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| Coverage Subject to Change |
By Nicole A. Killoran
Ever wondered what happens when you’re one of several passengers in a car crash, your driver is the jerk who’s responsible, and his liability insurance doesn’t pay for everyone’s injuries? Well, I hope you’re all hydrated, because we’re about to dive into a very dry area of law to find out the answer from a case that came out a few years ago.
The particular facts of this accident—you know, the grim details that make it onto the evening news and leave you feeling protective of your family—are not explained in this opinion. Even if they were, I doubt they would have made the topic, the enforceability of an “owned-vehicle” or “covered-auto” underinsured motorist coverage exclusion in Vermont, any sexier. All we know is that some poor shmuck passenger riding in his mom’s car found himself one of several victims of a one-car crash, the driver’s liability coverage was woefully short of paying for everyone’s injuries, and passenger had to tap into his underinsured motorist (“UIM”) coverage under his own car insurance to make up the difference.
Now, Progressive had both the tortfeasor driver’s insurance and passenger’s (both $500k policies), and passenger had twice the Progressive coverage under a MMG policy he had the foresight to buy. Progressive being the carrier for two of the three policies makes it a bit confusing, but here’s how this played out. Progressive paid out to all the victims under the tortfeasor’s policy to the liability limits ($500k), including roughly $250k to passenger. This still left passenger short about $400k, and it looked like he had three policies’ UIM coverage (the driver/host vehicle’s, and both of his) to tap into. Progressive ended up paying half, and MMG paid the other half, leaving room to spare out of the $1.5 million he had available.
If you’re still with me, you’re probably thinking, plenty of coverage, so what’s the big deal, and why did this end up in the SCOV?
The answer is in the title of the case. Insurer vs. insurer—that means a declaratory judgment action where the applicability of some aspect of an insurance policy is in question, and the insurance companies just gotta know the answer. In this case, it’s Progressive’s “host-vehicle” UIM exclusion. This particular item of fine print says that: (1) when Progressive insures the vehicle, or the jerk driving the vehicle, that is responsible for the accident; and (2) the liability coverage is maxed out; then (3) the UIM coverage is off limits. In this case, that would have meant that instead of paying for half of the rest of passenger’s damages, Progressive would have only had to pay for a third of it because MMG had two-thirds of the total available UIM coverage ($1 million out of $1.5 million).
Because Progressive and MMG couldn’t agree on whether Progressive could enforce its “host-vehicle” exclusion in Vermont, they ended up settling on each paying half, and Progressive reserved the right to ask the court to decide the question after the settlement. Progressive filed a declaratory judgment action. Both insurers filed for summary judgment. The trial court sided with MMG, and Progressive appealed.
The particular question on appeal the SCOV has to decide is more complicated than you might think, but it’s basically whether Progressive can get away with this cute little “not-my-underinsured-host-vehicle-policy” trick in Vermont. “Underinsured vehicle” is defined under subsection (f) of this statute. The SCOV breaks its analysis of the definition into two rough sections: (1) what on earth did the Legislature do when it amended the statute in 2005? (answer, it begat a new policy that might be useful to passenger and thus MMG in this case); and (2) does the amendment really create double liability insurance? (answer, no, so MMG is actually SOL).
Today’s version of the statute says a vehicle is “underinsured” if the liability insurance available for a particular passenger is less than the UIM coverage available to him. The point of the UIM statute is to let the good guy recover for his injuries when he gets into an accident with an underinsured motorist. It’s basically “self-insurance,” says the SCOV, because whatever car insurance you buy, if you are the victim of a jerk behind a wheel you can tap into your own UIM coverage if that jerk decided to buy the cheap policy for himself.
In 2003, under a previous version of the statute, the SCOV looked at the “underinsured vehicle” definition in this case (Colwell). At the time the statute defined an “underinsured” vehicle such that the SCOV decided UIM coverage was “gap coverage” in Vermont and only let an injured party recover the difference between the UIM cap and the amount paid out under the liability policy (i.e., the liability-UIM “gap”). Other states, the SCOV noted, use the “excess coverage” approach, which triggers “underinsured” status when the tortfeasor’s liability policy can’t cover the victim’s damages.
If you’re as confused by the difference between “gap” and “excess” coverage as I was the first, second, third, and fourth times wading through this opinion, then the facts in Colwell might help. Colwell involved a multi-victim accident where the liability policy couldn’t cover everyone’s injuries. In that case, even though one guy presumably got stuck with the bill for much of his injuries, the SCOV concluded that the way the statute was phrased meant Allstate only had to pay for the small “gap” between the tortfeasor’s cheapo liability coverage and his UIM coverage. The SCOV agreed that this result was unfair, but basically pointed at the Legislature and said, “fix it!”
