Merkel v. Nationwide Insurance Co.

Annotate this Case
Merkel v. Nationwide Insurance Co.  (95-636); 166 Vt. 311; 693 A.2d 706

[Filed 21-Mar-1997]

       NOTICE:  This opinion is subject to motions for reargument under
  V.R.A.P. 40 as well as formal revision before publication in the Vermont
  Reports.  Readers are requested to notify the Reporter of Decisions,
  Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801 of
  any errors in order that corrections may be made before this opinion goes
  to press.

                                 No. 95-636

George Merkel                                     Supreme Court

                                                  On Appeal from
     v.                                           Addison Superior Court

Nationwide Insurance Company                      August Term, 1996

Matthew I. Katz, J.

       James A. Dumont and Jon M. Groveman, Law Clerk, of Keiner & Dumont,
  P.C., Middlebury, for plaintiff-appellant

       Allan R. Keyes and John A. Serafino of Ryan Smith & Carbine, Ltd.,
  Rutland, for defendant-appellee

PRESENT:  Allen, C.J., Gibson, Dooley, Morse and Johnson, JJ.

       DOOLEY, J.   Plaintiff George Merkel sought a declaration that
  defendant Nationwide Insurance Company was liable under the underinsured
  motorist provision of its policy, following plaintiff's 1988 accident with
  an underinsured driver.  The Addison Superior Court granted defendant's
  summary judgment motion, and plaintiff appealed.  He argues that: (1)
  defendant failed to obtain an effective election to set the underinsured
  motorist coverage limit at $20,000 per person, so it automatically remained
  at the liability limit of $100,000 per person; and (2) even if defendant
  obtained an effective election at the purchase of the policy, it failed to
  obtain a new reduced-coverage election at the policy's renewal.  We affirm.

       In 1984 plaintiff purchased a liability policy from defendant, with
  liability limits of $100,000 per person/$300,000 per accident.  Plaintiff
  elected coverage of $20,000 per person/$40,000 per accident on a form
  referring to "uninsured" motorist coverage.  At the time of purchase, the
  policy's definition of "uninsured motorists coverage" did not include
  underinsured motorists.  However, a rider sent by defendant to plaintiff in
  1985 or 1986 defined


  an uninsured motor vehicle as

     a motor vehicle with respect to the ownership, maintenance, or use
     of which either no auto liability bond or insurance policy applies
     at the time of the accident, or with respect to which the sum of the
     limits of liability under all auto liability bonds and insurance
     policies applicable to the accident is less than the limits of this

  After issuance of the policy in 1984, defendant sent plaintiff annual
  declarations indicating the same uninsured motorist coverage limits, and he
  remitted his premium payments without questioning these limits or seeking
  to change them.

       In 1988, following several policy renewals, plaintiff was in an
  accident with a vehicle covered by a liability insurance policy with a
  $20,000-per-person/ $40,000-per-accident liability limit, the same limit as
  for uninsured motorist coverage in plaintiff's policy.  Plaintiff assessed
  his total losses from the accident at $75,000, recovered $20,000 from the
  other motorist in the accident, and sought the difference of $55,000 from
  defendant.  Defendant denied plaintiff's claim because the other driver was
  not underinsured within the definition of the policy.  Plaintiff brought
  the present action, claiming that the form he signed in 1984 related to
  uninsured motorist coverage but did not mention or relate to underinsured
  motorist coverage, which he never elected to reduce below his own liability
  coverage limits, and that he never agreed to reduce underinsured motorist
  coverage at the renewals of the policy.

       Defendant moved for summary judgment on grounds that under the
  language of the policy and under 23 V.S.A. § 941 plaintiff's election to
  purchase coverage at a lower liability limit applied to both uninsured and
  underinsured motorist coverage and continued at each policy renewal.  The
  court agreed and granted defendant's motion.  This appeal followed.

       Under 23 V.S.A. § 941(a), no liability policy may issue or be
  delivered in Vermont "unless coverage is provided therein . . . for the
  protection of persons insured thereunder who are legally entitled to
  recover damages, from owners or operators of uninsured, underinsured or
  hit-and-run motor vehicles . . . ."  23 V.S.A. § 941(c) states:


     (c) Unless the policyholder otherwise directs, the coverages
     under (a) and (b) of this section for new or renewed policies shall
     be identical to those provided in the policy selected by the person
     obtaining said policy but shall not be less than the minimum limits
     of coverage required under the provisions of section 801 of this

  Plaintiff argues first that these provisions create "separate and distinct"
  categories of coverage for uninsured and underinsured motorists and that to
  be valid, waivers of the statutory limits in § 941(c) had to be separate
  for uninsured and underinsured coverages.  Thus, plaintiff argues that his
  election to reduce his uninsured motorist coverage to $20,000 per person
  had no effect on his underinsured motorist coverage, which remained at the
  limit of his liability coverage, $100,000 per person.

