American States Insurance Co. v. Estate of Tollari , 1985 Iowa Sup. LEXIS 956 ( 1985 )

UHLENHOPP, Justice.

The determinative issue in this appeal is whether the district court erred in its construction of “underinsured” in section 516A.1 of the Iowa Code of 1981.

Most of the facts which give rise to the issue are uncontroverted. Randy Schuldt was driving a car near Van Wert, Iowa. An accident occurred, and Schuldt and his five passengers including Mark Tollari were killed. The accident occurred in such way that the Schuldt estate is liable to the Tollari estate in damages for Tollari’s death.

At the time of the accident the car was covered by three liability insurance policies with total limits of $120,000. That amount was divided among the estates of the five passengers; each received $24,000 (plus $500 interest). No dispute exists as to that division. No further recoveries were made by the Tollari estate.

At the time of the accident Tollari was a “covered person” under still another insurance policy, this one issued by United Fire & Casualty Company (United). The policy contained underinsured motorist coverage to a limit of $50,000.

Other insurers brought the present inter-pleader action; the interpleader itself is not involved in this appeal. In that action the Tollari estate cross-claimed against United seeking to recover $50,000 under the under-insured clause. United denied liability and moved for summary judgment. The district court granted the motion, and the Tollari estate appealed.

As we understand, United’s position is that its policy provided $50,000 of underin-sured motorist coverage but the Schuldt car had $120,000 of liability coverage in effect at the time. Since the Schuldt car was insured in excess of United’s underin-sured coverage, that car was not “underin-sured”.

To state the position of the Tollari estate we will assume, solely for the purpose of explanation, that the Tollari estate was damaged $100,000 by reason of Tollari’s death. The Tollari estate then contends that it is entitled to recover $100,000 from United less $24,000 which the estate received from Schuldt’s liability insurance, or $76,000, subject to the limit of $50,000 of underinsured coverage in United’s policy.

I. We turn first to the Iowa statute on this subject. United cites clauses in its policy, but an Iowa statute provides for uninsured and underinsured coverage, Iowa Code § 516A.1 (1981), and the law writes insurance statutes into policies. Benzer v. Iowa Mutual Tornado Insurance Ass’n, 216 N.W.2d 385, 388 (Iowa 1974) (“A statute applicable to a contract of insurance enters into and forms a part thereof in the same manner as if it had been actually written or copied therein and in construing the terms of the policy, the statute is to be read in connection therewith, in the light of the purpose and intent of the statute.”); 43 Am.Jur.2d Insurance § 302 (1982); 44 C.J.S. Insurance § 302 (1945) (“A statute applicable to a contract of insurance in force at the time of the making of the contract enters into and forms a part thereof, must be read in connection therewith in construing the terms of the policy, and controls in case of conflict, notwithstanding its subsequent amendment or repeal.”). The question here is the meaning of “underinsured” in the statute, and this court is the final arbiter in the construction of Iowa statutes. Hubbard v. State, 163 N.W.2d 904 (Iowa 1969).

Previously our statute dealt only with uninsured (and hit-and-run) motorists. Iowa Code § 516A.1 (1979). This court had held that an “uninsured” motorist clause did not cover the situation of an “underin-sured” motorist. Detrick v. Aetna Casualty & Surety Co., 261 Iowa 1246, 1253, 158 N.W.2d 99, 105 (1968) (“‘Underinsu-rance’ means ‘insurance in an amount insufficient to cover the possible loss or to satisfy the requirements of a co-insurance clause_’ We find no authority authorizing us to define the word ‘uninsured’ to mean underinsured in relation to plaintiff’s injury.”). Subsequently the General Assembly amended section 516A.1 to add “underinsured”. At the time of this accident the first paragraph of section 516A.1 read:

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 under-insured 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 10. The form and provisions of such coverage shall be examined and approved by the commissioner of insurance.

(Section 321 A. 1(10), referred to in the quotation, prescribes minimum liability coverage for certain drivers for whom insurance is mandatory: $10,000 per person and $20,-000 per accident at the time of these events. The second paragraph of section 516A. 1 permitted a motorist to reject uninsured or underinsured coverage by executing a separate document.)

II. We believe the present case is controlled by two principles. In ascertaining the amount that a tortfeasor’s car is underinsured, we think the General Assembly intended to include only the amount of the tortfeasor’s liability insurance which is available to the victim who has underinsu-rance coverage, in this case, $24,000. The remaining $96,000 of liability insurance on the Schuldt car is illusory so far as the Tollari estate is concerned; the estate has no way of obtaining any of it.

Second, we believe the General Assembly contemplated that a buyer of un-derinsurance coverage is entitled to recover on that clause for the amount of his loss that the tortfeasor’s liability insurance does not reach, subject to the limit of the underinsurance clause. Detrick, at 1253, 158 N.W.2d at 105 (“ ‘Underinsurance’ means ‘insurance in an amount insufficient to cover possible loss’ ”. (Emphasis added.)). In this case the applicable figures are $100,000 of loss (assumed), less $24,000 of liability insurance available, or $76,000, subject to a limit of $50,000. Any other interpretation of underinsurance would mean the victim cannot recover part of the underinsurance limit he has bought and paid for, and that portion of the limits also would be illusory. For example, if the Tollari estate had to deduct $24,000 of liability insurance received from its underin-surance limits of $50,000, the estate would recover only $26,000 of underinsured coverage and the remaining $24,000 of underin-surance that was purchased would be unavailable to the estate — notwithstanding a loss of $100,000.

The following decisions, although distinguishable, lend support to our rationale: Williams v. Hartford Accident & Indemnity Co., 382 So.2d 1216 (Fla.1980); Whitten v. Empire Fire & Marine Insurance Co., 353 So.2d 1071 (La.App.1977); Holman v. All Nation Insurance Co., 288 N.W.2d 244 (Minn.1980); and United Services Automobile Ass’n v. Winbeck, 30 Wash.App. 769, 637 P.2d 996 (1981).

III. The result of this construction of section 516A.1 of the Code is that uninsured and underinsurance coverages are complementary, as we think the General Assembly intended them to be. They protect against essentially one peril: loss caused by a tortfeasor who is not financially responsible. In the one case the tort-feasor has no liability insurance at all to pay the loss, and in the other he has insufficient liability insurance to pay the loss. If the tortfeasor has no liability insurance the injured plaintiff can, under his own uninsured motorist coverage, recover his loss from the tort, subject to the limit of that uninsured coverage — assuming no duplication of benefits exists. McClure v. Employers Mutual Casualty Co., 238 N.W.2d 321 (Iowa 1976). Correspondingly, if the tortfeasor has some liability insurance but insufficient to pay the loss fully, the plaintiff can, under his own underin-sured motorist coverage, recover his loss from the tort less the tortfeasor’s available liability insurance proceeds, subject to the limit of that underinsured coverage —again assuming no duplication of benefits exists.

We thus hold that United is liable to the Tollari estate for the estate’s damages from Tollari’s death less $24,000, subject to the limit of $50,000.

We remand the case to district court for a substituted partial summary judgment in conformity with this opinion and for further proceedings on the issue of the amount of damages of the Tollari estate arising from Tollari’s death.

REVERSED AND REMANDED.

All Justices concur except WOLLE, SCHULTZ, and CARTER, JJ., who dissent.