Court Opinion

ID: 9845145
Source: CourtListenerOpinion
Date Created: 2023-09-24 03:15:52.095841+00
Date Added: 2024-06-11T09:15:52.788741
License: Public Domain

MESCHKE, Justice,
dissenting.
I respectfully dissent because I believe this insurance policy should be construed in Score’s favor.
First, the language of this policy connotes a coverage broader than the statute dictates. Generally, an insurer may offer more coverage than is required by statute. See Johnson v. American Family Mut. Ins. Co., 193 Ill.App.3d 794, 140 Ill.Dec. 783, 550 N.E.2d 668, 673 (1990) (“The policy can provide coverage broader than the statute” and “any conflict between the statute and policy ought to be resolved to the benefit of the insured.”); Travelers Ins. Cos. v. Chandler, 569 So.2d 1337, 1338 (Fla.App.1990) (“Florida law does not preclude an insurer from offering greater coverage than is statutorily required” through a broader definition of the underin-sured motor vehicle.); 44 C.J.S. Insurance § 288 p. 539 (1993) (“Insurance companies and insureds may contract for coverage in excess of the coverage required by particular statutes, particularly where the statutory provision is for the benefit of insured.”); 8C John A. Appleman & Jean Appleman, Insurance Law & Practice § 5067.65, p. 56 (1981) (“While a statute may set a minimum amount of protection, it does not purport to control *211the maximum coverage which may be made available.”). Although not adopted until 1989, NDCC 26.1-40-15.7(5) reflects the general rule: “Nothing in sections 26.1 — 40—15.1 through 26.1^40-15.7 may be construed to prevent an insurer from offering, making available, or providing coverage terms and conditions more favorable to its insured or limits higher than are required by sections 26.1-40-15.1 through 26.1-40-15.7.”
Legislation in the 1987 legislative session first mandated that motor vehicle liability insurance policies offer coverage for injuries caused by the owners or operators of under-insured motor vehicles. S.L.1987, Ch. 369. As originally introduced, it would have required “excess” coverage by defining an un-derinsured motor vehicle as “a motor vehicle which ... is, with respect to any particular accident insufficiently insured to fully pay damages to a person legally entitled to recover damages arising from the accident.” House Bill 1279. Due to concern about higher premiums, the Legislature changed the definition before passage to what is essentially now codified at NDCC 26.1 — 40—15.1(2). That section defines an underinsured motor vehicle narrowly:
“Underinsured motor vehicle” means a motor vehicle for which there is a bodily injury liability insurance policy ... in effect at the time of the accident, but the applicable limit of bodily injury liability of such policy or bond:
a. Is less than the applicable limit for underinsured motorist coverage under the insured’s policy; ...
Id. See S.L.1987, Ch. 369, § 1. In contrast, Score’s policy does not carry the statutory definition, but rather defines an underinsured motor vehicle more broadly as a “motor vehicle which is insured by a liability bond or policy ... which provides bodily injury liability limits less than the damages an insured person is legally entitled to recover.”
A policy definition that differs from the statutory one should count for something, and be given its ordinary meaning. NDCC 9-07-09. Perhaps, as the majority said in Thompson v. Nodak, 466 N.W.2d at 119, we cannot wholly “determine how much coverage exists in this case” from a policy definition of an underinsured motor vehicle. Surely, however, the policy definition can help identify the correct figure to subtract a payment to the insured from, when we must interpret the policy as a whole. NDCC 9-07-06. American Family’s definition, describing more extensive coverage than the statutory minimum, ought not be ignored. Unlike the majority, I believe this fact, that Score’s policy defines an underinsured motor vehicle more broadly than the statute, evidences that the insured and insurer “bargained for coverage greater than that required by law.”
Obviously, something more was intended by American Family’s policy language. We should uphold that broader coverage.
