Lester Dunigan v. Liberty Mutual Insurance Company d/b/a Liberty Mutual Fire Insurance Company ( 2019 )

IN THE COURT OF APPEALS OF IOWA
No. 18-0692
Filed June 5, 2019
LESTER DUNIGAN,
Plaintiff-Appellant,
vs.
LIBERTY MUTUAL INSURANCE COMPANY d/b/a LIBERTY MUTUAL FIRE
INSURANCE COMPANY,
Defendant-Appellee.
________________________________________________________________
Appeal from the Iowa District Court for Polk County, Paul D. Scott, Judge.
Lester Dunigan appeals the adverse summary judgment ruling on his claim
for underinsured motorist insurance coverage against Liberty Mutual Insurance
Company. AFFIRMED.
Zachary C. Priebe and Jeff Carter of Jeff Carter Law Offices, P.C., Des
Moines, for appellant.
Benjamin T. Erickson and Andrew D. Hall of Grefe & Sidney. P.L.C., Des
Moines, for appellee.
Heard by Vogel, C.J., and Mullins and Bower, JJ.
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MULLINS, Judge.
Lester Dunigan appeals the adverse summary judgment ruling on his claim
for underinsured motorist coverage against Liberty Mutual Insurance Company
(Liberty Mutual). He argues the district court erred by applying Illinois law to the
insurance policy, contending the plain language of the policy requires the
application of Iowa law. Further, he argues Liberty Mutual failed to obtain a written
declination of underinsured motorist coverage as required by Iowa Code section
516A.1 (2014), which results in underinsured motorist coverage being read into his
policy.
I. Background Facts and Proceedings
On October 8, 1997, Lester Dunigan and his wife Ella completed and signed
an application for motor vehicle insurance covering multiple vehicles with Liberty
Mutual. The application provided the insurance would commence at 12:01 a.m.
on October 9. Dunigan’s address on the application was in Rock Island, Illinois,
and the application indicated that he provided an Illinois driver’s license. The
insurance coverage’s liability limit for uninsured motorists was $20,000 to $40,000
with no coverage for underinsured motorists, as indicated by a line through the
designated box. The application also included a provision that stated, “I reject
uninsured and underinsured motorists coverage equal to my bodily injury liability
limits and instead select the limits indicated on my option form.” The box next to
the line was not checked, but Dunigan’s signature appears on the signature line
immediately below the provision.
On a separate page noted as “3 of 5” and titled “Uninsured Motorists
Property Damage Coverage,” two options were provided “[i]f you do not have
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Collision Coverage.” Option 1 allowed for the election of coverage on specific
vehicles. Option 2 was the rejection of coverage for all vehicles. Neither option
was selected on the form. The form also included the following paragraph:
I am aware, unless I indicate otherwise to Liberty Mutual in
writing, that my coverage choices of Uninsured Motorists Coverage,
Underinsured Motorists Coverage, and Uninsured Motor Vehicle
Property Damage coverage shall apply throughout the policy period,
regardless of any changes such as the replacement or addition of
vehicles or drivers, and to all renewals, amendments, replacements
or reinstatements of this policy.
Dunigan signed his name on the signature line below the paragraph. A fourth form,
noted “Dunigan” and “4 of 5” at the top, provided:
We recommend that you maintain UNINSURED MOTORISTS
COVERAGE limits equal to your bodily injury limits. . . .
Please be aware that any summary of coverage on these
pages is necessarily general in nature. Your policy contains
specific definitions, exclusions, terms, and conditions. In case
of any conflict, your policy language will control the resolution of any
coverage questions. If you have any questions about this coverage
or its cost, please contact your local Liberty Mutual Sales Office
before completing this form.
Listed below are the available single and separate limits of
UNINSURED and UNDERINSURED MOTORISTS COVERAGE and
the applicable premium for each. Please check the box next to the
limits you wish to select.
