46 when the Legislature intended to refer to cities and other governmental units it did so specifically, e.g., RCW 46.04.280, .355; RCW 46.08.065-.068. The question, unbriefed, is whether "person" includes a municipal corporation.
A further question is raised by RCW 48.62. Because this chapter was not effective until 1992, it does not apply to this case, but approval of the self-insurance exclusion would raise this question in the future. RCW 48.62.011 provides: "This chapter is intended to provide the exclusive source of local government entity authority to individually or jointly self-insure risks . . .". (Italics ours.) RCW 48.62 contemplates a "formal program of advance funding and management. . .". RCW 48.62.021(3). This starkly contrasts with the original self-insurance statute which makes no such requirement. RCW 46.29.630. State Farm relies on RCW 48.62 as a source for showing legislative intent. Brief of Appellant, at 17-18.
The State Farm exclusion itself raises unbriefed questions. It denies coverage whenever a vehicle is owned or operated by a self-insurer. By its terms it is not limited to a "person" who holds a certificate of self-insurance. The exclusion is "up to the extent that bodily injury limits . . . are payable under a certificate of self-insurance." Clerk's Papers, at 140. Thus, arguably, the exclusion applies to any self-insurer, regardless whether that "person" is the holder of a certificate, but restricts itself to limits payable under a certificate of self-insurance. The statute makes no provision for what is "payable under" it. It relates only to the ability to pay a judgment obtained against such person. RCW 46.29-*678.630. We do not answer these unbriefed questions, but they lurk in the future if a self-insurance exclusion is approved.
A response to the dissent is necessary. The dissent's reasoning contains its own destruction. It states: "Of course, a full self-insured exclusion might not be valid under this analysis of the limited self-insured exclusion." It continues: "A full self-insured exclusion would raise the grave possibility of a self-insured being unable to actually meet a large judgment." Dissent, at 689. This speculation by the dissent is nothing more than just that — speculation.
These remarkable assumptions by the dissent necessarily admit that the self-insured exclusion is not permitted by the statute. Yet amazingly, the dissent concludes that a "little" exclusion is alright, but a "big" exclusion would be prohibited.
Next, the dissent assumes that the exclusion "only excludes coverage when the self-insured has a legally identifiable means of payment." (Footnote omitted.) Dissent, at 686. There is no such requirement in the statute. All the self-insurer has to do is convince the Department of Licensing, at the time of the application, that it "is possessed and will continue to be possessed of ability to pay judgment obtained against such person." RCW 46.29.630(2). It is a complete mysteiy where the dissent finds a requirement that there must be a "legally identifiable means of payment." The certificate here was obtained 43 years ago. There might not be a question as to the City of Seattle, but what of a small municipal corporation which has been drastically altered in its financial condition in the last 43 years?
Unless the Director undertakes revocation proceedings, upon "reasonable grounds", a certificate of self-insurance is good forever. RCW 46.29.630(3).
The generalized requirements to obtain a certificate are quite different from the protection of UIM coverage by a regulated insurance company with the underlying protections of the Washington Insurance Guaranty Association Act, RCW 48.32. The well known bankruptcy proceedings of major national companies cast doubt upon the dissent's *679erroneous assumption that a self-insurer has "a legally identifiable means of payment."
Finally, the dissent finds the majority to be "most dramatically inconsistent with this court's decisions in Millers Cas. Ins. Co. v. Briggs, 100 Wn.2d 1, 665 P.2d 891 (1983) and Blackburn v. Safeco Ins. Co., 115 Wn.2d 82, 794 P.2d 1259 (1990)." Dissent, at 683. The dissent simply misses the point. In both those cases there was liability insurance. Here there is none. In both those cases the claimants were protected by the liability coverage of the policy. Here there is no liability policy as required by the statute. The theory of those cases is summarized: "The result of dual recovery in the instant case would transform underinsured motorist coverage into liability insurance." Millers Cas. Ins. Co. v. Briggs, supra at 8. What the dissent does is transform no liability coverage into liability coverage, but only so long as it is just a partial conversion, not a complete conversion. The dissent notwithstanding, the holding of the majority does not conflict with the cited cases nor does it conflict with our prior analytical approach to UIM coverage questions.
The trial court is affirmed.
Andersen, C.J., and Dolliver, Smith, and Johnson, JJ., concur.

State Farm argues that without the exclusion, plaintiff would be placed in a better position having run into an uninsured motorist rather than an insured one. See Roller v. Stonewall Ins. Co., 115 Wn.2d 679, 685, 801 P.2d 207 (1990). However, although it may be easier to recover from one's own insurance company rather than a tortfeasor, plaintiff will receive no more compensation from her State Farm policy than she would have received from the City of Seattle.