So the Legislature fixed it. In 2005, it amended the definition of “underinsured vehicle” to the version the SCOV is being asked to interpret in this case, and it told the world (or at least future Vermont lawyers) that it specifically did so to fix the problem in Colwell. With this amendment, the SCOV now tells us, a victim can tap into his or her UIM policy when other victims drain the tortfeasor’s liability policy. Basically, “gap coverage” and “excess coverage” had a baby that lets people bring out the fancy UIM insurance they bought if they need it. Ok, bad analogy, but you get the point, right?
Sadly for MMG, after concluding that this “gap-excess coverage” approach is the new thing, the SCOV goes on to conclude that the trial court was right—MMG is in fact screwed in this case and Progressive can enforce its host-vehicle exception when determining how much it has to pay passenger. In other words, MMG is stuck with two-thirds of the bill.
The SCOV’s prior crack at interpreting the statutory “underinsured motorist” language was in 2007. In this case (Hubbard), it looked at a single-car accident with only one victim (albeit a tragic one, the plaintiffs’ son). Even though the SCOV doesn’t find Hubbard very useful because the facts are different, it does trot out its Hubbard policy and reasoning to support its conclusion in this case.
In Hubbard there were also three insurance policies, one from Concord (the tortfeasor’s, $100k liability/$100k UIM) and two from Metropolitan (the plaintiffs’, $100k UIM each, total of $200k). Like Progressive, Concord had its own little tricksy UIM exclusion applicable where an injured person invokes the liability and UIM policies in the same contract. Metropolitan argued in favor of Concord enforcing this exclusion. Its angle was that Concord’s UIM coverage didn’t count toward the total the victim could recover, so there was only $200k available, and that its $200k exposure was cut in half by the $100k Concord paid out under its liability policy. See how that works? Insurance companies love it when they have a way to cut their policy payouts.
The Hubbard trial court sided with Metropolitan, as did the SCOV, because if it went with the alternative interpretation the victims would have access to more coverage than they bought (i.e., “double liability insurance”). The SCOV decided “double liability insurance” wasn’t the right way to interpret the statute, and that the “owned-vehicle” exclusion could be enforced to prevent the victim from recovering under both the liability and UIM parts of the same insurance contract.
Applied to this case, with multiple victims that sucked dry the host-vehicle’s liability policy, the SCOV tells us that if passenger could use both his UIM policies and also the host-vehicle UIM policy he would be able to access more than he bargained for when he bought his fancy liability insurance. The fact that Progressive’s contract doesn’t let this happen is okay under the statute, and it doesn’t mess with the policy behind it either because passenger still had coverage up to the limit of what he had through his own UIM policies.
Vermont is not a “double liability insurance” state says the SCOV, and, it notes, neither are the majority of states that have had the joy of looking at this exciting question. Letting UIM coverage “stack” like MMG wants in this case would undercut the purpose of the UIM statute. The SCOV reminds us that the point is to protect a hapless victim from an underinsured tightwad, not to give the victim more than he bargained for when he bought insurance.
Justice Robinson begs to differ with the majority’s interpretation of Vermont’s statutory “underinsured motorist” definition. She agrees with the trial court, and pens a dissent with which Justice Dooley joins. In its simplest form, Justice Robinson’s quarrel with the majority is with its less-than-literal interpretation of the UIM statute. She thinks her reading is closer to what the legislature intended, and she picks apart the case law and policy support the majority cites in support of its own.
The dissent uses a circular example with facts similar to the ones in this case but with just one liability policy, the responsible driver’s, to demonstrate the problems with UIM gap analysis. This approach, Justice Robinson shows us, is a circular way to go about figuring out if a driver is underinsured because “the starting point determines the end point.” Either you assume the host-vehicle policy isn’t applicable, in which case the driver isn’t underinsured even if he technically is, or you assume it is applicable, in which case the driver is underinsured. This analysis, claims the dissent, just isn’t helpful.
Circular reasoning (something that never happens in the law) aside, Justice Robinson gives us several reasons why she, and Justice Dooley, think the majority is wrong in this case.
The dissent thinks that the SCOV’s emphasis on the injured passenger’s own UIM insurance, as opposed to all available UIM insurance, including the driver’s, doesn’t jive with the plain language of the statute. The part of Section 941 the SCOV is interpreting says that “applicable” insurance should be considered, not just the “portable” UIM coverage an injured passenger had the foresight to purchase that follows him around in the event he is an accident with a cheapskate with insufficient liability coverage.