The form allowed Dunigan the option to either: (1) “elect Uninsured Motorists
Bodily Injury Coverage at the minimum financial responsibility limits required by
Illinois law. ($20,000 per person and $40,000 per accident)” or (2) “elect an
Uninsured Motorists Bodily Injury Coverage limit and Underinsured Motorists
Bodily Injury Coverage limit equal to or lower than the liability limit of my policy.”
The second option included a note: “The charges for all Limits below include both
Uninsured Motorists Bodily Injury Coverage and Underinsured Motorists Bodily
Injury Coverage.” The first option was marked on the form. There were no initials
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or signature on the page. The record provides that the insurance policy was
renewed yearly, including on October 9, 2014.
On February 9, 2015, Dunigan was involved in a traffic accident at the
intersection of 19th Street and College Avenue in Des Moines. Dunigan was
driving north on 19th Street, a one-way street. A driver heading east on College
Avenue stopped at the stop sign at the intersection with 19th Street and continued
through the intersection but failed to yield to Dunigan as he proceeded through the
intersection. There was no stop sign for traffic heading north on 19th Street at the
intersection. The driver hit Dunigan on the driver’s side. The police report
identified that both vehicles sustained minor damage and the other driver took
complete responsibility for the accident. The accident form listed Rock Island,
Illinois as both Dunigan’s home and vehicle registration address. Dunigan’s
driver’s license was listed as an Illinois license.
Following the accident, Dunigan settled his claim against the other driver
for the liability policy limits of the other driver’s auto insurance policy. Dunigan filed
suit against Liberty Mutual in February 2017 to recover under the uninsured and
underinsured motorist benefits provisions of his insurance policy. He claimed his
sustained damages exceeded the liability limits of the other driver’s insurance
policy. In November, Liberty Mutual moved for summary judgment. It claimed
Illinois law applied and under Illinois law, because Dunigan elected to carry only
the statutory minimum amount of uninsured motorist insurance coverage, it was
not contractually obligated to provide underinsured motorist coverage. Further, it
was not required to ask for or obtain a rejection each time the policy came up for
renewal. Dunigan resisted the motion, arguing that Iowa law applied and, under
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Iowa Code section 516A.1, underinsured coverage must be read into his policy
because Liberty Mutual failed to obtain his written rejection of the coverage.
The court heard the motion in January 2018 and filed its ruling in April. The
court identified that the only issue before it was “whether Illinois law or Iowa law
governs the insurance policy at issue.” The district court found there was no
choice-of-law provision in the insurance policy, therefore it applied the “most
significant relationship” test to determine which state’s laws governed the policy.
See Gabe’s Constr. Co. v. United Capitol Ins. Co., 539 N.W.2d 144, 146 (Iowa
1995); see also Restatement (Second) of Conflict of Laws § 188(1)–(2) (Am. Law
Inst. 1971). The district court concluded, even when viewing the facts in the light
most favorable to Dunigan, Illinois law controlled the policy. It found that under
Illinois law, Dunigan properly rejected underinsured motorist coverage when he
applied for the initial insurance policy, continued to reject the coverage when
renewing the policy, and consequently, he did not have underinsured motorist
coverage at the time of the accident. Based upon its findings, the court granted
Liberty Mutual’s motion for summary judgment. Dunigan appeals.
II. Standard of Review
“We review grants of summary judgment for correction of errors at law.”
United Suppliers, Inc. v. Hanson, 876 N.W.2d 765, 772 (Iowa 2016). Further, “the
interpretation of an insurance policy is a matter of law,” and consequently, our
review “is for errors at law.” Greenfield v. Cincinnati Ins. Co., 737 N.W.2d 112,
117 (Iowa 2007).
“Summary judgment is appropriate when there is no genuine issue of
material fact and the moving party is entitled to judgment as a matter of law.”
