| Alaska Supreme Court Opinions made Available byTouch N' Go Systems and Bright Solutions |
|
|
|
| Alaska Supreme Court Opinions made Available byTouch N' Go Systems and Bright Solutions |
|
|
|
|
You can search the entire site. or go to the recent opinions, or the chronological or subject indices. State Farm Mutual Automobile Insurance Co. v. Houle (8/26/2011) sp-6597
Notice: This opinion is subject to correction before publication in the PACIFIC REPORTER.
Readers are requested to bring errors to the attention of the Clerk of the Appellate Courts,
303 K Street, Anchorage, Alaska 99501, phone (907) 264-0608, fax (907) 264-0878, email
corrections@appellate.courts.state.ak.us.
THE SUPREME COURT OF THE STATE OF ALASKA
STATE FARM MUTUAL )
AUTOMOBILE INSURANCE ) Supreme Court Nos. S-13645/S-13855
COMPANY, )
) Superior Court No. 3AN-06-07851CI
Petitioner/ )
Cross-Respondent, ) O P I N I O N
)
v. ) No. 6597 - August 26, 2011
)
LARRY HOULE, SUNNIE )
HOULE, GRAHAM HOULE, and )
MARSHALL HOULE; and BRIAN )
NOEL, LYNN NOEL, LAURA )
NOEL, and SARAH NOEL, )
)
Respondents/ )
Cross-Petitioners. )
)
Petition for Review from the Superior Court of the State of
Alaska, Third Judicial District, Anchorage, William F.
Morse, Judge.
Appearances: David S. Carter, Hughes, Gorski, Seedorf,
Odsen, & Tervooren, LLC, Anchorage, for Petitioner/Cross-
Respondent. Richard E. Vollertsen and Christopher J.
Slottee, Atkinson, Conway, & Gagnon, Anchorage, for
Respondents/Cross-Petitioners.
Before: Carpeneti, Chief Justice, Fabe, Christen, and
Stowers, Justices. [Winfree, Justice, not participating.]
CARPENETI, Chief Justice.
----------------------- Page 2-----------------------
I. INTRODUCTION
At issue in this case are the coverage limits associated with underinsured
motorist (UIM) insurance and whether coverage provided under disputed insurance
policies complies with the requirements of Alaska insurance statutes. The respondent
families hold UIM policies. They allege that they have suffered emotional distress and
loss of consortium as a result of a collision that killed one family's child and severely
injured the other family's child. The insurer accepts that the policyholders incurred
damages. However, it contends that the families have already exhausted the coverage
limits available to them under the UIM policies because the family members seeking
damages were not "in" the fatal collision.
The superior court concluded that the families had not exhausted their UIM
coverage under Alaska insurance statutes and reformed the insurance policies to allow the
emotional distress claims to proceed to arbitration. The superior court dismissed the
families' loss of consortium claims as outside the coverage of the policies. Because we
conclude that the families have exhausted the coverage limits available under their
policies and that these policies are consistent with statutory requirements, we reverse the
superior court's decision to reform the policies. Because coverage limits are exhausted,
we decline to consider whether loss of consortium is covered under the policies.
II. FACTS AND PROCEEDINGS
This is a dispute over insurance coverage arising from an automobile
accident in which Nolan Houle was killed and Caroline Noel sustained significant
injuries. The accident took place in August 2001 near the intersection of O'Malley Road
and New Seward Highway in Anchorage. Nolan and Caroline were passengers in a car
driven by Ryan Schubert. Schubert, who is not a party in this case, turned left in front
of a bus that slammed into his car. The parties do not dispute that the injuries in this case
-2- 6597
----------------------- Page 3-----------------------
resulted from Schubert's driving and that the families' claims triggered coverage under
Schubert's liability insurance policy.
Schubert was insured by State Farm Mutual Automobile Insurance
Company. Schubert's liability policy covered claims up to a per-person limit of
$100,000 and a per-accident limit of $300,000.1 Pursuant to Schubert's liability policy,
State Farm paid $100,000 to Caroline Noel and $100,000 to the estate of Nolan Houle,
exhausting two separate per-person limits and two-thirds of the sum available for a single
accident. Pursuant to the same liability policy, State Farm also made payments to
Caroline's parents and Nolan's parents based on claims that, according to the families,
included negligent infliction of emotional distress (NIED). Together these payments
exhausted the $300,000 per-accident limit of Schubert's liability policy.
The Houle family had three automobile insurance policies with State Farm.
