Owners Insurance Company v. Betty Hughes ( 2013 )

United States Court of Appeals
For the Eighth Circuit
___________________________
No. 12-2198
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Owners Insurance Company
lllllllllllllllllllll Plaintiff - Appellee
v.
Betty Lu Hughes
lllllllllllllllllllll Defendant - Appellant
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Owners Insurance Company
lllllllllllllllllllll Defendants - Appellees
v.
Betty Lu Hughes
lllllllllllllllllllll Plaintiff - Appellant
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Appeal from United States District Court
for the Eastern District of Missouri - St. Louis
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Submitted: January 17, 2013
Filed: April 3, 2013
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Before WOLLMAN, GRUENDER, and SHEPHERD, Circuit Judges.
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GRUENDER, Circuit Judge.
Betty Lu Hughes appeals the district court’s1 grant of summary judgment
declaring that defendant Owners Insurance Company (“Owners”) is not obligated to
cover her claim for damages caused by an underinsured motorist. For the reasons
stated below, we affirm.
Hughes was a passenger in a vehicle driven by Lilburn Mash when she was
injured in a collision with another vehicle. Hughes’s medical treatment costs
exceeded $200,000. After collecting from Mash’s vehicle liability insurance up to
its bodily injury limit of $100,000 per person, Hughes sought additional coverage
under an “underinsured motorist” provision in her own insurance policy issued by
Owners. Owners sued for a declaration that it owed no coverage on each of two
alternative grounds: (1) Mash’s insurance coverage did not satisfy the Owners policy
definition of “underinsured,” and (2) even if Mash qualified as “underinsured,” the
Owners policy set-off provision reduced the amount available under the Owners
policy to zero in light of the $100,000 Hughes received from Mash’s policy. After
the parties submitted a stipulation of facts and cross-moved for summary judgment,
the district court granted summary judgment to Owners on each of the two alternative
grounds.
We review a grant of summary judgment de novo, viewing the facts and
making reasonable inferences in the light most favorable to the nonmoving party.
1
The Honorable Charles A. Shaw, United States District Judge for the Eastern
District of Missouri.
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Merriam v. Nat’l Union Fire Ins. Co. of Pittsburgh, 572 F.3d 579, 583 (8th Cir.
2009). In this diversity action, “we are bound by the decisions of the Missouri
Supreme Court regarding issues of substantive state law.” Bockelman v. MCI
Worldcom, Inc., 403 F.3d 528, 531 (8th Cir. 2005). “Decisions by the Missouri Court
of Appeals may be used as an indication of how the Missouri Supreme Court may
rule, but we are not bound to follow these decisions.” Aerotronics, Inc. v. Pneumo
Abex Corp., 62 F.3d 1053, 1068 (8th Cir. 1995).
The relevant provisions of the Owners policy “underinsured motorist” coverage
provision are as follows:
2. COVERAGE
***
b. If the first named insured in the Declarations is an individual, this
coverage is extended as follows:
(1) We will pay compensatory damages you are legally entitled
to recover from the owner or operator of any underinsured
automobile for bodily injury you sustain:
a. When you are not occupying an automobile that is covered by
SECTION II—LIABILITY COVERAGE of the policy; or
b. When occupying an automobile you do not own which is not
covered by SECTION II—LIABILITY COVERAGE of the
policy.
Thus, if the vehicle satisfies the definition of “underinsured automobile,”
Owners must cover “compensatory damages [Hughes is] legally entitled to recover”
from the driver. The Owners policy definition of “underinsured automobile” is as
follows:
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1. DEFINITIONS
***
b. Underinsured automobile means an automobile to which a bodily
injury liability bond or liability insured policy applies at the time of the
occurrence:
(1) with limits of liability at least equal to or greater than
the limits required by the Motor Vehicle Financial
Responsibility Law of Missouri; and
(2) such limits of liability are less than those stated in the
Declarations for Underinsured Motorist Coverage.
The limit required by Missouri law, as referenced in subsection (1), is $25,000.
See Mo. Rev. Stat. § 303.190.2(2). The limit stated in the Declarations for the
Owners policy, as referenced in subsection (2), is $100,000. Thus, an underinsured
automobile is one with bodily injury liability coverage of at least $25,000 but less
than $100,000. As stated above, Mash’s liability insurance bodily injury limit was
exactly $100,000, not “less than” $100,000. Therefore, by its plain language, the
Owners policy definition of “underinsured automobile” would appear not to apply to
Mash’s vehicle, resulting in no coverage for Hughes’s claim.