       This is a question of statutory construction.  Our goal in
  interpreting a statute is to discern and implement the intent of the
  Legislature.  See Lane v. Town of Grafton, 8 Vt. L.W. 1, 1 (1997).  We
  consider the purpose of the statute and look to "the broad subject matter
  of the law, its effects and consequences, and the reason and spirit of the
  law."  Id.

       The requirement that liability policies include uninsured motorist
  coverage dates from 1968.  In 1980, the Legislature amended the law to
  require additional coverage with respect to operators of underinsured or
  hit-and-run motor vehicles.  The Legislature imposed this additional
  mandatory coverage in order to eliminate the anomaly that insureds were
  better off when they were hit by an uninsured driver than when they were
  hit by a driver with very little liability coverage.  As we explained in
  Monteith v. Jefferson Ins. Co., 159 Vt. 378, 385-86, 618 A.2d 488, 492
  (1992) (quoting State Farm Mut. Auto. Ins. Co. v. Hancock, 295 S.E.2d 359,
  360 (Ga. 1982)):

     "[W]hile a motorist insured over the minimum coverage could
     obtain full redress to the maximum of his policies when the
     tortfeasor was uninsured, he was denied any recovery of excess
     damages through his own coverage when the tortfeasor was only
     minimally insured.  This created the anomalous situation whereby
     a prudent motorist with maximum insurance coverage was actually
     penalized if injured by a tortfeasor who was in compliance with
     the minimum no fault coverage requirements."


  Put another way, underinsured motorist coverage is simply a different point
  on an undivided continuum between the amount of the insured's own liability
  coverage and any lesser amount of coverage of the other driver.

       The legislative purpose is generally inconsistent with plaintiff's
  argument that uninsured motorist coverage and underinsured motorist
  coverage are separate and distinct.  Moreover, the drafting of the section
  does not support such separation.  Despite the addition of mandatory
  coverage for underinsured and hit-and-run motorists, the Legislature
  retained the title of the statutory section as "Insurance against Uninsured
  Motorists."  The point is reinforced in § 941(f), which states that "a
  motor vehicle is underinsured to the extent that its personal injury limits
  of liability at the time of an accident are less than the limits of
  uninsured motorists coverage applicable to any injured party legally
  entitled to recover damages under said uninsured motorist coverage." 
  (Emphasis added.)  Nor does the coverage-limit-waiver provision, § 941(c),
  explicitly require separate waiver of coverage limits for uninsured,
  underinsured, and hit-and-run coverage.  See McCoy v. Dairyland Ins. Co.,
  808 P.2d 180, 182 (Wash. Ct. App. 1991) (rejection of underinsured
  motorists bodily injury coverage constituted rejection of hit-and-run
  coverage, and no separate rejection was required).  At best, plaintiff has
  to derive this requirement by implication from its basic position that
  uninsured motorist and underinsured motorist coverage are separate.

       Our construction of the statute is also affected by the fact that
  plaintiff is relying on a technicality, with no apparent purpose. 
  Plaintiff has not suggested that if he were offered different coverage
  limits for uninsured motorist and underinsured motorist coverage, he would
  have taken them.  More important, we can see no reason why any insured
  would opt for different coverage limits in those circumstances.  Thus,
  plaintiff seeks to prevail on the basis that he was not offered an
  irrational choice.

       We recently held in Lecours v. Nationwide Ins. Co., 163 Vt. 157, 159,
  657 A.2d 177, 179 (1995), a case factually indistinguishable from this one,
  that § 941(c) requires that the


  insurance carrier show only that the insured "made a knowing rejection of
  higher UM [uninsured] coverage."  In reaching that decision, we did not
  consider whether separate limits could be chosen for uninsured and
  underinsured motorist coverage because neither party raised this
  possibility.  On reconsideration, in light of plaintiff's new argument
  here, we conclude that the Lecours ruling is correct and should not be
  modified.  The carrier may require that the insured choose one UM limit for
  uninsured, underinsured, and hit-and-run motorist coverage.