Each policy provided underinsured motorist (UIM) coverage to the members of the Houle
household up to a per-person limit of $250,000 and a per-accident limit of $500,000. The
Noel family also had three State Farm automobile insurance policies subject to the same
policy language. Each policy provided UIM coverage to members of the Noel family up
to a per-person limit of $100,000 and a per-accident limit of $300,000. It is undisputed
that the Houle and Noel families' UIM policies were "stackable," as that term is
commonly understood.2 By stacking, the Houle family effectively had UIM coverage
1 We consider the arguments before us in order to interpret the disputed
provisions of the families' UIM policies; this case does not conclusively interpret
obligations or limitations under Schubert's liability policy.
2 See BLACK 'S LAW DICTIONARY 1440 (8th ed. 2004) (defining "stacking"
as "[t]he process of obtaining benefits from a second policy on the same claim when
recovery from the first policy alone would be inadequate"); see also IRVIN E. SCHERMER
(continued...)
-3- 6597
----------------------- Page 4-----------------------
up to a per-person limit of $750,000 and a per-accident limit of $1.5 million, while the
Noel family's limits were effectively $300,000 per person and $900,000 per accident.
Further, there is no dispute that coverage under these UIM policies was triggered
because, as a result of the August 2001 accident, members of the Houle and Noel families
suffered damages that exceeded the coverage available under the Schubert liability
policy.3
Pursuant to the Houle and Noel UIM policies, Caroline Noel, the estate of
Nolan Houle, and the respondent family members presented State Farm with claims for
various medical and economic costs resulting from the August 2001 accident, as well as
punitive damages. State Farm paid $750,000 on account of Nolan Houle's UIM
coverage and $300,000 on account of Caroline Noel's UIM coverage. These payments
exhausted the stacked per-person limits of the families' UIM policies. But State Farm's
2 (...continued)
& WILLIAM J. SCHERMER, AUTOMOBILE LIABILITY INSURANCE § 29:1, at 29-3 (4th ed.
2004).
3 The full extent of the damages suffered by the Houles and Noels is not
known. The record suggests that Caroline was in a coma for a week; spent 12 days in
intensive care; had approximately 30 days of post-traumatic amnesia; and suffered a
severe traumatic brain injury that caused, at least for some time, cognitive and memory
deficits, hemiparesis, migraine headaches, knee-buckling, and full-body spasms. We
have no doubt that the loss and injury of loved ones may have devastating physiological
effects on close family members. In this case, the families assert that they were prepared
to present evidence of asthma, depression, trouble sleeping, anxiety attacks, and chronic
stress that Caroline's and Nolan's family members suffered as a result of the tragic car
accident. State Farm has not contested before this court the amount of the families'
damages as a factual matter. Under the policies, the extent of monetary damages would
be resolved in arbitration if coverage limits were not exhausted.
-4- 6597
----------------------- Page 5-----------------------
payments did not exhaust the aggregate per-accident limits of the Houle and Noel UIM
policies.4
That is the origin of this dispute. The respondent family members believed
that they were entitled to additional coverage based on the claims they had filed with
State Farm. In other words, they believed that the injuries Caroline's and Nolan's
parents and siblings had suffered as a result of the August 2001 accident triggered UIM
coverage subject to separate per-person limits for each injured family member. But State
Farm refused to make additional payments under the UIM policies, believing that any
injuries suffered by the respondent family members were subject to the single per-person
limits triggered by Caroline's and Nolan's injuries. Thus, State Farm filed an action for
declaratory judgment, asking the superior court to declare that the Noel and Houle
families' coverage limits had been exhausted. The families sought a stay of the
declaratory judgment action and appointment of an arbitrator to hear their claims and
resolve any factual disputes.
The superior court carefully addressed three rounds of summary judgment
and several other motions concerning procedure and discovery. It responded to new
developments in the governing law, including the release of our opinion in State Farm
Mutual Automobile Insurance Co. v. Dowdy (Dowdy II).5 Among other issues, the
superior court considered which of the parents' and siblings' claims constituted "bodily
4 State Farm has asserted that its payments "totaled in excess of $688,000 to
the Noel family and $1.288 million to the Houle family," which (according to State
Farm) exhausted the stacked policy limits of both families' UIM coverage. State Farm
claims that these sums include "interest . . . and add[-]ons." Nevertheless, the sums that
State Farm reports paying to the Noel and Houle families fall short of the $900,000 and
$1.5 million stacked per-accident limits in the families' respective UIM policies.
