UIM Coverage Not Available for Driver’s Negligence

UIM Coverage Only Available When Insured Injured by a Third Party

Uninsured Motorist (UM) and Underinsured Motorist (UIM) coverages are designed to provide indemnity to an insured who is injured by an uninsured or underinsured motorist’s negligence. It is not designed to supplement the liability coverage of the negligent person.

In Simmons v. Geico Indemnity Company, Not Reported in S.W.3d, Court of Appeals of Kentucky, 2016 WL 4575669 (9/2/2016), the Kentucky Court of Appeals was asked to broaden the coverages available to the injured person.

ISSUE

This case involves a dispute over insurance coverage. The issue presented is whether the decedent’s estate may recover Underinsured Motorist (UIM) benefits on behalf of the decedent under a policy of insurance tendered by Geico Indemnity Company. The circuit court found it could not.

FACTS AND PROCEDURE

On August 16, 2012, the decedent, Charles Simmons, was a passenger in a 2003 Chevrolet Blazer that he owned. Charles’ stepson, Michael Mundy, was driving. Mundy, traveling westbound, crossed the center line and collided head-on with an eastbound vehicle. The collision claimed Charles’ life.

The Blazer was insured pursuant to a policy issued by Geico to Charles and Lenora Simmons. The policy provided liability coverage up to $25,000 per person ($50,000 per occurrence) and included UIM coverage with policy limits of $25,000.00 per person. Mundy was named an “additional driver” under the policy.

Appellant Lenora Simmons, in her individual capacity and as Executrix of the Estate of Charles Simmons, filed the underlying action seeking a declaratory judgment that the Geico policy provided UIM benefits to which the Estate was entitled. Geico counterclaimed, requesting a declaration that the policy’s express terms explicitly excluded UIM coverage for this particular collision because the vehicle driven by Mundy was not an “underinsured auto.”

The parties filed competing motions for declaratory summary judgment. By Order entered April 15, 2014, the circuit court granted Geico’s motion, finding the insurance policy did not provide UIM coverage for the subject collision.

ANALYSIS

The sole issue, as framed, is whether Charles was entitled to UIM benefits under his own insurance policy with Geico for this particular accident.

As a general rule, the construction and legal effect of an insurance contract is a matter of law for the court. A court must give clear and unambiguous terms in an insurance policy their plain and ordinary meaning.

The policy at issue states Geico will provide UIM coverage “for damages an Insured is legally entitled to recover for bodily injury caused by accident and arising out of the ownership, maintenance, or use of an underinsured auto.” Therefore, if the court of appeal agrees with Geico and the circuit court that the Blazer was not an “underinsured auto,” the court of appeal must affirm the trial court’s order.

An underinsured auto does not include any vehicle or equipment which is an insured auto. An insured auto is one that is described in the declarations and covered by the Bodily Injury Liability coverage of this policy. It is undisputed that the 2003 Chevrolet Blazer involved in this accident was described in the policy’s declarations and the policy provided liability coverage for Mundy’s negligent acts. By definition, it is an insured auto, and concomitantly, not an underinsured auto, under this policy.

The policy’s language is plain, clear and unambiguous. The court of appeal must enforce the policy as written. When the terms of an insurance contract are unambiguous and not unreasonable, they will be enforced.

In pertinent part, that statute says UIM is coverage whereby: “the insurance company agrees to pay its own insured for such uncompensated damages as he may recover on account of injury due to a motor vehicle accident because the judgment recovered against the owner of the other vehicle exceeds the liability policy limits thereon….”

Interpreting the statute, the Kentucky Supreme Court affirmed that it contemplates that the underinsured tortfeasor will be operating a different vehicle than the vehicle providing UIM coverage for the injured claimant. The statute simply “does not authorize recovery against both the liability and UIM coverages of the same policy.

Of course, the policy itself may authorize recovery under both the liability and UIM provisions. The insurance contract could provide broader coverage than required by the statute. The Geico policy in this case contains no such endorsements. It must be remembered that “[t]he purpose of UIM coverage is not to compensate the insured or his additional insureds from his own failure to purchase sufficient liability insurance.” Windham v. Cunningham, 902 S.W.2d 838, 841 (Ky. App. 1995).

Lenora attempts to side-step these principles and the language of the Geico policy by invoking the doctrine of reasonable expectations.

The doctrine of “reasonable expectations” requires the insured be entitled to all coverage he may reasonably expect to be provided under the policy. A limitation of insurance coverage must be clearly stated in order to apprise the insured of such limitations. Combining these principles, only an unequivocally conspicuous, plain and clear manifestation of the company’s intent to exclude coverage will defeat one’s reasonable expectation of coverage.

The UIM exclusion in the Geico policy is conspicuous, clear, and unambiguous. It describes the UIM exclusion in plain language. We perceive no ambiguity.

Further, the placement later in the policy of the exclusion language does not defeat any reasonable expectation created by the declarations page. Insured persons are charged with knowledge of their policy’s contents. The declarations page is but a single page briefly describing the various coverage and maximum limits. It is manifestly unreasonable to expect an insurance carrier to describe fully the workings of each coverage option in the Declarations page. An insurance policy must be read as a whole.

The reasonable expectation of the average person who purchases UIM coverage is that she will be entitled to UIM benefits if she is struck by another driver whose liability limits are not sufficient to satisfy her damages. To adopt the view propounded by Lenora simply stretches the purpose and scope of underinsured coverage beyond the bounds of reason or common sense.

ZALMA OPINION

One can only wonder why anyone would take to a court of appeal a case where the person responsible for the accident was the person responsible for the accident. The liability coverage was available to the estate of the decedent but not a bonus of UIM coverage since the vehicle was insured. This suit was less than reasonable and sought to get an insurer to provide coverage that is beyond the bounds of reason and common sense.