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Hanson, 876 N.W.2d at 772. In reviewing a district court’s determination that the
defendants met their burden under this standard, “we view the evidence in a light
most favorable to the nonmoving party.” Merriam v. Farm Bureau Ins., 793 N.W.2d
520, 522 (Iowa 2011) (quoting Langwith v. Am. Nat’l Gen. Ins. Co., 793 N.W.2d
215, 218 (Iowa 2010)). “In deciding whether there is a genuine issue of material
fact, the court . . . afford[s] the nonmoving party every legitimate inference the
record will bear.” Kern v. Palmer Coll. of Chiropractic, 757 N.W.2d 651, 657 (Iowa
2008) (alteration in original) (quoting Smidt v. Porter, 695 N.W.2d 9, 14 (Iowa
2005)).
III. Analysis
A. Applicable Law
Dunigan asserts the district court erred in failing to consider the plain
language of his insurance policy when determining whether Iowa law applies to his
insurance policy. He further argues his ties to Iowa and his understanding of the
insurance policy require the application of Iowa law.
In support of its ruling, the district court cited Gabe’s Construction Company
v. United Capitol Insurance Company, , which stated that we look to “intent of the
parties or the most significant relationship” when determining “choice-of-law issues
in insurance policy cases.” 539 N.W.2d at 146. “In the absence of a choice-of-law
clause in the policy, the rights of the parties are determined by the law of the state
which ‘has the most significant relationship to the transaction and the parties.’” Id.(quoting Restatement (Second) of Conflict of Laws § 188(1)).
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Dunigan argues that the out-of-state provision in his insurance policy
operates as a general choice-of-law provision and therefore Iowa law should apply
to determine Liberty Mutual’s coverage obligations. The provision requires:
If an auto accident to which this policy applies occurs in any
state or province other than the one in which “your covered auto” is
principally garaged, we will interpret your policy for that accident as
follows:
A. If the State or province has:
....
2. A compulsory insurance or similar law requiring a
nonresident to maintain insurance whenever the nonresident
uses a vehicle in that state . . ., your policy will provide at least
the required minimum amounts and types of coverage.
Dunigan contends that Iowa law requires a written rejection of underinsured
motorist coverage, pursuant to Iowa Code section 516A.1,1 and given that he
1 Section 516A.1 reads as follows:
No automobile liability or motor vehicle liability insurance policy
insuring against liability for bodily injury or death arising out of the
ownership, maintenance, or use of a motor vehicle shall be delivered or
issued for delivery in this state with respect to any motor vehicle registered
or principally garaged in this state, unless coverage is provided in such
policy or supplemental thereto, for the protection of persons insured under
such policy who are legally entitled to recover damages from the owner or
operator of an uninsured motor vehicle or a hit-and-run motor vehicle or an
underinsured motor vehicle because of bodily injury, sickness, or disease,
including death resulting therefrom, caused by accident and arising out of
the ownership, maintenance, or use of such uninsured or underinsured
motor vehicle, or arising out of physical contact of such hit-and-run motor
vehicle with the person insured or with a motor vehicle which the person
insured is occupying at the time of the accident. Both the uninsured motor
vehicle or hit-and-run motor vehicle coverage, and the underinsured motor
vehicle coverage shall include limits for bodily injury or death at least equal
to those stated in section 321A.1, subsection 11. The form and provisions
of such coverage shall be examined and approved by the commissioner of
insurance.
However, the named insured may reject all of such coverage, or
reject the uninsured motor vehicle (hit-and-run motor vehicle) coverage, or
reject the underinsured motor vehicle coverage, by written rejections
signed by the named insured. If rejection is made on a form or document
furnished by an insurance company or insurance producer, it shall be on a
separate sheet of paper which contains only the rejection and information
directly related to it. Such coverage need not be provided in or
8
provided no written rejection of the coverage to Liberty Mutual, the coverage must
be read into his policy.
The district court determined the out-of-state clause in Dunigan’s insurance
policy did not constitute a choice-of-law provision. On our review of the record, we
agree. We find that the provision highlighted by Dunigan does not amount to an
agreement that the law of Iowa would apply to this case.
