Aetna Casualty & Surety Co. v. Belcher ( 1978 )

T. M. Burns, J.

The issue in this case is whether a guest passenger who was injured in an accident involving an uninsured motorist on April 11, 1974, and has been paid $18,000 after arbitration by the host driver’s insurance company under an uninsured motorist provision in that policy, is barred by an "other insurance” clause in his own policy from seeking arbitration against his own insurer. On the facts of this case, the trial court held he was not, and we agree.

Belcher was injured on April 11, 1974, while a guest passenger in an automobile driven by Harold Lowrey when Lowrey’s automobile was struck by an uninsured motorist. Three other individuals were riding with Lowrey and were also injured. The injured individuals filed claims with Lowrey’s insurer under the uninsured motorist provision in Lowrey’s policy and ultimately submitted them to arbitration. The arbitration of Belcher’s claim resulted in an award of $18,000. There has been no showing that this recovery fully compensated Belcher for the injuries he received in the accident. See, Detroit Automobile Inter-Insurance Exchange v Pulig, 80 Mich App 288; 263 NW2d 52 (1977).

After Belcher received payment from Lowrey’s insurer, he sought arbitration with Aetna under his own policy which also provided uninsured motorist protection. Aetna filed this action for declaratory relief and to restrain arbitration. The trial court determined that the "other insurance” clause which Aetna relied upon was against public policy at the time of the accident and, therefore, not a bar to arbitration. Aetna appealed to this Court.

The paragraphs of the policies upon which Aetna relies provide:

"With respect to bodily injury to an insured while occupying an automobile not owned by the named insured, the insurance under the uninsured motorists coverage shall apply only as excess insurance over any other similar insurance available to such insured and applicable to such automobile as primary insurance, and this insurance shall then apply only in the amount by which the limit of liability for this coverage exceeds the applicable limit of liability of such other insurance.

"Except as provided in the foregoing paragraph, if the insured has other similar insurance available to him and applicable to the accident, the damages shall be deemed not to exceed the higher of the applicable limits of liability in this insurance and such other insurance, and Aetna Casualty shall not be liable for a greater proportion of any loss to which this Uninsured Motorists Coverage applies than the limit of liability hereunder bears to the sum of the applicable limits of liability of this insurance and such other insurance.”¹

There are at least three possible theories which would allow Belcher to arbitrate, to some extent, Aetna’s liability even in the face of this clause.

First, the "other insurance available” clause could be construed to mean actually available for payment to Belcher. In this case, others were also injured in the accident, which may have resulted in the "each occurrence” limit being exhausted before the individuals were fully compensated. If this is true, the stated policy limit of $20,000 per individual was not actually available to Belcher. See, Anno: Uninsured Motorist Insurance: Validity and Construction of "Other Insurance” Provisions, 28 ALR3d 551, § 5. Here, that would mean the parties would arbitrate over a maximum of $2,000.

Second, the court could find the clause unconscionable because it has the effect of providing no coverage where, as here, the insured has paid a premium for protection of himself² against uninsured motorists and is injured while a passenger in a car with similar coverage.. This theory has gained some favor in this Court. Detroit Automobile Inter-Insurance Exchange v Curl, 82 Mich App 140; 266 NW2d 479 (1978), Kozak v Detroit Automobile Inter-Insurance Exchange, 79 Mich App 777, 783; 262 NW2d 904 (1977) (N. J. Kaufman, J. dissenting.) Application of this theory may seem particularly appealing where the primary recovery came from an insurer who had received no premium from the injured person, thus freeing the insurer who has received a premium from any liability if the clause is enforced as written.

A third theory, the one adopted by the trial court in this case, is that the provision is against public policy. For purposes of this case, we accept this narrower ground for imposing liability.

At the time of this accident, April 11, 1974, the provisions of the insurance code requiring uninsured motorist coverage in each policy of insurance delivered in this state, MCL 500.3010; MSA 24.13010³, had already been repealed by 1972 PA 345. However, the Motor Vehicle Accident Claims Act, MCL 257.1101 et seq.; MSA 9.2801 et seq., was still in effect and applicable to this incident.⁴ Under this act, persons injured by negligent uninsured motorists in this state are allowed to recover for their injuries, up to a specified sum, from a fund created by the act.