5 192 P.3d 994 (Alaska 2008).
-5- 6597
----------------------- Page 6-----------------------
injury" under the UIM policy's broad definition of this term; it concluded that the policy
covered negligent infliction of emotional distress but not loss of consortium. The
superior court later concluded that the families had not exhausted their UIM coverage
under Alaska insurance statutes and reformed State Farm's insurance policy to allow the
negligent infliction of emotional distress claims to proceed to arbitration.
State Farm then filed a petition for review, arguing that its UIM policy is
consistent with the requirements of Alaska statutes and should not have been reformed.
We granted the petition and authorized a cross-petition. The families cross-petitioned,
urging us to address their loss of consortium claims and to reconsider our ruling in
Dowdy II. We have considered the issues raised by both petitions.
III. STANDARD OF REVIEW
This case "involves a ruling on summary judgment and presents a question
of law. We therefore apply a de novo standard of review, 'adopting the rule of law that
is most persuasive in light of precedent, reason, and policy.' "6 "We also review de novo
as a question of law the interpretation of insurance policy language."7
IV. DISCUSSION
Taken together, State Farm's petition and the families' cross-petition ask
us whether Nolan Houle's and Caroline Noel's family members are entitled to separate
per-person coverage under the terms of State Farm's UIM policies, whether the terms of
the policies are consistent with the requirements of Alaska insurance statutes, whether
the families' loss of consortium claims and emotional distress claims should be treated
6 Id. at 998 (quoting State Farm Mut. Auto. Ins. Co. v. Lestenkof, 155 P.3d
313, 316 (Alaska 2007)).
7 Id. (citing Simmons v. Ins. Co. of N. Am., 17 P.3d 56, 59 (Alaska 2001)).
-6- 6597
----------------------- Page 7-----------------------
differently under the governing rules, and whether our decision in Dowdy II governs the
outcome of the case.
The parties do not dispute that the Houle and Noel family members incurred
damages as a result of the August 2001 car accident. They disagree about whether the
injuries to these family members triggered per-person limits separate from Nolan Houle's
and Caroline Noel's per-person limits.
State Farm argues that the applicable coverage limits have been exhausted
and that the UIM policies are consistent with statutory requirements. According to State
Farm, any covered injuries incurred by Nolan's and Caroline's family members are
covered only under the per-person limits paid in respect of Nolan Houle and Caroline
Noel.
The family members assert that separate per-person limits should apply to
their claims. They also argue that while the superior court properly reformed the policy
to cover the parents' emotional distress claims, there is no principled reason to
distinguish the emotional distress claims from the loss of consortium claims. According
to the families, all of these claims should proceed to arbitration.
Dowdy II governs the interpretation of the UIM policy language in this
case. We decline to reconsider the ruling of that case and conclude that coverage has
been exhausted under the terms of the Houles' and Noels' UIM policies. Because
coverage has been exhausted, we need not consider whether loss of consortium claims
could satisfy the policies' definition of "bodily injury." Reformation of the policies is
unnecessary because the terms of the policies are consistent with statutory requirements.8
8 See State Farm Mut. Auto. Ins. Co. v. Lawrence, 26 P.3d 1074, 1080
(Alaska 2001) ("If State Farm has failed to provide [required] coverage, its UM/UIM
(continued...)
-7- 6597
----------------------- Page 8-----------------------
A. The UIM Policies Do Not Provide Separate Per-Person Coverage For
The Family Members' Emotional Distress Claims.
In addressing the proper interpretation of an insurance policy, we look to
"(1) the language of the disputed provisions in the policy, (2) other provisions in the
policy, (3) extrinsic evidence, and (4) case law interpreting similar provisions."9
Because "an insurance policy is a contract of adhesion,"10 we "construe grants of
coverage broadly and interpret exclusions narrowly."11 We recently explained:
Insurance policies are construed in such a way as to honor a
lay insured's reasonable expectations. Policy language is
construed in accordance with ordinary and customary usage.
Ambiguities in . . . insurance policies are to be construed
most favorably to an insured, but ambiguities only exist when
there are two or more reasonable interpretations of particular
policy language.[12]
These rules of construction provide a general guide for interpreting disputed policy
language.
Notably, we have already applied these rules of construction to the policy
language at issue in this case. State Farm's UIM policy provides in relevant part:
The amount of coverage for bodily injury is shown on the
declarations page under "Limits of Liability - UI - Bodily
Injury, Each Person, Each Accident". Under "Each Person"
8 (...continued)
provisions will be reformed to conform with the statutory requirements." (citing State
Farm Mut. Auto. Ins. Co. v. Harrington, 918 P.2d 1022, 1025 (Alaska 1996))).
