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Dircks v. The Travelers Indemnity Company of America

Supreme Court of Utah

October 17, 2017

Derek Dircks and Valerie Dircks, Appellants,
v.
The Travelers Indemnity Company of America, Appellee.

         On certification from the United States District Court for the District of Utah The Honorable Jill N. Parrish No. 2:14-cv-00118

          Attorneys: Brian S. Coutts, Scott D. Brown, Tyler Brown, Midvale, for appellants

          Beth E. Kennedy, Michael D. Zimmerman, Troy L. Booher, Nicholas E. Dudoich, Paul M. Belnap, Salt Lake City, for appellee

          Associate Chief Justice Lee authored the opinion of the Court, in which Chief Justice Durrant, and Justice Durham joined. Justice Himonas filed a dissenting opinion, in which Justice Pearce joined.

          OPINION

          Lee, Associate Chief Justice

         ¶ 1 This case is before us on a certified question from the federal district court. We are asked to examine the terms of Utah Code section 31A-22-305.3. The question presented is whether this provision requires that all vehicles covered under the liability provisions of an automobile insurance policy must also be covered under the underinsured motorist provisions of that policy, and with equal coverage limits. We conclude that it does, unless a named insured waives the coverage by signing an acknowledgment form meeting certain statutory requirements.

         I

         ¶ 2 On July 11, 2012, Derek Dircks and Michael Riley suffered injuries in a car accident caused by another driver. Both Dircks and Riley were employees of Mid-State Consultants, Inc. They were in Riley's personal vehicle on an assignment for Mid-State at the time of the accident.

         ¶ 3 To cover his resulting medical bills, Dircks and his wife sought and received liability benefits under the third-party driver's automobile insurance policy, as well as underinsured motorist benefits under Riley's policy. But the amounts received were insufficient to cover the bills. So Dircks sought additional underinsured motorist benefits under Mid-State's commercial insurance policy with Travelers Indemnity Company of America. The policy included $1 million of liability coverage for persons driving in either a Mid-State fleet vehicle listed in the insurance policy or a vehicle owned by a Mid-State employee when used for Mid-State business.[1] The policy also included $1 million of underinsured motorist coverage. And it purported to limit this coverage to persons driving in Mid-State fleet vehicles.[2]

         ¶ 4 Travelers denied Dircks' claim on the ground that Mid-State's policy did not provide underinsured motorist coverage for Riley's vehicle. Dircks subsequently filed suit. After the parties filed cross-motions for summary judgment, the federal district court certified to us the question of whether state law requires that all vehicles for which Mid-State had purchased liability coverage be covered to the same extent under Mid-State's underinsured motorist coverage.

         II

         ¶ 5 The Utah code requires "every resident owner of a motor vehicle" to "maintain owner's or operator's security in effect at any time that the motor vehicle is operated on a highway or on a quasi-public road or parking area within the state." Utah Code § 41-12a-301(2)(a). Proof of such security may be provided by a "certificate of insurance under Section 41-12a-402 or 41-12a-403." Id. § 41-12a-401(1)(a). By statute, "[e]very policy of insurance or combination of policies purchased to satisfy the owner's or operator's security requirement" must include four specific types of insurance: "(a) motor vehicle liability coverage under Sections 31A-22-303 and 31A-22-304; (b) uninsured motorist coverage under Section 31A-22-305, unless affirmatively waived under Subsection 31A-22-305(5); (c) underinsured motorist coverage under Section 31A-22-305.3, unless affirmatively waived under Subsection 31A-22-305.3(3); and (d) except as provided in Subsection (2) and subject to Subsection (4), personal injury protection under Sections 31A-22-306 through 31A-22-309." Id. § 31A-22-302(1).

         ¶ 6 This case concerns the required terms and scope of underinsured motorist coverage in a policy purchased to satisfy a vehicle owner's insurance requirements. The key operative provision is Utah Code section 31A-22-305.3. Section 305.3 states that "[u]nderinsured motorist coverage under Subsection 31A-22-302(1)(c) provides coverage for a covered person who is legally entitled to recover damages from an owner or operator of an underinsured motor vehicle because of bodily injury, sickness, disease, or death." Id. § 31A-22-305.3(2)(a) (emphasis added). Covered person, in turn, is defined to include "any person occupying or using a motor vehicle referred to in the policy." Id. § 31A-22-305(1)(d); id. § 31A-22-305.3(1)(a). And section 305.3 mandates that "the limits of underinsured motorist coverage shall be equal to the lesser of the limits of the named insured's motor vehicle liability coverage or the maximum underinsured motorist coverage limits available by the insurer under the named insured's motor vehicle policy" unless the named insured signs an acknowledgment electing "coverage in a lesser amount." Id. § 31A-22-305.3(3)(b).