An examination of the language contained in the “out of state”
coverage provision of the instant policy reveals that it was not
intended to be a choice of law provision. Indeed, the provision
contains no language mandating that the policy be interpreted
according to the law of the state where the accident occurred.
Rather, the plain language of the “out of state” coverage provision
provides that, in the event an accident occurs in a state that has a
financial responsibility or compulsory insurance law that requires
certain minimal amounts and types of coverage, [Liberty Mutual]
would provide that coverage to its insured.
W. States Ins. Co. v. Zschau, 698 N.E.2d 198, 201 (Ill. App. Ct. 1998). Further,
we find there is no other choice-of-law provision in Dunigan’s policy. Accordingly,
as there is no choice-of-law clause in the policy, we must look at which state “has
the most significant relationship to the transaction and the parties.” Gabe’s Constr.,
539 N.W.2d at 146. We consider:
(a) the place of contracting,
(b) the place of negotiation of the contract,
(c) the place of performance,
(d) the location of the subject matter of the contract, and
(e) the domicil, residence, nationality, place of incorporation
and place of business of the parties.
supplemental to a renewal policy if the named insured has rejected the
coverage in connection with a policy previously issued to the named
insured by the same insurer.
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Restatement (Second) of Conflict of Laws § 188(2). Further, we must consider
these contacts “according to their relative importance with respect to the particular
issue.” Id. Additionally,
The validity of a contract of fire, surety or casualty insurance and the
rights created thereby are determined by the local law of the state
which the parties understood was to be the principal location of the
insured risk during the term of the policy, unless with respect to the
particular issue, some other state has a more significant relationship.
Gabe’s Constr., 539 N.W.2d at 146–47 (quoting Restatement (Second) of Conflict
of Laws § 193). Liability and collision insurance are included in the various types
of casualty insurance. Restatement (Second) of Conflict of Laws § 193 cmt. a.
In this matter, the insurance policy was contracted for and made in Illinois.
The vehicles covered in the policy were all licensed and registered in Illinois at the
time of the application. The vehicle involved in the accident was licensed and
registered in Illinois at the time of the accident. Dunigan’s driver’s license is also
from Illinois.2 Dunigan’s address on the 1997 initial application form, 2014 renewal
declaration page, and the 2015 accident report are all listed as the same Illinois
address. Additionally, both the application and renewal forms make reference to
Illinois. The application includes an option for uninsured motorist coverage at the
minimum levels “required by Illinois law.” The renewal contains a list of
“Endorsements-Changes to Your Policy” which includes “Amend of Policy
Provisions-Illinois.”
2
We note the Illinois driver’s license number listed on the 2015 accident report is the same
one listed on the initial insurance application from 1997. However, the 2014 insurance
policy renewal declarations form indicates an Iowa driver’s license number.
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Though Dunigan indicated in his brief that two of the vehicles listed in his
insurance policy were licensed in Iowa at the time of the accident, the record does
not reflect such information. The 2014 policy renewal declarations page lists the
vehicles covered by the insurance policy but only provides each vehicle’s make,
model, and vehicle identification number. It does not provide the state where each
vehicle is registered and licensed.
Further, while Dunigan argues that he had resided in Iowa for two years at
the time of the accident and “Liberty Mutual was well aware of Mr. Dunigan’s
connection to the state of Iowa,” the record does not reflect such information.
There is no record of communication between the parties that reflects Dunigan
provided Liberty Mutual with an Iowa address or which, if any, vehicles were
primarily garaged in Iowa. There is also nothing in the record that indicates either
party believed Iowa was to be the “principal location of the insured risk.” Based
upon our review of the record, we find that Illinois has the most significant
relationship to the transaction and the parties. Accordingly, the district court was
correct in applying Illinois law to Dunigan’s insurance policy.
