Levine v. State Farm Mutual Automobile Insurance , 2004 Me. LEXIS 33 ( 2004 )

Majority: SAUFLEY, C.J., and CLIFFORD, DANA, ALEXANDER, and LEVY, JJ.

Dissent: RUDMAN and CALKINS, JJ.

SAUFLEY, C.J.

[¶ 1] We are called upon here to determine whether Maine’s uninsured/underin-sured vehicle coverage laws require un-derinsured vehicle policies to supplant available tortfeasor insurance coverage that is not timely sought by the injured insured. State Farm Mutual Automobile Insurance Company appeals from a judgment entered in the Superior Court (Ken-nebec County, Marden, J.) concluding that Nicole Levine, who was injured by the driver of an underinsured vehicle, was entitled to recover from State Farm, the un-derinsured vehicle insurance carrier of the driver in whose vehicle she was riding, when the coverage held by the tortfeasor became unavailable to Levine because of the passage of time before she filed her claim. It is undisputed that the tortfea-sor’s coverage was less than the State Farm policy limits and that State Farm is responsible for that amount of underinsurance. Because we conclude that State Farm is only liable for the amount by which the State Farm coverage exceeded the insurance held by the tortfeasor, we vacate the judgment.

I. BACKGROUND

[¶ 2] In August 1992, Nicole Levine, a passenger in a motor vehicle operated by Michael Fisher, was injured when a vehicle negligently operated by William Kruzynski collided head-on with Fisher’s automobile, causing Levine damages later determined by a jury to total $100,000.

[¶ 3] At the time that Kruzynski injured Levine, he was insured through a North East Insurance Company policy, which provided liability coverage of $50,000 per person. Fisher and Levine were each insured by Fisher’s State Farm policy, which contained a provision for uninsured/underinsured vehicle coverage in the amount of $100,000 per person. Levine was also insured by a Prudential Property and Casualty Insurance Company policy, which provided uninsured/underinsured vehicle coverage in the amount of $100,000 per person. Coverage under that policy is not at issue here.

[¶ 4] Kruzynski died approximately one year after the accident and no probate proceedings were filed concerning his estate until March 1999, nearly six years after his death, when Levine filed a petition for formal adjudication of intestacy and appointment of a personal representative. In her petition, Levine requested that the court appoint her, as a creditor, to serve as personal representative of Kruz-ynski’s estate. The Probate Court dismissed Levine’s petition, holding that the three-year limit for commencing probate proceedings had expired, and she was therefore barred from obtaining relief for her injuries from Kruzynski or his estate.¹

[¶ 5] On January 18, 2001, more than eight years after the accident, Levine filed a direct cause of action against State Farm and Prudential, seeking recovery for the damages resulting from the 1992 automobile accident pursuant to each company’s underinsured vehicle coverage.² The parties have never disputed that Kruzynski’s vehicle qualified as an “uninsured motor vehicle” pursuant to the State Farm policy because the $50,000 bodily injury liability limit contained in his policy with North East was less than the $100,000 uninsured/underinsured vehicle limit Fisher carried in his policy with State Farm.³ Moreover, Kruzynski’s negligence undis-putedly caused the motor vehicle accident and, as a result, Levine was “legally entitled” to collect damages from him.⁴ Thus, the sole issue presented at the jury trial held in the Superior Court concerned the amount of Levine’s total damages resulting from the accident, which the jury calculated to be $100,000.

[¶ 6] Following the jury verdict, Levine filed a motion pursuant to M.R. Civ. P. 58 requesting that the court enter judgment in her favor in the amount of the jury verdict (plus costs) against State Farm, and in an amount equal to the prejudgment interest against Prudential.⁵ State Farm opposed Levine’s motion, arguing that it only owed her the $50,000 by which the State Farm underinsured vehicle coverage exceeded Kruzynski’s bodily injury coverage. State Farm also maintained that a “limits of liability” clause in its policy authorized an offset by the amount of Kruzynski’s coverage limit because Kruzynski was “legally liable” for Levine’s bodily injury due to his undisputed negligence in causing the accident.⁶

[¶ 7] The Superior Court granted Levine’s Rule 58 motion and concluded that State Farm was responsible not only for the undisputed $50,000 by which Kruzyn-ski was underinsured, but also for the $50,000 of Kruzynski’s available insurance, which had become unavailable due only to the passage of time. This appeal followed.