Hughes argues that the plain language of the policy’s definition of
“underinsured” cannot be given effect because, if it were, the promised $100,000
limit of liability for underinsured motorist coverage would never be available to the
insured.2 “[I]f a contract promises something at one point and takes it away at
2
The policy provisions alleged to create the ambiguity are as follows:
4. LIMIT OF LIABILITY
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another, there is an ambiguity . . . [and if] policy language is ambiguous, it must be
construed against the insurer.” Jones v. Mid-Century Ins. Co., 287 S.W.3d 687, 690
(Mo. banc 2009) (quoting Seeck v. Geico Gen. Ins. Co., 212 S.W.3d 129, 132 (Mo.
banc 2007)). Like the district court, we recognize a Missouri Supreme Court decision
a. Subject to the limits of liability stated in the Declarations for
Underinsured Motorist Coverage, our limit of liability shall not exceed
the lowest of:
(1) The amount by which the Underinsured Motorist Coverage
limits stated in the Declarations exceed the total limits of all
bodily injury liability bonds and liability insurance policies
available to the owner or operator of the underinsured
automobile; or
(2) The amount by which compensatory damages for bodily
injury exceed the total limits of such bodily injury liability
bonds an[d] liability insurance policies.
***
d. If the Limits of Liability stated in the Declarations for Underinsured
Motorist Coverage are equal to or greater than two times the limits for
bodily injury pursuant to the Missouri Vehicle Financial Responsibility
Law, our payment for Underinsured Motorist Coverage shall be reduced
by any amounts paid or payable for the same bodily injury:
***
(3) by or on behalf of any person or organization who may be
legally responsible for the bodily injury.
Because an underinsured vehicle by definition has at least $25,000 of coverage,
section 4.a(1) guarantees that the $100,000 limit stated in the Declarations will be
reduced by at least $25,000 for every covered claim.
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that is directly on point. In Rodriguez v. General Accident Insurance Co. of America,
808 S.W.2d 379 (Mo. banc 1991), involving a policy with a similar definition of an
underinsured automobile, the appellant likewise argued that an ambiguity existed
because “an insured would never reach the limits of liability set out” for underinsured
vehicles on the declarations page. Id. at 382. The Missouri Supreme Court rejected
that argument and applied the definition of “underinsured” automobile as written:
The contract between General Accident and the Rodriguezes clearly
states that an underinsured motor vehicle is a vehicle whose limits for
bodily injury liability are “less than the limit of liability for this
coverage.” By their own admission, the Rodriguezes acknowledge that
Fruehwirth’s liability insurance coverage was $50,000. Since
Fruehwirth’s coverage is equal to the limit of liability under the
Rodriguezes’ policy, Fruehwirth was not an underinsured motorist as
defined by the Rodriguezes’ policy.
Id.
Hughes contends that this aspect of Rodriguez has been declared to be dicta in
a footnote of a more recent Missouri case. See Jones, 287 S.W.3d at 692 n.3
(“[T]here was no underinsurance in [Rodriguez], and its subsequent discussion of
how to interpret underinsured motorist coverage was mere dicta.”). However, the
“subsequent discussion” in Rodriguez merely involved a set-off provision that would
have applied had the definition for an “underinsured” motor vehicle been satisfied.
See Rodriguez, 808 S.W.2d at 382 (“A set-off provision of the Rodriguezes’ policy
reinforces this definition of underinsured motorist.”). By noting the nature of that
subsequent discussion as dicta, the footnote in Jones actually confirms that the
operative holding of Rodriguez is “[t]here was no underinsurance.” Jones, 287
S.W.3d at 692 n.3. In other words, because the unambiguous definition of
“underinsured motor vehicle” was not satisfied, the coverage did not apply regardless
of potential ambiguities in the description of the amount of underinsured coverage.
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At oral argument, Hughes directed us to another recent case from the Supreme
Court of Missouri, Manner v. Schiermeier, No. SC92408, 2013 WL 85606 (Mo. Jan.