Slapping on this new “portable UIM coverage” to the analysis, says Justice Robinson, is judicial poppycock. It’s not in the plain language, it’s not in the legislative history, and it’s not in Colwell or, by extension, the legislature’s subsequent attempt to address Colwell. It also contradicts the remedial purpose of the statute, she argues. None of the other jurisdictions the majority cites to as support have a statute like Vermont’s, and she just doesn’t see the “double-liability insurance” problem the majority finds so troubling. Justice Robinson would not enforce the policy exclusion
With a stroke of its officious pen, the SCOV approves a creative loophole for future insurers to slide through so they don’t have to pay out under their policies. So just remember folks, friends don’t let friends drive underinsured.
The answer is in the title of the case. Insurer vs. insurer—that means a declaratory judgment action where the applicability of some aspect of an insurance policy is in question, and the insurance companies just gotta know the answer. In this case, it’s Progressive’s “host-vehicle” UIM exclusion. This particular item of fine print says that: (1) when Progressive insures the vehicle, or the jerk driving the vehicle, that is responsible for the accident; and (2) the liability coverage is maxed out; then (3) the UIM coverage is off limits. In this case, that would have meant that instead of paying for half of the rest of passenger’s damages, Progressive would have only had to pay for a third of it because MMG had two-thirds of the total available UIM coverage ($1 million out of $1.5 million).
Because Progressive and MMG couldn’t agree on whether Progressive could enforce its “host-vehicle” exclusion in Vermont, they ended up settling on each paying half, and Progressive reserved the right to ask the court to decide the question after the settlement. Progressive filed a declaratory judgment action. Both insurers filed for summary judgment. The trial court sided with MMG, and Progressive appealed.
The particular question on appeal the SCOV has to decide is more complicated than you might think, but it’s basically whether Progressive can get away with this cute little “not-my-underinsured-host-vehicle-policy” trick in Vermont. “Underinsured vehicle” is defined under subsection (f) of this statute. The SCOV breaks its analysis of the definition into two rough sections: (1) what on earth did the Legislature do when it amended the statute in 2005? (answer, it begat a new policy that might be useful to passenger and thus MMG in this case); and (2) does the amendment really create double liability insurance? (answer, no, so MMG is actually SOL).
Today’s version of the statute says a vehicle is “underinsured” if the liability insurance available for a particular passenger is less than the UIM coverage available to him. The point of the UIM statute is to let the good guy recover for his injuries when he gets into an accident with an underinsured motorist. It’s basically “self-insurance,” says the SCOV, because whatever car insurance you buy, if you are the victim of a jerk behind a wheel you can tap into your own UIM coverage if that jerk decided to buy the cheap policy for himself.
In 2003, under a previous version of the statute, the SCOV looked at the “underinsured vehicle” definition in this case (Colwell). At the time the statute defined an “underinsured” vehicle such that the SCOV decided UIM coverage was “gap coverage” in Vermont and only let an injured party recover the difference between the UIM cap and the amount paid out under the liability policy (i.e., the liability-UIM “gap”). Other states, the SCOV noted, use the “excess coverage” approach, which triggers “underinsured” status when the tortfeasor’s liability policy can’t cover the victim’s damages.
If you’re as confused by the difference between “gap” and “excess” coverage as I was the first, second, third, and fourth times wading through this opinion, then the facts in Colwell might help. Colwell involved a multi-victim accident where the liability policy couldn’t cover everyone’s injuries. In that case, even though one guy presumably got stuck with the bill for much of his injuries, the SCOV concluded that the way the statute was phrased meant Allstate only had to pay for the small “gap” between the tortfeasor’s cheapo liability coverage and his UIM coverage. The SCOV agreed that this result was unfair, but basically pointed at the Legislature and said, “fix it!”
So the Legislature fixed it. In 2005, it amended the definition of “underinsured vehicle” to the version the SCOV is being asked to interpret in this case, and it told the world (or at least future Vermont lawyers) that it specifically did so to fix the problem in Colwell. With this amendment, the SCOV now tells us, a victim can tap into his or her UIM policy when other victims drain the tortfeasor’s liability policy. Basically, “gap coverage” and “excess coverage” had a baby that lets people bring out the fancy UIM insurance they bought if they need it. Ok, bad analogy, but you get the point, right?