II. DISCUSSION

[¶ 8] Underinsured and uninsured vehicle coverage is intended to provide financial compensation in instances where the tortfeasor “ ‘is uninsured’ ” or “ ‘is financially unable to furnish adequate compensation for the injuries caused in the accident.’ ” Braley v. Berkshire Mut. Ins. Co., 440 A.2d 359, 362 (Me.1982) (quoting Wescott v. Allstate Ins., 397 A.2d 156, 166 (Me.1979)). It was not intended to supplant the tortfeasor’s coverage. Consistent with that purpose, the State Farm underinsured vehicle policy at issue expressly provides that it does not cover any amounts covered by “the total of the bodily injury limits of all other vehicle liability policies ... that apply to any person ... legally liable for such bodily injury.” (Emphasis omitted.) Thus, the plain language of Levine’s coverage precludes recovery from State Farm for the amount by which Kruzynski was actually insured.

[¶ 9] Levine argues, nonetheless, that the policy contravenes Maine’s uninsured/underinsured vehicle statute, 24-A M.R.S.A. § 2902 (2000 & Supp.2003). Therefore, the question presented is whether the statute mandates coverage by the underinsured vehicle coverage carrier of the amount that would have been paid by the tortfeasor, but for the injured party’s failure to seek recovery.

[¶ 10] Contrary to Levine’s contentions, section 2902(4) does not require that the underinsured vehicle coverage carrier make all payments due from any insurer and then seek recovery from the tortfeasor’s insurer. 24-A M.R.S.A. § 2902(4) (2000). It merely allows recovery from other responsible parties- “[i]n the event” that the underinsured vehicle coverage carrier has made payment to the insured. Id. The underinsured vehicle coverage carrier has the right pursuant to statute to pay its insured and then seek recovery from any “legally responsible” party.⁷ ' Id. Nothing in the statutes, however, mandates that approach.⁸

[¶ 11] Moreover, the entire statutory scheme makes it evident that underinsured vehicle coverage is in the nature of gap coverage, not a substitute for primary coverage. In mandating uninsured vehicle coverage in Maine, the Legislature intended to ensure coverage when an injured party is “legally entitled to recover damages from owners or operators of uninsured, underinsured or hit-and-run motor vehicles.” 24-A M.R.S.A. § 2902(1) (2000) (emphasis added). There exists no indication of legislative intent to ensure coverage when and to the extent that the tortfeasor, in fact, has insurance. Because Kruzynski was only covered to a maximum of $50,000 per person, and Levine’s damages totaled $100,000, Kruzynski was “underinsured” in the amount of $50,000. He was not, however, underinsured by the full $100,000. To the contrary, that $50,000 coverage was available to Levine. See Greenvall v. Me. Mut. Fire Ins. Co., 1998 ME 204, ¶ 8, 715 A.2d 949, 952-53 (joining jurisdictions that hold an insured may be “legally entitled to recover” without first obtaining a judgment against an uninsured motorist). Accordingly, the $50,000 available from Kruz-ynski’s carrier cannot be considered an amount by which Kruzynski’s vehicle was underinsured. See 24r-A M.R.S.A. § 2902(1) (stating that an underinsured vehicle is one that has less coverage than the injured party’s uninsured vehicle coverage).

[¶ 12] Other states have reached similar conclusions. “Generally, [an underinsured vehicle coverage] carrier is entitled to offset the amount of the tortfeasor’s liability limits.” Farmers Ins. Co. of Wash. v. Lautenbach, 93 Wash.App. 671, 963 P.2d 965, 967 (1998) (emphasis added). This is consistent with our conclusion that under-insured vehicle coverage “fills the gap left by an underinsured tortfeasor” and is designed to “ ‘permit the insured injured person the same recovery which would have been available to him had the tortfeasor been insured to the same extent as the injured party.’ ” Tibbetts v. Me. Bonding & Cas. Co., 618 A.2d 731, 734 (Me.1992) (emphasis added) (quoting Connolly v. Royal Globe Ins. Co., 455 A.2d 932, 935 (Me.1983)).

[¶ 13] We conclude, therefore, that State Farm is not responsible for the amount Levine could have obtained pursuant to Kruzynski’s policy; rather, State Farm is responsible for paying $50,000 — the extent to which Kruzynski’s vehicle was underin-sured.⁹ See 24-A M.R.S.A. § 2902(1); Tibbetts, 618 A.2d at 734. Nothing in the statute requires a contrary result.