Second, I adhere to the view I expressed in dissent in Thompson v. Nodak Mut. Ins. Co., 466 N.W.2d 115 (N.D.1991), that the policy was ambiguous. Three justices in Thompson v. Nodak thought the policy was unambiguous and reached a “gap” theory result. Two justices in Thompson v. Nodak thought the policy was ambiguous and would have reached an “excess” theory result. In State Farm Fire & Cas. Co. v. Sigman, 508 N.W.2d 323, 325 (N.D.1993), we held that “an insurance contract is ambiguous when reasonable arguments can be made in support of different positions as to its meaning.”
Not only have justices of this court advanced reasonable arguments in support of different positions as to the meaning of the language used in the policy in Thompson v. Nodak, but other courts have also reached different conclusions about the meaning of the same or similar language. Wood v. American Family Mut. Ins. Co., 148 Wis.2d 639, 436 N.W.2d 594, 599 (1989), where the court found “that the words ‘amounts payable’ found in the reducing clause in each UIM policy at issue are ambiguous.” Construing the policy as a reasonable insured would understand it, the court in Wood held that the reducing clause
does not reduce UIM benefits recoverable under the policy’s limit by the amount received by the insured from the underin-sured driver’s liability policy. Rather, the *212“amounts payable” from each UIM provision ... are measured against the insured’s total damages, and the reducing clauses reduce UIM benefits by subtracting from the total damages ... the amount received by the insured from the underin-sured driver’s liability policy.
Id. at 601. Similarly, in Weber v. American Family Mut. Ins. Co., 868 F.2d 286 (8th Cir.1989), the policy declared that “American Family would pay ‘damages for bodily injury which an insured person is legally entitled to recover from the owner or operator of an underinsured motor vehicle,’ ” and that “ ‘[a]ny amounts payable [under the underin-sured motorist coverage] will be reduced by * * * [any] payment made by the owner or operator of the underinsured motor vehicle or organization which may be legally liable.’ ” Id. at 287. The payment the Weber insured received from an underinsured tortfeasor’s insurer was likewise subtracted from his total damages, not from the policy’s limits. Id.
On the other hand, the court in Kahn v. Aetna Cas. & Sur. Co., 186 Ill.App.3d 803, 134 Ill.Dec. 532, 542 N.E.2d 878 (1989), construed the following reducing clause in the same way as the majority did in Thompson v. Nodak:
Any amounts otherwise payable for damages under this coverage shall be reduced by:
1. all sums paid because of the bodily injury by or on behalf of persons or organizations who may be legally responsible. This includes all sums paid under the Liability Coverage of this policy * * *(emphasis added).
Id., 134 Ill.Dec. at 533, 542 N.E.2d at 879. The court upheld, at 134 Ill.Dec. at 534, 542 N.E.2d at 880, the trial court’s determination that “the policy’s underinsured motorist coverage extended only to the policy’s limit of liability, reduced by any payment by the tortfeasor.”
These varying constructions of the same or similar reducing clauses in underinsured motorist policies by justices of this and other courts show that “reasonable arguments can be made in support of different positions as to [their] meaning.” State Farm Fire & Cas. Co. v. Sigman, 508 N.W.2d at 325. The reducing clause in the policy in this case is, therefore, ambiguous, I believe. The policy should, then, be construed in favor of Score.
[I]t is well-established in North Dakota that, because an insurance policy is a contract of adhesion, any ambiguity or reasonable doubt as to the meaning of the policy is to be strictly construed against the insurer and in favor of the insured. If the language in an insurance contract will support an interpretation which will impose liability on the insurer and one which will not, the former interpretation will be adopted.
Aid Ins. Services, Inc. v. Geiger, 294 N.W.2d 411, 414 (N.D.1980). See also Continental Cas. Co. v. Kinsey, 499 N.W.2d 574 (N.D.1993) (an insurance policy is a contract of adhesion and an ambiguity, absent evidence of a contrary intent, is construed against the insurer).