       Plaintiff argues that even if the Lecours standard applies to
  underinsured motorist coverage, the trial court could not determine that he
  made a knowing rejection of higher underinsured motorist coverage as a
  matter of law so as to grant summary judgment for defendant.  Summary
  judgment is appropriate only if there are no genuine issues of material
  fact and the moving party is entitled to judgment as a matter of law, after
  giving the benefit of all reasonable doubts and inferences to the nonmoving
  party.  See Select Design, Ltd. v. Union Mut. Fire Ins. Co., ___ Vt. ___,
  ___, 674 A.2d 798, 800 (1996).  In this case, plaintiff concedes that the
  Lecours waiver standard was met as a matter of law as to uninsured motorist
  coverage.  He argues only that the evidence is conflicting on whether he
  made a knowing waiver of higher underinsured motorist coverage limits. 
  Since we have held that the insurer may properly treat uninsured motorist
  and underinsured motorist coverage as a package and require the insured to
  choose a common limit, this argument necessarily fails.  Only one limit was
  applicable, and plaintiff knowingly chose it.  Summary judgment was

       Plaintiff's second argument is that the election required by § 941(c)
  must be made at each policy renewal.  He relies particularly on the
  inclusion of "new or renewed policies" in the direction of § 941(c),
  arguing that the Legislature must have intended that uninsured motorist
  coverage limits revert to the liability policy limits unless "the
  policyholder otherwise directs" at each policy renewal.  As with
  plaintiff's first argument, the statutory language does not explicitly
  support plaintiff's position.

       Drawing on the legislative history, defendant has offered a more
  persuasive analysis of


  the statutory language.  See In re Lunde, 8 Vt. L.W. 10, 11 (1997)
  (legislative history useful where there is doubt as to meaning of statutory
  language).  The waiver provision of § 941(c) was added in 1983, fifteen
  years after the Legislature had added mandatory uninsured-motorist coverage
  and three years after it had expanded this coverage to underinsured and
  hit-and-run motorists.  After a version of the waiver provision passed the
  Senate, the Vermont Department of Motor Vehicles expressed concern that
  insurance carriers would be unable to implement it in the middle of a
  policy period and offered the language making it effective for "new or
  renewed policies," so carriers could delay implementation to that point. 
  See Statement of Thomas McCormick on S.75 to the House Transportation
  Committee, at 7-8 (March 30, 1983). The language was adopted in the House
  of Representatives and retained in conference.  See S.75, Vt. House Jour.
  519-20 (April 14, 1983); S.75, Vt. Sen. Jour. 459 (April 19, 1983).  We
  agree with defendant's position that the specific mention of "renewed
  policies" was to provide an effective date for the requirements of the
  section and not to require a new direction at each policy renewal.

       The general rule around the country has been that any waiver of
  uninsured-motorist coverage in an initial policy is extended to the renewal
  policy.  See 8C J. Appleman, Insurance Law and Practice § 5073.55, at 131
  (1981) ("The tendency is to find that a straight renewal need not require a
  separate rejection . . . ."); 12A Couch on Insurance, Second § 45:627, at
  65 (1981) ("Generally, upon renewal, waiver in the prior policy is extended
  to the subsequent renewal policy.").  Although statutes generally deal with
  the question more specifically than § 941(c), the decisions from other
  states on waivers of uninsured motorist coverage or coverage limits are
  usually consistent with this rule.  See, e.g., Insurance Co. of North
  America v. MacMillan, 945 F.2d 729, 731 (4th Cir. 1991) (Virginia law)
  (rejection of UM coverage in one year excuses need for rejection in
  subsequent year); Petrou v. South Carolina Ins. Co., 435 So. 2d 316, 317
  (Fla. Dist. Ct. App. 1983) (no new rejection or selection of UM coverage
  required if policy is merely renewal policy); National Union Fire Ins. Co.
  v. Johnson, 357 S.E.2d 859, 860 (Ga. Ct. App. 1987) (insured need not again reject uninsured motorist
  coverage when policy is renewed for earlier election to prevail); Carlson
  v. Mutual Service Ins., 494 N.W.2d 885, 888 (Minn. 1993) (agent had no duty
  to offer UM coverage to insureds upon renewal, where policy application
  showed that coverage had been offered and rejected when policy was
  originally purchased); Goode v. Daughtery, 694 S.W.2d 314, 319 (Tenn. Ct.
  App. 1985) (once insured has elected lower limits of UM coverage, insurer
  need not include rejected UM coverage in renewal of policy unless requested
  by insured).  Contra American Universal Ins. Co. v. Russell, 490 A.2d 60,
  62 (R.I. 1985) (UM coverage must be offered at each policy renewal, even
  though insured originally waived such coverage).

       We cannot conclude that § 941(c) requires a new direction to set
  uninsured motorist coverage limits at each policy renewal.  In this case,
  plaintiff received a clear specification of the coverage limits and the
  premium charges at each renewal.  He had the opportunity to make whatever
  changes he desired.  In the absence of action by him, defendant kept his
  uninsured motorist coverage at the minimum level.


                              FOR THE COURT:

                              Associate Justice