Sadly for MMG, after concluding that this “gap-excess coverage” approach is the new thing, the SCOV goes on to conclude that the trial court was right—MMG is in fact screwed in this case and Progressive can enforce its host-vehicle exception when determining how much it has to pay passenger. In other words, MMG is stuck with two-thirds of the bill.
The SCOV’s prior crack at interpreting the statutory “underinsured motorist” language was in 2007. In this case (Hubbard), it looked at a single-car accident with only one victim (albeit a tragic one, the plaintiffs’ son). Even though the SCOV doesn’t find Hubbard very useful because the facts are different, it does trot out its Hubbard policy and reasoning to support its conclusion in this case.
In Hubbard there were also three insurance policies, one from Concord (the tortfeasor’s, $100k liability/$100k UIM) and two from Metropolitan (the plaintiffs’, $100k UIM each, total of $200k). Like Progressive, Concord had its own little tricksy UIM exclusion applicable where an injured person invokes the liability and UIM policies in the same contract. Metropolitan argued in favor of Concord enforcing this exclusion. Its angle was that Concord’s UIM coverage didn’t count toward the total the victim could recover, so there was only $200k available, and that its $200k exposure was cut in half by the $100k Concord paid out under its liability policy. See how that works? Insurance companies love it when they have a way to cut their policy payouts.
The Hubbard trial court sided with Metropolitan, as did the SCOV, because if it went with the alternative interpretation the victims would have access to more coverage than they bought (i.e., “double liability insurance”). The SCOV decided “double liability insurance” wasn’t the right way to interpret the statute, and that the “owned-vehicle” exclusion could be enforced to prevent the victim from recovering under both the liability and UIM parts of the same insurance contract.
Applied to this case, with multiple victims that sucked dry the host-vehicle’s liability policy, the SCOV tells us that if passenger could use both his UIM policies and also the host-vehicle UIM policy he would be able to access more than he bargained for when he bought his fancy liability insurance. The fact that Progressive’s contract doesn’t let this happen is okay under the statute, and it doesn’t mess with the policy behind it either because passenger still had coverage up to the limit of what he had through his own UIM policies.
Vermont is not a “double liability insurance” state says the SCOV, and, it notes, neither are the majority of states that have had the joy of looking at this exciting question. Letting UIM coverage “stack” like MMG wants in this case would undercut the purpose of the UIM statute. The SCOV reminds us that the point is to protect a hapless victim from an underinsured tightwad, not to give the victim more than he bargained for when he bought insurance.
Justice Robinson begs to differ with the majority’s interpretation of Vermont’s statutory “underinsured motorist” definition. She agrees with the trial court, and pens a dissent with which Justice Dooley joins. In its simplest form, Justice Robinson’s quarrel with the majority is with its less-than-literal interpretation of the UIM statute. She thinks her reading is closer to what the legislature intended, and she picks apart the case law and policy support the majority cites in support of its own.
The dissent uses a circular example with facts similar to the ones in this case but with just one liability policy, the responsible driver’s, to demonstrate the problems with UIM gap analysis. This approach, Justice Robinson shows us, is a circular way to go about figuring out if a driver is underinsured because “the starting point determines the end point.” Either you assume the host-vehicle policy isn’t applicable, in which case the driver isn’t underinsured even if he technically is, or you assume it is applicable, in which case the driver is underinsured. This analysis, claims the dissent, just isn’t helpful.
Circular reasoning (something that never happens in the law) aside, Justice Robinson gives us several reasons why she, and Justice Dooley, think the majority is wrong in this case.
The dissent thinks that the SCOV’s emphasis on the injured passenger’s own UIM insurance, as opposed to all available UIM insurance, including the driver’s, doesn’t jive with the plain language of the statute. The part of Section 941 the SCOV is interpreting says that “applicable” insurance should be considered, not just the “portable” UIM coverage an injured passenger had the foresight to purchase that follows him around in the event he is an accident with a cheapskate with insufficient liability coverage.
Slapping on this new “portable UIM coverage” to the analysis, says Justice Robinson, is judicial poppycock. It’s not in the plain language, it’s not in the legislative history, and it’s not in Colwell or, by extension, the legislature’s subsequent attempt to address Colwell. It also contradicts the remedial purpose of the statute, she argues. None of the other jurisdictions the majority cites to as support have a statute like Vermont’s, and she just doesn’t see the “double-liability insurance” problem the majority finds so troubling. Justice Robinson would not enforce the policy exclusion
With a stroke of its officious pen, the SCOV approves a creative loophole for future insurers to slide through so they don’t have to pay out under their policies. So just remember folks, friends don’t let friends drive underinsured.
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