Mancillas v. Arizona Property & Casualty Insurance Guaranty Fund

OPINION

TOCI, Judge.

Plaintiff was one of seven people injured in an automobile accident by a tortfeasor with a statutory minimum liability coverage. Apportionment of the tortfeasor’s liability policy limits among the injured parties resulted in plaintiff recovering less than the minimum amount specified in the Financial Responsibility Law. The issue is whether the tortfeasor is therefore “functionally uninsured” so that plaintiff may recover under the uninsured motorist provisions of his own policy, the difference between the amount available to him from the tortfeasor’s liability policy and the minimum amount of uninsured motorist coverage required by the Financial Responsibility Law.

Lucio Rosas Mancillas appeals the trial court’s grant of summary judgment to The Arizona Property and Casualty Insurance Guaranty Fund (“the Fund”). He raises the following issues: (1) is he entitled to uninsured motorist benefits to the extent of the $15,000 statutory minimum required for such coverage, and (2) if not, should underinsured motorist coverage be written into his policy as a matter of law even though he signed a written waiver of such coverage?

We hold that Mancillas is entitled to uninsured motorist benefits up to the statutory minimum amount. Because we answer the first issue in the affirmative, we need not address the second issue raised in this appeal.¹

I. FACTS AND PROCEDURAL HISTORY

Mancillas purchased automobile liability insurance from Old Hickory Casualty Insurance Company (“Old Hickory”). The policy provided liability and uninsured motorist coverage of $15,000 per person/$30,000 per accident. The policy defined “uninsured motor vehicle” in part as:

a motor vehicle for which there is no bodily injury policy or liability bond available at the time of the car accident with at least the minimum limits required by the financial responsibility law of the state in which your car is principally garaged.

Mancillas signed a form rejecting underinsured motorist coverage, and no such coverage was afforded by the policy.

Several months later, Mancillas was involved in an automobile accident caused by Roberto D. Enriquez. Mancillas, each of the four passengers in Ms car, and two of the passengers in Enriquez’s car were injured and incurred medical bills. All seven claimants filed personal injury claims with Enriquez’s insurer, and five of those claimants, including Mancillas, later sued Enriquez for their injuries.

After the suits were consolidated, counsel for Enriquez disclosed that Enriquez had only $30,000 in policy limits. His insurer proposed a pro-rata distribution of the $30,-000 based on the amount of each claimant’s medical bills. Mancillas’ share of tMs distribution was $2,215.58, wMch did not fully compensate him for Ms injuries.

Mancillas made a claim for uninsured motorist benefits with Ms own insurer-Old Hickory. The claim was demed, and Mancillas sued Old Hickory for, among other things, breach of contract and bad faith. Mancillas later amended his complaint to add a claim for underinsured motorist benefits and to add his insurance agent as a defendant. This lawsuit was consolidated with Mancillas’ lawsuit against Enriquez. When Old Hickory was declared insolvent, the Fund was substituted as the defendant.

Mancillas filed a motion for partial summary judgment on the uninsured motorist coverage issue. He argued that he was entitled to such benefits for the damages he had sustained in the accident, less the compensation received from Enriquez, up to the $15,-000 minimum for uninsured motorist coverage required by the Uninsured Motorist Act, AR.S. section 20-259.01 (Supp.1993), and the Uniform Motor VeMcle Safety Responsibility Act, A.R.S. sections 28-1101 to 28-1262 (1989 and Supp.1993). Mancillas relied on Porter v. Empire Fire and Marine Insurance Co., 106 Ariz. 274, 475 P.2d 258 (1970), as support for Ms motion.

The trial court denied Mancillas’ motion on the basis that Porter is no longer valid law. At the time Porter was decided, section 20-259.01 required insurers to provide its policyholders with uninsured motorist coverage, but it contained no provision for underinsured motorist coverage. The trial court reasoned that Porter was rendered obsolete by the 1981 amendments to section 20-259.01, which added a section requiring insurers to offer underinsured motorist coverage to all policyholders.

The case was then assigned to arbitration on the underinsured motorist coverage issue. The arbitrator ruled that underinsured motorist coverage was included in Mancillas’ policy as a matter of law. The Fund appealed to superior court.

The Fund filed a motion for summary judgment on the underinsured motorist issue, arguing that Mancillas had rejected such coverage. Mancillas filed a cross-motion on both issues. He asserted a new argument for uninsured motorist coverage based on the policy’s language, and he claimed entitlement to underinsured motorist coverage because Old Hickory’s agent had not “effectively” offered such coverage to him as required by law. He argued that Ms written rejection of such coverage was invalid because he did not read English, did not understand the form, and did not receive an explanation of under-insured motorist coverage from the agent. The trial court demed Mancillas’ motion and granted the Fund’s motion on the issue of underinsured motorist coverage. TMs appeal followed.