9 Allstate Ins. Co. v. Teel, 100 P.3d 2, 4 (Alaska 2004).
10 C.P. ex rel. M.L. v. Allstate Ins. Co., 996 P.2d 1216, 1222 (Alaska 2000).
11 Teel, 100 P.3d at 4.
12 Dowdy II, 192 P.3d at 998 (footnotes omitted).
-8- 6597
----------------------- Page 9-----------------------
is the amount of coverage for all damages due to bodily
injury to oneperson . "Bodily injury to oneperson " includes
all injury and damages to others resulting from this bodily
injury. Under "Bodily Injury - Each Accident" is the total
amount of coverage, subject to the amount shown under
"Each Person", for all damages due to bodily injury to two or
more persons in the same accident.
When we refer to "per-person" and "per-accident" limits in State Farm's UIM policy, we
refer to the parameters established for "Each Person" and "Each Accident" in the passage
above.
In both Lawrence and Dowdy II, we construed basically the same policy
language that is before us today.13 In both of these cases, family members who suffered
emotional distress as a result of an accident sought separate per-person coverage under
the terms of State Farm's UIM policy.14 In other words, not only have we had occasion
to construe the same language that is in dispute here; we have construed the same
language in light of similar facts.
In Lawrence, we identified two requirements that must be met in order for
separate coverage limits to apply under the terms of the policy: (1) the claimant must
have suffered "bodily injury"; and (2) that injury must have been suffered "in the same
13 See Lawrence, 26 P.3d at 1077; Dowdy II, 192 P.3d at 996 n.9.
14 See Lawrence, 26 P.3d at 1075-76 (considering the claims of Tobitha and
Stacey Lawrence Sr., who suffered emotional distress as a result of their son's
hospitalization following a collision with a suicidal, underinsured driver and who sought
separate per-person coverage after payments to their son had exhausted the per-person
limit for an accident involving one person); Dowdy II, 198 P.3d at 995 (considering the
claims of Asa and Barbara Dowdy, who suffered severe emotional distress as a result of
the death of their 17-year-old daughter in a collision with an underinsured intoxicated
driver and who sought separate per-person coverage after payments to their daughter's
estate had exhausted the per-person limit for an accident involving one person).
-9- 6597
----------------------- Page 10-----------------------
accident."15 But we did not reach the merits of the coverage dispute in Lawrence.16
When we took up the issue in Dowdy II, we explained that "the 'accident' referred to by
the policy . . . is, of course, the collision between the vehicles."17 We concluded that
" 'injury in the same accident' cannot reasonably be construed to refer to injuries that
result from viewing a dead or injured person away from an accident scene."18 In light
of our interpretation of the phrase "in the same accident," we concluded that the
Dowdys' emotional distress did not trigger separate per-person coverage limits.19
Dowdy II left open the possibility that some bystander emotional distress
claims could meet the "in the same accident" requirement.20 Asa and Barbara Dowdy
saw their daughter's body at the hospital at least three hours after the collision that killed
her; the parents were "miles away" from the scene of the accident when the collision
took place.21 Because the Dowdys were "far removed" from the accident involving their
daughter, we concluded that they could not satisfy the "in the same accident"
requirement.22
15 See Lawrence, 26 P.3d at 1077 (quoting Crabtree v. State Farm Ins. Co.,
632 So.2d 736, 741 (La. 1994)).
16 Id. at 1077-78 (concluding that State Farm had waived the relevant
arguments about interpretation of the policy).
17 Dowdy II, 192 P.3d at 999.
18 Id. at 995.
19 Id. at 1001-02.
20 Id. at 999-1002.
21 Id. at 999.
22 Id. at 1001.
-10- 6597
----------------------- Page 11-----------------------
In this case, none of Nolan Houle's or Caroline Noel's family members
were vehicle occupants or pedestrians in the collision that took place at the intersection
of O'Malley Road and New Seward Highway. Nor did any of the family members see
the August 2001 accident take place. The family members saw Nolan and Caroline for
the first time at the hospital. Following Dowdy II 's interpretation of the term "accident,"
the undeniable emotional distress suffered by Nolan's and Caroline's family members
was not incurred "in the same accident" that injured Caroline and Nolan.23 According
to the families' allegations, some of Nolan's and Caroline's family members were dining
"just minutes away" from the hospital, and Brian Noel drove past the accident scene on
his way to the hospital. These allegations, while poignant, do not distinguish the claims
of Nolan's and Caroline's family members from the emotional distress claims that failed
to trigger separate per-person coverage in Dowdy II. The emotional distress suffered by
the family members does not trigger separate per-person coverage because they were not
in or near the August 2001 collision.