8, 2013), to support her argument that Rodriguez is no longer controlling. In Manner,
as here, the plaintiff was injured by a vehicle and collected the $100,000 limit of
liability from a policy covering that vehicle. 2013 WL 85606, at * 1. However,
Manner differs from the instant case in that the plaintiff had underinsured motor
vehicle coverage under four separate insurance policies, each with a $100,000 limit
of liability. Id. at *1-2. The four insurers argued that, because the four policies under
which the plaintiff claimed coverage each defined “underinsured” as “less than” the
policyholder’s limit of liability, the tortfeasor’s vehicle failed to meet the definition
of “underinsured” under each of the four policies considered separately. See id. at *4.
The court rejected this argument because the plaintiff’s four policies permitted
“stacking” of their limits of liability, resulting in a definition of “underinsured” as
having a limit less than $400,000. See id. at *5 (“[T]he coverage provided by the
policies is their stacked amount, not the amount each would provide if considered
separately, and it is the stacked amount that must be compared against the insurance
coverage of the tortfeasor.”). Thus, in Manner, the vehicle that caused the injury
satisfied the definition of “underinsured” under the four “stacked” policies. Here, in
contrast, Hughes is making a claim under a single policy, and the policy definition of
“underinsured motor vehicle” is not satisfied, just as in Rodriguez. Nothing in the
holding of Manner indicates that Rodriguez does not still apply in cases where the
definition of “underinsured motor vehicle” is not satisfied.
Finally, Hughes also submitted a letter under Rule 28(j) of the Federal Rules
of Appellate Procedure directing us to Miller v. Ho Kun Yun, No. WD74890, 2013
WL 427355 (Mo. Ct. App. Feb. 5, 2013), issued after the instant case was submitted.
In Miller, the Missouri Court of Appeals held that language in the set-off and
coverage provisions of an underinsured motor vehicle endorsement rendered a policy
ambiguous despite the fact that an unambiguous definition of “underinsured motor
vehicle,” read in isolation, was not satisfied. 2013 WL 427355 at *11-12. The court
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noted that Rodriguez did not end the inquiry because “[s]ubsequent decisions have
made clear that the fact that a definition is clear and unambiguous does not end the
inquiry as to the existence of an ambiguity until the court has reviewed the ‘whole
policy’ to determine whether there is contradictory language that would cause
confusion and ambiguity in the mind of the average policy holder.” Id. at *5. We
agree, of course, that if other policy provisions inject ambiguity into the meaning of
what is a covered “underinsured motor vehicle,” then Rodriguez would not compel
a finding of no coverage. However, the policy language in the instant case is
substantively identical to the policy language that was held to be unambiguous by the
Missouri Supreme Court in Rodriguez.3 In contrast, the Miller court relied on a lack
3
The policy at issue in Rodriguez stated:
INSURING AGREEMENT
A. We will pay damages which an “insured” is legally entitled to recover
from the owner or operator of an “underinsured motor vehicle” because
of “bodily injury;”
***
C. “Underinsured motor vehicle” means a land motor vehicle or trailer
of any type to which a bodily injury liability bond or policy applies at
the time of the accident but its limit for bodily injury liability is less than
the limit of liability for this coverage.
LIMIT OF LIABILITY
A. The limit of liability shown in the schedule for this coverage is our
maximum limit of liability for all damages resulting from any one
accident. . . .
***
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of evidence in the record as to whether the defined policy term “underinsured motor
vehicle” was presented in bold type so as to notify the ordinary reader of its technical
meaning. 2013 WL 427355, at *1 n.1, *12. No similar ambiguity has been identified
in the instant case. In any event, to the extent that Miller conflicts with Rodriguez,
we are bound to follow Rodriguez, an on-point decision of the state supreme court,
rather than Miller, the decision of a state court of appeals. See Aerotronics, 62 F.3d
at 1068.
In short, the Owners policy’s underinsured motorist coverage does not cover
Hughes’s claim because Mash’s liability insurance bodily injury limit was not “less
than” $100,000 as required by the policy’s unambiguous definition of “underinsured
automobile.” We need not reach the alternative argument that, even if Mash’s vehicle
was “underinsured,” the Owners policy set-off provision reduced the amount
available under the Owners policy to zero.
For the foregoing reasons, we affirm the grant of summary judgment to
Owners.
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However, the limit of liability shall be reduced by all sums paid because
of the “bodily injury” by or on behalf of persons or organizations who
may be legally responsible.
Rodriguez, 808 S.W.2d at 381.
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