B. Underinsured Coverage
With some exceptions not applicable to this matter, Illinois law “requires
liability insurance coverage for all motor vehicles designed to be used on a public
highway.” Thounsavath v. State Farm Mut. Auto. Ins. Co., 104 N.E.3d 1239, 1244
(Ill. 2018). Insurance policies must contain specific minimum liability amounts. Id.At the time Dunigan submitted his insurance application and at the time of the 2014
policy renewal, the minimum liability coverage limit was
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not less than $20,000 because of bodily injury to or death of any one
person in any one motor vehicle accident and, subject to said limit
for one person, to a limit of not less than $40,000 because of bodily
injury to or death of 2 or more persons in any one motor vehicle
accident.
Alshwaiyat v. Am. Serv. Ins. Co., 986 N.E.2d 182, 188 (Ill. App. Ct. 2013) (quoting
625 Ill. Comp. Stat. 5/7–203 (2008)).3
However, “a driver covered by such mandatory liability insurance is not
similarly protected against damages caused by other drivers who may not possess
similar insurance.” Id. Therefore, Illinois law “specifically requires that all policies
of liability insurance must also provide [uninsured motorist] insurance,” which
“must provide coverage limits that are, at a minimum, equal to the above-
referenced statutory minimums contained in the Financial Responsibility Law.” Id.While there is a statutory minimum amount of uninsured motorist coverage
required in each policy, “there is nothing to preclude a motorist from obtaining a
policy of insurance providing liability coverage in excess of the minimum amounts
required.” Id.“If the limits for the insured’s liability coverage exceed the minimum
amounts required by law, the uninsured motorist provisions must provide the same
higher coverage amounts unless the excess amount is specifically rejected by the
insured.” Thounsavath, 104 N.E.3d at 1244. Insureds and insurance applicants
can reject the additional uninsured motorist coverage by making a written request
for their coverage to be less than their bodily injury liability limits or providing a
3
We note that as of January 1, 2015, the minimum bodily injury liability limits increased to
$25,000 person and $50,000 per accident, thus increasing the statutory minimum amount
of uninsured motorist coverage. 625 Ill. Comp. Stat. 5/7-203 (2015). However, the
increase applies only to policies issued or renewed on or after January 1, 2015. Id.
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written rejection of coverage in excess of the minimum statutory requirements.
See 215 Ill. Comp. Stat. 5/143a-2(2) (2015).
In order to reject additional uninsured motorist coverage, the rejection must
meet certain statutory requirements. At the time Dunigan submitted his insurance
application, Illinois law required “every application for motor vehicle coverage must
contain a space for indicating the rejection of additional uninsured motorist
coverage.” 215 Ill. Comp. Stat. 5/143a-2(2) (1997). Further, the rejection of the
additional coverage was not effective “unless the applicant signs or initials the
indication of rejection.” Id. Once an insured either elects to purchase uninsured
motorist coverage limits less than their bodily injury liability coverage or rejects
limits greater than required by statute, the insurance company is not required to
provide that coverage in “any renewal, reinstatement, reissuance, substitute,
amended, replacement or supplementary policy” unless the insured makes a
written request. Id. The initial application, including copies of the original
application, “indicating the applicant’s selection of uninsured motorist coverage
limits [constituted] sufficient evidence of the applicant’s selection of uninsured
motorist coverage limits and shall be binding on all persons insured under the
policy.” Id. § 5/143a-2(3).
By the time of the 2014 renewal of Dunigan’s insurance and the 2015
accident, Illinois had revised the statute enumerating the requirements for rejecting
additional uninsured motorist coverage. Illinois law now requires motor vehicle
insurance policies to include uninsured motorist coverage in an “amount equal to
the insured’s bodily injury liability limits unless specifically rejected by the insured
as provided in paragraph (2).” 215 Ill. Comp. Stat. 5/143a-2(1) (2015). Paragraph
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two requires insureds and insurance applicants to submit a “written request for
limits of uninsured motorist coverage which are less than bodily injury liability limits
or a written rejection of limits in excess of those required by law.” Id. § 5/143a-
2(2). The law no longer requires insurance applications to include a space to
indicate the rejection or additional coverage or a signature or initialization of the
rejection. Compare 215 Ill. Comp. Stat. Ann. 5/143a-2(2) (1997), with 215 Ill.