The families draw attention to cases in which we allowed family members'
emotional distress claims to trigger separate per-person coverage. In Lawrence, we
allowed the parents' claims of emotional distress to trigger separate per-person coverage
limits; but we noted that the insurer had waived the arguments that the emotional distress
claimed by the parents did not constitute "bodily injury" and did not meet the policies'
23 Testing the logic of Dowdy II 's definition of "accident," the respondent
family members ask: If they were not injured in the same accident as Caroline and
Nolan, in what accident were they injured? But Dowdy II made clear that not all
compensable injuries are incurred "in" a covered accident under the terms of State
Farm's UIM policy. Id. ("[I]t is not possible to say that all plaintiffs with NIED claims
that are valid under Alaska law are necessarily injured in the same accident as their
injured relatives."). The family members were injured "as a result" of the accident but
not "in" the accident.
-11- 6597
----------------------- Page 12-----------------------
requirement of having been "in the same accident" as their son.24 In Teel, we again
allowed a parent's emotional distress claim to trigger separate per-person coverage, but
we were interpreting different policy language in that case.25 These cases do not change
the conclusion that the emotional distress suffered by Caroline's and Nolan's family
members does not trigger separate per-person coverage limits under the UIM policies in
this case. As explained above, this result is compelled by Dowdy II.
Nor is a different result compelled by the new evidence presented in this
case. Through discovery, the families obtained evidence that State Farm has, at times,
paid emotional distress claimants under separate per-person limits. The families argue
that this is strong evidence that the proper interpretation of the policy would allow
Nolan's and Caroline's family members' claims to fall under separate per-person limits.
But, according to State Farm, these payments were made at a time when the law was
unsettled, and served as compromises to avoid litigation. The families have identified
some isolated cases where State Farm made payments under separate per-person limits
to family members who were not in the collision. But this evidence is insufficient to
support the conclusion that State Farm consistently made such payments or is obligated
to make such payments. Moreover, this evidence does not compel revisiting the decision
in Dowdy II.26
24 Lawrence, 26 P.3d at 1077.
25 Allstate Ins. Co. v. Teel, 100 P.3d 2, 3-4 (Alaska 2004) (concluding that a
mother's emotional distress was "because of" the bodily injury suffered by her son, and
thus, satisfied the requirements for separate per-person coverage under a policy that
defined an "insured person" as someone who is legally entitled to recover damages
"because of bodily injury to [the insured], a resident relative, or an occupant of [the
insured's] auto with [the insured's] permission" (italics omitted)).
26 See Pratt & Whitney Can., Inc. v. Sheehan, 852 P.2d 1173, 1176 (Alaska
(continued...)
-12- 6597
----------------------- Page 13-----------------------
The families also argue that State Farm's limits of liability clause does not
include limiting language found elsewhere in the State Farm policy. They cite to C.P.
ex rel. M.L. v. Allstate Insurance Co.,27 a case in which an insurer "knew how to phrase
an exclusion unambiguously" but failed to repeat the relevant exclusion in a separate
provision of the policy; we concluded in M.L. that the policy provided the disputed
coverage because the insurer had not expressly excluded it.28 In the present case, the
families draw attention to the fact that a separate provision of State Farm's policy limits
coverage to injuries sustained by an insured "while they operate or occupy a vehicle
covered under the liability section." According to the families, this demonstrates State
Farm's ability to be more precise in defining and clarifying the terms of the policy. The
families argue that State Farm's failure to employ limiting terms shows State Farm's
clear intent to provide broader coverage. However, we find that the absence of these
terms creates, at best, an ambiguity, rather than a clear expression of intent. To the
degree that an ambiguity exists, we already applied the relevant rules of construction
when we interpreted the policy language in Dowdy II .29 And there we rejected the
interpretation of the UIM policy urged by the families in this case.
26 (...continued)
1993) ("[W]e will overrule a prior decision only when 'clearly convinced [that] the rule
was originally erroneous or is no longer sound because of changed conditions, and that
more good than harm would result from a departure from precedent' . . . ." (quoting State
v. Dunlop, 721 P.2d 604, 610 (Alaska 1986))).