II. STANDARD OF REVIEW

The facts pertaimng to the uninsured motorist coverage issue, wMch is dispositive of tMs appeal, are undisputed. When reviewing a grant of summary judgment on undisputed facts, our role is to determine whether the trial court correctly applied the substantive law to those facts. Miller v. Westcor Ltd. Partnership, 171 Ariz. 387, 390, 831 P.2d 386, 389 (App.1991). Thus, we must determine whether the trial court erred by ruling that Porter is no longer good law.

III. DISCUSSION

A. Is Porter Still Good Law in Light of the Amendments to A.R.S. Section 20-259.01?

We begin with several general principles govermng umnsured motorist coverage. First, “[s]eetion 20-259.01 is remedial in nature and should be liberally construed in order to effectuate its purpose.” Lowing v. Allstate Ins. Co., 176 Ariz. 101, 104, 859 P.2d 724, 727 (1993). Furthermore, “[t]he purpose of uninsured motorist coverage is to ‘benefit the injured party to the same degree as if the uninsured motorist had liability insurance available in the amounts set forth in the Financial Responsibility Law.’ ” Herring v. Lumbermen’s Mut. Casualty Co., 144 Ariz. 254, 256, 697 P.2d 337, 339 (1985) (quoting State Farm Mut. Auto. Ins. Co. v. Eden, 136 Ariz. 460, 462, 666 P.2d 1069, 1071 (1983)). Finally, “[A]n insured motorist with too little insurance to compensate an injured party up to the minimum statutory limits is considered uninsured.” Lowing, 176 Ariz. at 105, 859 P.2d at 728 (describing the court’s holding in Porter, 106 Ariz. at 279, 475 P.2d at 263).

In Porter, the Arizona Supreme Court addressed virtually the identical facts presented by this case. Porter was one of five persons injured in an automobile accident caused by Joseph Fitch. 106 Ariz. at 275, 475 P.2d at 259. Fitch carried liability insurance in the minimum amounts required under the financial responsibility laws at that time—$10,000 per person/$20,000 per occurrence. Id. The parties agreed that Porter’s damages met or exceeded the statutory single-injury minimum of $10,000. Id. at 276, 475 P.2d at 260. Yet, because of the number of persons injured in the accident, Porter received only $2,500 in settlement proceeds— $7,500 less than the applicable statutory minimum. Id. Porter subsequently made demand on his own insurer for the remaining $7,500, claiming that he was entitled to recover the sum as uninsured motorist benefits. Id.

The Arizona Supreme Court ruled in Porter’s favor. It held that where the tortfeasor’s automobile liability insurance is insufficient to provide the injured party with at least the statutory minimum in compensation, the tortfeasor will be considered “uninsured.” Id. at 279, 475 P.2d at 263. Thus, the injured party may recover from his own uninsured motorist coverage any deficiency between the tortfeasor’s payment and the statutory minimum amount. Id. The court reasoned:

The uninsured policy is issued for the protection of the insured in the minimum amount provided in the Financial Responsibility Act. Otherwise ... the insured might be better off if the offending motorist had no insurance whatsoever. We agree with the principle that the person who avails himself of the protection afforded by uninsured motorist coverage should be permitted to recover as if the tortfeasor had the minimum amount of liability insurance; provided that there be available to him the full amount of his damages, up to the minimum amount prescribed by the Financial Responsibility Act, which in this case is $10,000. This is so whether the sum is recoverable under the insured’s policy alone or in combination with those funds actually receivable from the tortfeasor’s liability coverage.

Id.

Two cases reaffirmed Porter after the 1981 amendments to A.R.S. section 20-259.01. In Eden, the supreme court, while distinguishing Porter, recognized the continued validity of that case:

We find no merit to appellant’s argument that section (B) [added in 1972] implicitly changed the definition of “uninsured.” Presumably the legislature was cognizant of the Porter definition of “uninsured” when section (B) was added to A.R.S. § 20-259.01.