Comp. Stat. Ann. 5/143a-2(2) (2015). “If the insured’s uninsured motorist
coverage limit exceeds the minimum liability limit required by the Financial
Responsibility Law, the policy must also include underinsured motorist coverage
in an amount equal to the uninsured motorist coverage.” Thounsavath, 104 N.E.3d
at 1244–45 (citing 215 ILCS 5/143a–2(4) (2012)). “In contrast to the uninsured
motorist provision, the underinsured motorist provision does not include a right of
rejection.” Id. at 1245.
Here, Dunigan and Liberty Mutual contracted for liability insurance in the
amounts of $100,000 per person and $300,000 per accident. This exceeded the
minimum statutory limits. “Pursuant to section 143a of the Insurance Code,
[Liberty Mutual] was required to include uninsured motorist coverage in those
amounts in [Dunigan’s] policies unless [Dunigan] specifically rejected the higher
coverage amounts.” Id. at 1247–48. At the time Dunigan submitted his insurance
application in 1997, the application contained a section that stated, “I reject
uninsured and underinsured motorists coverage equal to my bodily injury liability
limits and instead select the limits indicated on my option form.” Dunigan signed
on the signature line directly below this statement. On page three of the
application, Dunigan signed underneath a paragraph that stated:
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I am aware, unless I indicate otherwise to Liberty Mutual in writing,
that my coverage choices of Uninsured Motorists Coverage,
Underinsured Motorists Coverage, and Uninsured Motor Vehicle
Property Damage coverage shall apply throughout the policy period,
regardless of any changes such as the replacement or addition of
vehicles or drivers, and to all renewals, amendments, replacements
or reinstatements of this policy.
On page four, option one is selected. This option stated, “I elect Uninsured
Motorists Bodily Injury Coverage at the minimum financial responsibility limits
required by Illinois law. ($20,000 per person and $40,000 per accident.).”
We find the selected options and Dunigan’s signatures meet the
requirements to reject additional uninsured motorist coverage above Dunigan’s
selected bodily injury liability limits and reject a limit in excess of what Illinois law
required at that time. As such, the original policy delivered to Dunigan did not
provide uninsured motorist coverage above the statutory minimum. Accordingly,
because Dunigan’s uninsured motorist coverage did not exceed the statutory
minimum required by law, underinsured motorist coverage was not required to be
included in the policy at the time of the application. The application clearly provided
no underinsured motorist coverage was included in the policy.
At the time of the 2014 insurance renewal and the 2015 accident, Dunigan’s
coverage for liability, medical payments, and uninsured motorists remained the
same as it was on the 1997 application. The statutory minimum amount of
coverage also remained the same. Since Dunigan “elected to purchase limits of
uninsured motorist coverage which are less than bodily injury liability limits or to
reject limits in excess of those required by law,” Liberty Mutual was not required to
provide in any renewal “coverage in excess of that elected by the insured in
connection with a policy previously issued to such insured by the same insurer
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unless [Dunigan] subsequently [made] a written request for such coverage.” 215
Ill. Comp. Stat. 5/143a-2(2) (2014). There is no such written request by Dunigan
in the record. Again, because Dunigan’s motorist coverage did not exceed the
statutory minimum required by law at the time of the renewal or the accident,
underinsured motorist coverage was not required to be included in the policy. 4
Therefore, Dunigan did not have underinsured motorist coverage at the time of the
accident and cannot recover such benefits under his policy. Accordingly, we affirm
the district court’s grant of Liberty Mutual’s motion for summary judgment.
AFFIRMED.
4
Dunigan’s renewal form states: “Where no premium is shown, you have not purchased
the indicated coverage for that vehicle.” There is no premium listed for underinsured
coverage on the renewal form.