27 996 P.2d 1216 (Alaska 2000).
28 Id. at 1227-28.
29 See, e.g., Dowdy II, 192 P.3d 994, 998 (Alaska 2008) ("Ambiguities in . . .
insurance policies are to be construed most favorably to an insured, but ambiguities only
exist when there are two or more reasonable interpretations of particular policy
language.").
-13- 6597
----------------------- Page 14-----------------------
B. Alaska Insurance Statutes Do Not Require Separate Per-Person
Coverage For Family Members' Emotional Distress Claims.
The next question to consider is whether State Farm's policy is consistent
with the requirements of Alaska's insurance statutes. If a policy does not provide
statutorily required coverage, it will be reformed to conform with statutory
requirements.30 Former AS 21.89.020(c), now renumbered as AS 21.96.020(c), requires
automobile liability insurers to provide UIM coverage that meets certain criteria.31
Under this statute, insurers must offer policies with certain per-person and per-accident
coverage limits. The statute also prohibits insurers from providing UIM coverage with
limits "less than the limit in AS 28.20.440 or AS 28.22.101," statutory provisions that
identify requirements governing liability policies.32 The parties dispute the meaning of
the statutory language that suggests that coverage is triggered where damages arise
"because of bodily injury to or death of two or more persons in one accident."33
30 State Farm Mut. Auto. Ins. Co. v. Harrington, 918 P.2d 1022, 1025 (Alaska
1996) (citingHughes v. Harrelson, 844 P.2d 1106, 1107 (Alaska 1993); Burton v. State
Farm Fire & Cas. Co., 796 P.2d 1361, 1363 (Alaska 1990);Hillman v. Nationwide Mut.
Fire Ins. Co., 758 P.2d 1248, 1250-53 (Alaska 1988)).
31 AS 21.96.020(c) (requiring "coverage. . . for the protection of the persons
insured under the policy who are legally entitled to recover damages for bodily injury
or death from owners or operators of an uninsured or underinsured motor vehicle").
32 Id.; see also AS 28.20.440 (identifying liability coverage that automobile
insurers are required to provide); AS 28.22.101 (identifying general coverage
requirements with which automobile insurers must comply).
33 This language appears in two sections of the insurance statute:
AS 21.96.020(c)(2)(A)-(E) (requiring coverage where damages arise "because of bodily
injury to or death of two or more persons in one accident"); and AS 28.22.101(d)
(requiring coverage where damages arise "because of bodily injury to or death of two or
more persons in any one accident"). AS 28.20.440(b)(2) describes per-accident liability
(continued...)
-14- 6597
----------------------- Page 15-----------------------
According to the families, these statutes, particularly AS 28.20.440, require
insurers to provide UIM coverage for each family member injured as a result of an
accident and do not permit any restrictions on that coverage unless specifically
authorized by statute. The families argue that a separate per-person coverage limit is
triggered for each family member who was injured as a result of the August 2001
accident. Because several members of each family suffered injuries in this case, the
families insist that the aggregate per-accident limit has not been exhausted. To the extent
that the terms of State Farm's policy fall short of this coverage, the families argue that
reformation of the policy is required.
State Farm contends that in order to secure UIM coverage under the
statutory scheme, an injured family member must be injured in an accident, not simply
as a result of the accident. In turn, the insurer argues that because only Nolan Houle and
Caroline Noel were in the August 2001 accident, only one per-person coverage limit was
activated for each family, and as a result, any covered damages suffered by other family
members are subject to the single per-person caps. Based on its interpretation of the
statutes, State Farm argues that reformation is not required because its payments have
exhausted the single per-person limits for all six of the Houle and Noel policies, the full
extent of statutory required coverage.
Dowdy II is instructive in addressing this dispute. That case did not address
the interpretation of the insurance statutes laid out above, and it does not directly control
33 (...continued)
coverage in roughly the same language: "coverage . . . because of bodily injury to or
death of two or more persons in any one accident." Neither party has addressed
specifically whether the word "any" in AS 28.20.440(b)(2) necessitates interpreting that
statute differently from AS 28.22.101(d) and AS 21.89.020(c). We see no reason to
distinguish these phrases in this case. The parties have not suggested that there is any
significant difference between these statutory phrases.