The purpose of requiring uninsured motorist protection as provided in former § 3010 was to protect the fund by reducing the number of claims against it. Collins v Motorists Mutual Insurance Co, 36 Mich App 424, 433; 194 NW2d 148 (1971), lv den, 388 Mich 812 (1972) (Judge, now Justice, Levin, concurring). The trial court found that the repeal of § 3010 did not necessarily indicate a change in the validity of other insurance clauses while the fund was still vulnerable. We agree.

The legislative intent to protect the fund continues as long as the fund is vulnerable to claims from persons injured by uninsured motorists. See note 4. Therefore, Belcher will be allowed to stack the policies and arbitrate his claim against Aetna. The amount recoverable is, of course, limited to the amount of his loss less the amount previously recovered under Lowrey’s policy, or the policy limit. Cf., Blakeslee v Farm Bureau Mutual Insurance Company of Michigan, 388 Mich 464, 474-475; 201 NW2d 786 (1972).

Aetna relies on two Michigan Supreme Court cases which have approved this type of provision when former § 3010 was not applicable, in arguing the result suggested here is improper. These cases may be distinguished from the present situation.

In Horr v Detroit Automobile Inter-Insurance Exchange, 379 Mich 562, 566; 153 NW2d 655 (1967), the Court stated:

"We find no statutory or decisional law of this State applicable in 1963 to the insurance clauses requiring our interpretation and the parties assert there were none. Consequently, our task is limited to determining the intent of the contracting parties.”

There is a statute, the Motor Vehicle Accident Claims Act, applicable in this case. It is also noted that the result reached in Horr was to prorate the loss between the two insurers. Aetna is not claiming the loss should be prorated, it is claiming it has no liability at all.

Rowland v Detroit Automobile Inter-Insurance Exchange, 388 Mich 476; 201 NW2d 792 (1972), may also be distinguished. The defendant in Rowland had issued both of the policies involved in that case. Here, two insurers are involved. The Court did not rely on the "other insurance” clause as Aetna does here, but on an exclusion contained in the policy which specifically stated the insurance provided by the policy did not apply if the injury occurred while the insured was occupying a nonowned automobile which had similar coverage. The exclusion applied and was enforced as written.

Perhaps more significant to our analysis here is the fact that the policy in Rowland was issued on September 25, 1965. This was before the effective date of § 3010 and that section was held not to apply even though the accident occurred after the effective date of the act. The Supreme Court did not discuss the Motor Vehicle Accident Claims Act in Rowland, but we note the policy in issue there was also issued before the effective date of that act. MCL 257.1131; MSA 9.2831.

Thus, the Motor Vehicle Accident Claims Act was not a factor in the Supreme Court’s determination in either Horr or Rowland, and neither was the policy of protecting the fund. As stated above, that policy continues even after the repeal of § 3010. The cases referred to by Aetna do not control this situation.

Affirmed. Costs to appellee.

M. J. Kelly, P. J., concurred.

1 If the clause does not prevent Belcher from arbitrating his claim against Aetna, it would still make this policy only a secondary source of recovery without apportionment. That is, Lowrey’s policy is primarily liable up to the limit stated therein and this policy acts as excess insurance up to the total amount of the insured’s loss. See discussion in Werner v Traveler’s Indemnity Co, 55 Mich App 390, 395-396; 222 NW2d 254 (1974).

2 Uninsured motorist coverage applies to people, not automobiles and provides protection wherever an insured happens to be and no matter what he happens to be doing, unless a valid exclusion applies. See, Hickman v Community Service Insurance Co, 78 Mich App 1; 259 NW2d 367 (1977), Bradley v Mid-Century Insurance Co, 78 Mich App 67; 259 NW2d 378 (1977), Ellis v State Farm Insurance Co, 78 Mich App 189; 259 NW2d 421 (1977).

3 There is no doubt that while § 3010 was in effect the clause in question here would not prevent stacking. Blakeslee v Farm Bureau Mutual Insurance Company of Michigan, 388 Mich 464, 474-475; 201 NW2d 786 (1972).

4 By express provision, the act does not apply to accidents after the effective date of 1975 PA 322. MCL 257.1133; MSA 9.2833.

The Legislature also amended § 5 of the act, MCL 257.1105; MSA 9.2805, by adding the last two sentences of that provision by 1974 PA 223 which became effective July 26, 1974. The amendments to § 5 made the act inapplicable to some situations where "no-fault” benefits are available.

Neither of these amendments are applicable to this case.