[¶ 14] Finally, if we were to accept Levine’s argument that the underinsured vehicle coverage carrier may not offset from its responsibility the amount of insurance held by the tortfeasor, the economic risks of injury in motor vehicle accidents would shift entirely to the underinsured vehicle coverage carrier. The expense involved in providing uninsured/underinsured vehicle coverage would increase, the cost to consumers would increase, and an insurance product originally required by the Legislature to protect against those who fail to carry adequate insurance would be treated as if it were the primary source of coverage notwithstanding the tortfeasor’s own coverage. The Legislature neither mandated nor intended such a result.

The entry is:

Judgment vacated. Remanded to the Superior Court for entry of judgment against State Farm in the amount of $50,000, with interest and costs, if any, to be determined by the court.

1 . We subsequently affirmed the judgment entered in the Probate Court. Estate of Kruzynski, 2000 ME 17, ¶¶ 4, 7, 744 A.2d 1054, 1055-56 (holding Levine’s petition for appointment as the personal representative was untimely pursuant to 18-A M.R.S.A. § 3-108(a) (1998)).

2 . Prior to trial, the parties agreed that State Farm was the primary insurer and that Prudential would only provide underinsured vehicle coverage for damages in excess of State Farm’s $100,000 policy limit.

3 . Pursuant to the State Farm policy, an "uninsured motor vehicle” includes "a land motor vehicle, the ownership, maintenance or use of which is ... insured or bonded for bodily injury liability at the time of the accident; but ... the limits of liability are less than the limits you carry for uninsured motor vehicle coverage under this policy.” (Emphasis omitted.)

4 .The State Farm policy provides, in relevant part: "We will pay damages for bodily injury an insured is legally entitled to collect from the owner or driver of an uninsured motor vehicle. The bodily injury must be caused by accident arising out of the operation, maintenance or use of an uninsured motor vehicle.” (Emphasis omitted.)

5 . After the jury returned its verdict, Prudential also filed a motion for judgment in its favor arguing that it was entitled to a judgment because it was the secondary insurer and Levine's damages were within State Farm’s policy limit. The court denied Prudential’s motion, holding the $100,000 verdict plus prejudgment interest exceeded State Farm’s policy limit. Prudential has not appealed from the court's decision.

6 . The policy’s limits of liability clause reduces the amount State Farm must pay when an uninsured motorist injures an insured:

2. Any amount payable under this coverage shall be reduced:

a. by any amount paid or payable to or for the insured:

(1) for bodily injury under the liability coverage ...

b. the total of the bodily injury limits of all other vehicle liability policies or bonds that apply to any person or organization legally liable for such bodily injury.

(Emphasis omitted.)

7 . The language of subsection 6 of section 2902 further refutes Levine’s contention that the Legislature did not intend to allow an underinsured vehicle coverage carrier to reduce its liability by the amount of other insurance. 24-A M.R.S.A. § 2902(6) (Supp.2003). Subsection 6 sets out the method for calculating payments owed by the underinsured vehicle coverage carrier when multiple persons are entitled to recover under the tortfeasor’s policy. Id. After first subtracting the amount actually recovered from the tortfeasor’s policy, ”[t]he amount of underinsured motor vehicle coverage must be further reduced by the amount by which [the tortfeasor's liability limit] exceeds all payments from that coverage to all persons legally entitled to recover damages from [the tortfeasor’s policy].” Id. As in subsection 1, the Legislature here permits an underinsured vehicle coverage carrier to offset an amount that may exceed what the insured actually recovered under a tortfea-sor's policy. Id. § 2902(1) & (6) (2000 & Supp.2003).

8 . The statute provides that if a person with uninsured vehicle coverage recovers from a responsible third party, her insurer is entitled to the proceeds:

In the event of payment to any person under uninsured vehicle coverage, and subject to the terms of such coverage, to the extent of such payment the insurer shall be entitled to the proceeds of any settlement or recovery from any person legally responsible for the bodily injury as to which such payment was made, and to amounts recoverable from the assets of the insolvent insurer of the other motor vehicle.

24-A M.R.S.A. § 2902(4) (2000).

9 . Because it is not before us, we do not address the interplay between the State Farm and Prudential policies related to prejudgment interest.