-15- 6597
----------------------- Page 16-----------------------
the question of statutory construction before us now.34 But in Dowdy II, we construed
similar language and identified the generally accepted usage of the phrase "in the same
accident."35 We explained that the generally accepted usage of the phrase "in the same
accident" was inconsistent with the conclusion that non-witness bystanders incurred
injuries "in the same accident" that hospitalized their daughter.36
State Farm urges us to interpret the statute's "in one accident" language and
"in any one accident" language in the same way that we interpreted the phrase "in the
same accident" in Dowdy II. State Farm suggests that the meaning of the words "in one
accident" and "in any one accident" is effectively indistinguishable from the phrase "in
the same accident" interpreted in Dowdy II. State Farm argues that ordinary and
customary usage should control the interpretation of the statute. We agree.
The families rightly note that ordinary usage does not always govern
statutory interpretation. We construe "words and phrases according to their 'common
and approved usage' unless such words and phrases have acquired peculiar meaning by
34 State Farm argued before the superior court, and seems to suggest here,
that our decision not to reform the insurance policies in Dowdy II should be read as a
statement that the policies are consistent with statutory requirements. But this argument
overlooks our policy of addressing only those issues that have been properly presented
and briefed. See, e.g., State Farm Mut. Auto. Ins. Co. v. Lawrence, 26 P.3d 1074, 1077
(Alaska 2001) (declining to reach the merits of coverage dispute because insurer waived
argument). The superior court was right not to "read so much into the silence of Dowdy
II" on the statutory issues.
35 Dowdy II, 192 P.3d at 199 ("To conclude that either Barbara or Asa Dowdy
were injured 'in the same accident' with [their daughter] would stretch the meaning of
that phrase beyond any generally accepted usage.").
36 See id.
-16- 6597
----------------------- Page 17-----------------------
virtue of statutory definition or judicial construction."37 But the families did not show
how the statutes give the words "in one accident" or "in any one accident" a peculiar and
appropriate meaning different from the phrase interpreted in Dowdy II. Thus, we
conclude that Nolan's and Caroline's family members were not "in" the August 2001
accident. The statutes require State Farm only to provide the family members with
coverage under the per-person limits triggered by Caroline and Nolan.
Alaska Statute 21.96.020, which requires insurers to offer UIM coverage,
is intended to protect insured persons from suffering uncompensated damages.38 With
this purpose in mind, the families urge us to avoid reading limits into the statute. Their
approach has some support.39 We reject State Farm's contention that the families'
approach is a "generic" effort to avoid the specific terms of the statute. But the families'
argument does not justify rejecting the common and approved usage of "in one
accident." The rules governing insurance policy interpretation, which we applied in
37 Lynch v. McCann, 478 P.2d 835, 837 (Alaska 1970) (citing AS 01.10.040).
38 Hillman v. Nationwide Mut. Fire Ins. Co., 758 P.2d 1248, 1252 (Alaska
1988) ("The purpose of the statute is to protect completely, those willing to accept its
protection, from all harm . . . produced by uninsured motorists." (internal citation and
quotation marks omitted)); see Coughlin v. Gov't Emps. Ins. Co., 69 P.3d 986, 991
(Alaska 2003) ("[T]he purpose of the statute [is] to ensure that UIM coverage is
secondary rather than primary coverage while at the same time making the benefit of
UIM coverage broadly available.").
39 In a variety of contexts, we have noted that statutes should be construed
liberally to give effect to their purpose. See, e.g., Imperial Mfg. Ice Cold Coolers, Inc.
v. Shannon, 101 P.3d 627, 630 (Alaska 2004) (calling for remedial statute "to be liberally
construed to effectuate its purpose"); Allstate Ins. Co. v. Teel, 100 P.3d 2, 4 (Alaska
2004) ("We construe grants of coverage broadly and interpret exclusions narrowly.");
Spenard Action Comm. v. Lot 3, Block 1, Evergreen Subdivision, 902 P.2d 766, 773
(Alaska 1995) ("[W]e construe these statutes in a manner to avoid frustrating their
remedial purpose.").
-17- 6597
----------------------- Page 18-----------------------
Dowdy II, require construing any ambiguities in favor of the insured.40 But even under
those rules of construction we concluded that the family members' emotional distress
claims were not incurred "in the same accident" from which the distress resulted.41
Applying the rules of statutory construction here does not mandate a different result.