136 Ariz. at 462, 666 P.2d at 1071. Herring, decided in 1985, also distinguished, but reaffirmed, Porter:

We do not retreat from Porter, but we do not believe that it governs the present situation. In Porter, the claimant was a victim, actually injured in the accident. In the case at bench, the minimum amount guaranteed by the financial responsibility law was available to the victim ... That amount has been paid. Thus, the question here is not whether minimum coverage was available for each victim injured or killed in the accident----

144 Ariz. at 256, 697 P.2d at 339 (emphasis added).

The Fund does not dispute that the facts of this case fall squarely within the purview of Porter; rather, the Fund argues that Porter was rendered obsolete in 1981, when our legislature amended A.R.S. section 20-259.01 to require insurers to offer underinsured motorist coverage to their policyholders. The Fund points out that although Eden and Herring were decided after 1981, the accidents at issue in those cases occurred before 1981. The Fund relies on a statement in Evenchik v. State Farm Insurance Co., 139 Ariz. 453, 458, 679 P.2d 99, 104 (App. 1984), that “[w]hen a negligent driver or owner has a liability policy, the vehicle is not uninsured.”

The Fund’s reliance on Evenchik is misplaced. In that case, the negligent third party did not have a liability insurance policy covering the injuries plaintiffs sustained in the accident. Id. at 454, 679 P.2d at 100. Thus, to resolve the case, the court did not need to decide what effect a tortfeasor’s liability insurance policy would have on uninsured motorist coverage. The court decided a different issue: whether a negligent third party with no liability insurance at all was an “underinsured motorist.” See id. Consequently, the Evenchik statement upon which the Fund relies—that if a tortfeasor has liability insurance the vehicle is not uninsured—is dicta, and not binding on this court. See Haldiman v. Gosnell Dev. Corp., 155 Ariz. 585, 589, 748 P.2d 1209, 1213 (App.1987).

Evenchik is questionable precedent for several additional reasons. First, because the facts are different, Evenchik is distinguishable from this case. There, the question was whether a negligent third party with no liability insurance was underinsured. Here, we must decide if an uninsured motor vehicle includes a vehicle upon which the liability limits of the tortfeasor’s policy are insufficient to meet the statutory minimum for each injured person. Furthermore, the Evenchik court cited Eden as authority for the statement that a tortfeasor with insurance is not uninsured. See Evenchik, 139 Ariz. at 458, 679 P.2d at 104. Eden, however, affirmed the Porter definition of uninsured motor vehicle. See Eden, 136 Ariz. at 462, 666 P.2d at 1071 (“We ... held that the tortfeasor was actually uninsured to the plaintiff as to the difference between the amount available to Porter and the minimum amounts set forth in the Financial Responsibility Law.”). Evenchik, therefore, is of little help to the Fund.

The Fund’s main argument, however, is not based on Evenchik; instead, the Fund relies on the proposition that the 1981 amendments to section 20-259.01 implicitly abolished Porter. The Fund contends that at the time Porter was decided, A.R.S. section 20-259.01 did not address the situation presented by that case—recovery from the underinsured tortfeasor. The Fund claims that the Porter court was therefore forced to hold that an underinsured tortfeasor constituted an uninsured tort-feasor in order to provide the injured party with recovery in that case.

The Fund reasons that the amendment to A.R.S. section 20-259.01 requiring insurers to offer underinsured motorist coverage to their policyholders rendered Porter ineffective. It also contends that this amendment to section 20-259.01 was enacted in response to Porter to ensure that policyholders were protected when the tortfeasor was underinsured. Accordingly, the Fund argues that Porter is no longer valid given that the statutory scheme now protects policyholders in this situation by providing for the offer of underinsured motorist coverage. The trial court concurred with the Fund and ruled that Mancillas was not entitled to uninsured motorist benefits.

Contrary to the lower court’s holding, Porter is still good law, as evidenced by Lowing, a recent supreme court case. There, the court held that an unidentified accident-causing motorist was an “owner or operator of an uninsured motor vehicle” within the meaning of A.R.S. section 20-259.01. 176 Ariz. at 106, 859 P.2d at 729. In reaching its decision, the court relied on the Porter holding that an insured motorist with insufficient insurance to pay an injured party the statutory minimum amount is considered uninsured. Id. at 105, 859 P.2d at 728. The court emphasized that it was returning to the “policy expressed in Porter of evaluating the status of the financially irresponsible motorist from the viewpoint of the injured insured.” Id. at 108, 859 P.2d at 731. The court concluded that this policy was consistent with the purpose of the financial responsibility laws “to make available to all persons injured by negligent motorists a certain minimum amount of compensation____” Id. at 104-05, 859 P.2d at 727-28. Based on this rationale, the court determined that an unidentified tortfeasor is “functionally uninsured.” Id. at 105, 859 P.2d at 728.