         ¶ 7 The parties offer differing views of the implications of these provisions. Dircks interprets them to mandate parallelism between underinsured motorist coverage and liability coverage within the same policy-both in terms of the persons and vehicles covered and the liability limits. And Dircks claims that he is entitled to underinsured coverage in the underlying case because Mid-State never signed an acknowledgment limiting its underinsured motorist coverage.

         ¶ 8 Travelers offers two grounds for rejecting Dircks' approach. First it says that section 305.3 does not apply to vehicles that Mid-State had no statutory obligation to insure (like those not owned by Mid-State). And second Travelers asserts that the Mid-State policy properly excludes the unowned vehicles in question from coverage for underinsured motorist purposes.

         ¶ 9 We reject both of Travelers' arguments and generally agree with Dircks' conception of the statutory scheme.

         A

         ¶ 10 Travelers first seeks to avoid any application of section 305.3 to vehicles not owned by Mid-State. It notes that this provision is addressed to "[u]nderinsured motorist coverage under Subsection 31A-22-302(1)(c)." Utah Code § 31A-22-305.3(2)(a) (emphasis added). And it indicates that section 302, in turn, speaks of insurance "purchased to satisfy the owner's or operator's security requirement of Section 41-12a-301." Id. § 31A-22-302(1).

         ¶ 11 Travelers emphasizes that Mid-State did not own Riley's vehicle. And it insists that it accordingly had no obligation to insure that vehicle under section 302. In Travelers' view, it follows that section 305.3 does not apply to the underinsured motorist provisions of the Mid-State policy because those provisions were not "purchased to satisfy" a statutory "security requirement" under section 302.

         ¶ 12 We disagree. Travelers' threshold point is correct. Mid-State had no legal duty to purchase any insurance for unowned vehicles.[3]But it does not follow that section 305.3 does not apply to the insurance policy in question. Section 305.3 applies to any "policy . . . purchased to satisfy the owner's or operator's security requirement." Id. § 31A-22- 302(1) (emphasis added). And the applicability of section 305.3 accordingly turns entirely on the scope of the term policy in section 302. For Travelers to succeed, we must read the term narrowly to encompass only the specific insurance coverage in a policy that is purchased to satisfy the security obligation. But there is nothing in the text that indicates the statute applies only to those portions of a policy.

         ¶ 13 A "policy" is "[a] document containing a contract of insurance." Policy, Black's Law Dictionary (9th ed. 2009). And the insurance document at issue in this case is clearly identified as a single policy. It is labeled with a single policy number throughout.[4] There is even a section in the document that allows the insurance provider to list "supplemental policies, " which are each "a separate policy containing its complete provisions." (Emphasis added). But that section was left entirely blank.

         ¶ 14 That indicates that the Travelers policy in question was a "policy . . . purchased to satisfy the owner's or operator's security requirement." Utah Code § 31A-22-302(1). And that conclusion defeats Travelers' first argument. For that reason we conclude that section 305.3 applies to the entire insurance document understood as a "policy" even if some of the provisions in the policy were not themselves purchased to satisfy the insured's statutory security requirement.

         ¶ 15 In so holding we also reject the dissent's contrary arguments. First, we see nothing "senseless" about the statutory scheme as interpreted herein. See infra ¶ 40. This statutory framework promotes transparency. It does so by requiring insurers to offer either two separate insurance policies (one that satisfies the insurance requirements and an additional policy for excess insurance) or a single policy that includes an acknowledgement that excess coverage within the policy does not get the full benefits of the insurance code. That provides clarity for policyholders. And it protects consumers from being misled or confused by insurance companies-who stand in a position of great power because consumers have no choice but to come to them to purchase a policy to satisfy the requirements articulated in section 41-12a-301.

          ¶ 16 Perhaps it is true that "sophisticated consumers" are those most likely to be protected by the statute as structured. See infra ΒΆ 51. But we see no reason to deem such consumers to fall beyond the legislature's reach. Even sophisticated consumers are at the mercy of insurance providers. And these consumers-like ...


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