An insurer whose policies are not written so that an ordinary layperson can clearly understand them “must assume the consequences of the ambiguity.” Aid Ins. Services, Inc. at 415. Here, one reasonable interpretation of the reducing clause, that “amounts payable” refers to the insured’s damages, will impose liability on the insurer. Another reasonable interpretation of the reducing clause, that “amounts payable” refers to the policy’s coverage limits, will not impose liability. In accordance with established North Dakota precedents, we should overrule Thompson v. Nodak and adopt the interpretation more favorable to the insured.
Third, we ought not lightly choose an interpretation of an ambiguous policy that will often lead to little, if not wholly illusory, coverage. In Hoglund v. Secura Ins., 176 Wis.2d 265, 500 N.W.2d 354 (1993), Hoglund’s underinsured motorist coverage limit was $25,000. A statute required Wisconsin drivers to have liability insurance for at least $25,000. The insurance policy defined an underinsured motor vehicle as one with a bodily injury liability policy in an amount lower than the underinsured motorist coverage limit. The policy defined out-of-state vehicles with liability limits of less than $25,-*213000 as uninsured vehicles. The court said of the policy’s underinsured motorist coverage:
Because Wisconsin drivers must have a liability policy of at least $25,000, Hoglund will never recover under American States’ $25,000 UIM policy if the tortfeasor is an insured Wisconsin driver. If the driver is uninsured, Hoglund would recover under the uninsured motorist provisions, not the UIM provisions.
Moreover, the UIM provisions would not provide coverage if the tortfeasor is an insured out-of-state driver_ Conse-
quently, there are no circumstances under which Hoglund can recover under the UIM provisions.
500 N.W.2d at 356. The court concluded, 500 N.W.2d at 357:
Because Hoglund has paid a premium for UIM coverage under which no benefits will ever be paid, the coverage is illusory and against public policy.
The illusion of a promised coverage implicit in the sale of underinsured coverage has concerned other courts. Glazewski v. Allstate Ins. Co., 126 Ill.App.3d 401, 81 Ill.Dec. 349, 466 N.E.2d 1151, 1156 (1984) (“underinsured coverage in the minimum limits of 15/30 is indeed illusory because it would never be payable when recovery is sought from another Illinois motorist” or when “the at-fault driver is insured in other states which have financial responsibility limits equal to or greater than those required in Illinois”); Meridian Mut. Ins. Co. v. Richie, 540 N.E.2d 27 (Ind.1989) (underinsured motorist coverage is illusory when the minimum mandatory liability insurance limit equals or exceeds the un-derinsured coverage limit); Stracener v. United Services Auto. Ass’n, 777 S.W.2d 378, 383 (Tex.1989) (unless liability insurance payments are subtracted from the insured’s actual damages, rather than from the underin-sured motorist coverage limits, “underin-sured motorist coverage would offer most motorists only nominal protection.”).
When uninsured coverage and underin-sured coverage are written separately for separate premiums, as here, rather than together with a single premium, the illusory effect can be readily seen. See NDCC 26.1-40-15.7(3) (“Notwithstanding any other provision ... or other laws of this state, an insurer may make underinsured motorist coverage a part of uninsured motorist coverage.”). The court in Weber v. American Family Mut. Ins. Co., 868 F.2d at 288, explained this well. If payments from a tort-feasor’s liability insurance company are subtracted from the insured’s underinsured motorist coverage limit, rather than from the insured’s damages, “an insured ... would never reach the limits of liability set forth in the Underinsured Motorist Coverage Endorsement of the contract unless the insured was dealing with an uninsured motorist rather than an underinsured motorist.” Id.
For these reasons, I would conclude that American Family’s reducing clause requires that payments received by its injured insured, Score, from the tortfeasor’s liability insurer be subtracted from Score’s total damages, rather than from the underinsured coverage limit, in determining underinsured benefits. Therefore, I respectfully dissent.