Lowing compels us to reject the Fund’s argument that the 1981 amendments to section 20-259.01 rendered Porter obsolete. Not only did the Lowing court rely on Porter, it also specifically noted that none of the amendments to section 20-259.01 altered the definition of uninsured motor vehicles. Id. at 106, 859 P.2d at 729; see also Eden, 136 Ariz. at 462, 666 P.2d at 1071 (“Presumably the legislature was cognizant of the Porter definition of ‘uninsured’ when section (B) was added ____”). We conclude, therefore, that Porter is still good law.

The dissent, agreeing with the Fund, opines that the legislature in 1981 added the underinsured coverage provision in response to Porter. The dissent reasons that by adding a provision requiring insurers to offer underinsured motorist coverage, which coverage could have protected Mancillas in this situation, the legislature intended to overrule the Porter definition of uninsured motor vehicle. We believe, however, that the dissent’s conclusion about the legislature’s intent is contrary to Lowing's determination of the legislature’s intent.

Viewing the development of section 20-259.01 and the corresponding case law, we believe that the legislature did not intend to disturb Porter's definition of uninsured motor vehicle. First, the legislature added underinsured motorist coverage in 1981, some eleven years after the Porter decision. The legislature, however, had previously amended section 20-259.01 in 1972, just two years after Porter. If the legislature was dissatisfied with Porter, it could have overruled Porter in the 1972 amendments to section 20-259.01. The legislature, however, did not do so. See Eden, 136 Ariz. at 462, 666 P.2d at 1071.

Furthermore, the legislature in the 1981 amendments defined underinsured motor vehicle but did not define uninsured motor vehicle. The mere addition of underinsured motorist coverage did not automatically dispel Porter's definition of uninsured motor vehicle. On the contrary, the 1981 amendments can be easily harmonized with Porter: uninsured motorist coverage guarantees coverage up to the statutory minimum amount; underinsured coverage, if accepted, guarantees coverage beyond that amount. Thus, if it intended to overrule Porter, it is reasonable to assume that the legislature would have included a simple definition of uninsured motor vehicle in the 1981 amendments.² The legislature’s silence implies satisfaction with Porter.

Nevertheless, we need not engage in speculation because our supreme court in Lowing specifically found that the legislature has not overruled the Porter definition of uninsured motor vehicle. The dissent distinguishes Lowing on the ground that Leming involved an unidentified motorist, not an underinsured motorist. While this is true, the dissent underestimates the extent of Lowing's reliance on Porter.

The Lowing court based its decision on the Porter ruling that “an insured motorist with too little insurance to compensate an injured party up to the minimum statutory limits is considered uninsured.” 176 Ariz. at 105, 859 P.2d at 728. The court did not carve out a new rale governing “unidentified” tortfeasors. Rather, the court held that an unidentified motor vehicle is included in the Porter definition of uninsured motor vehicle. Id.

Finally, to dispel any question that the legislature has not overruled Porter, the Lowing court stated that “[sjection 20-259.01 has been amended three times ... None of these amendments had anything to do with unidentified drivers, or with the definition of uninsured motor vehicles.'' 176 Ariz. at 106, 859 P.2d at 729 (emphasis added). Thus, the supreme court specifically determined, that the legislature has not overruled Porter. This court has no authority to invalidate the supreme court’s determination of the legislature’s intent.

Because our decision makes Mancillas the prevailing party below, he is entitled to the attorneys’ fees he incurred in the trial court pursuant to A.R.S. section 12-841.01(A) (1992).

IV. CONCLUSION

Mancillas is entitled to recover uninsured motorist benefits from the Fund for the difference between the damages he sustained in the accident and the compensation he received from Enriquez, up to the statutory minimum coverage of $15,000.

We reverse the entry of summary judgment in favor of the Fund. This matter is remanded to the trial court for entry of summary judgment in favor of Mancillas on the issue of uninsured motorist coverage and for determination of his actual damages. Upon compliance with Rule 21, Arizona Rules of Civil Appellate Procedure, Mancillas may also recover the costs and attorneys’ fees he incurred on appeal.

CONTRERAS, J., concurs.

1 . Mancillas concedes that he is prohibited from recovering both uninsured and underinsured motorist benefits. See Ariz.Rev.Stat.Ann. ("A.R.S.”) § 20-259.01(F) (Supp.1993) ("Uninsured and underinsured motorist coverages are separate and distinct and apply to different accident situations. Underinsured motorist coverage shall not provide coverage for a claim against an uninsured motorist in addition to any applicable uninsured motorist coverage.”).

2 . A short sentence similar to the following would have sufficed: “Uninsured motorist coverage” provides coverage for injury or damage where the vehicle that caused the injury or damage is not insured by a liability policy.