The families emphasize that the legislature mandated "coverage . . . for the
protection of persons insured under the policy who are legally entitled to recover
damages from owners or operators of uninsured or underinsured motor vehicles because
of bodily injury or death."42 The families correctly explain that the phrase "legally
entitled to recover damages" incorporates background tort principles into the statutory
scheme. They argue that where a person is "legally entitled to recover damages," that
person has met the threshold requirements for coverage and is entitled to proceed to
arbitration. According to the families, State Farm's interpretation creates an
impermissible gap between the injuries that are compensable under tort law and the
injuries compensable under the policy.43 They suggest that the doctrine of proximate
cause and the requirements for establishing a cause of action provide the workable limits
on coverage that the legislature intended. But the limits of tort law are not the only
coverage limits found in the statutes. The statutes also require us to give effect to the
words "in one accident" and "in any one accident." Giving effect to the ordinary
40 Dowdy II, 192 P.3d at 998 ("Ambiguities in . . . insurance policies are to
be construed most favorably to an insured, but ambiguities only exist when there are two
or more reasonable interpretations of particular policy language.").
41 Id. at 1002 ("[I]t seems plain that the 'in the same accident' language of the
policy cannot reasonably be construed to cover the Dowdys' NIED claim.").
42 AS 28.20.440(b)(3); see also AS 21.96.020(c).
43 The families also characterize this as an impermissible "exclusion" from
coverage.
-18- 6597
----------------------- Page 19-----------------------
meaning of this phrase, we conclude that Nolan Houle's and Caroline Noel's family
members are not entitled to separate per-person coverage under the underinsured
motorist statute. These family members were not "in" the accident.
The families also argue that the so-called "mirror-image rule" requires State
Farm to provide the same scope of coverage under its UIM policy that it provides under
the liability policy. We have explained that "automobile insurance companies must offer
insureds UM/UIM coverage that mirrors the insureds' liability."44 The two policies
should provide "the same benefit level."45 The families urge that the same reasoning
requires separate per-person coverage for their emotional distress and loss of consortium
claims because such coverage would be available under the liability policy. But the
families have not shown how State Farm's interpretation of the UIM policy would
provide different benefits than those available under the liability policy.46 As State Farm
points out, the liability and UIM policies include the same language to describe injuries
44 State Farm Mut. Auto. Ins. Co. v. Lawrence, 26 P.3d 1074, 1079-80 (Alaska
2001) (emphasis added) (concluding that because the injured party's liability policy
covered punitive damages, that party's UIM policy should compensate for punitive
damages). The legislature later superseded this specific holding with Ch. 172 SLA 2004,
which amended AS 21.89.020(c) (now AS 21.96.020(c)) to provide that "coverage for
punitive damages that might otherwise be recoverable from an uninsured or underinsured
person is not required under this paragraph." But the following general requirement
remains intact: An automobile insurer must make available UIM coverage with the same
limits as the liability policies it offers. AS 21.89.020(c)(1); see also State Farm Mut.
Auto. Ins. Co. v. Harrington , 918 P.2d 1022, 1025 (Alaska 1996) (concluding that a
policyholder was entitled to coverage for pre-judgment interest and attorney's fees where
that party's liability policy covered pre-judgment interest and attorney's fees).
45 Lawrence, 26 P.3d at 1079.
46 Harrington, 918 P.2d at 1026 ("[T]he evident purpose of section [AS
21.96.]020(c)(1) is to provide for the insured, as an injured claimant, the same benefit
level as that provided by the insured to those asserting claims against the insured.").
-19- 6597
----------------------- Page 20-----------------------
to one person. But the two policies differ in whom they cover. Liability insurance is not
designed to compensate the persons insured under the policy for their injuries; coverage
is available to compensate an indeterminate class of third parties who may suffer injuries
at the hands of the insured. By contrast, a UIM policy provides first-person coverage to
the persons insured under that policy. There is no clear analogy between the
circumstances of this case and the payments that would be provided to third parties under
the Houles' and Noels' liability policies. In other words, the mirror image rule does not
change the conclusion that the respondent family members are not entitled to separate
per-person coverage under the underinsured motorist statute.
We see no reason to stray from generally accepted usage in interpreting the
insurance statutes in this case. Looking to accepted usage, we conclude that the
respondent family members were not injured "in the same accident" as Nolan and
Caroline. Because Alaska's underinsured motorist statute does not require separate per-
person coverage for these family members, reformation is unnecessary.
V. CONCLUSION
Because neither AS 21.96.020, AS 28.20.440, nor AS 28.22.101 requires
coverage that is unavailable under the disputed insurance policies, we REVERSE the
decision to reform the policies and REMAND for the superior court to enter judgment
for State Farm.
-20- 6597
 |
| Case Law Statutes, Regs & Rules Constitutions Miscellaneous |
|
