Daughhetee v. State Farm Mutual Automobile Insurance

United States Court of Appeals
For the Eighth Circuit
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No. 13-1185
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Ronald E. Daughhetee; Melissa L. Daughhetee
lllllllllllllllllllll Plaintiffs - Appellants
Abby Burke
lllllllllllllllllllll Plaintiff
v.
State Farm Mutual Automobile Insurance Company
lllllllllllllllllllll Defendant - Appellee
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Appeal from United States District Court
for the Western District of Missouri - Kansas City
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Submitted: November 19, 2013
Filed: February 14, 2014
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Before BENTON, BEAM, and SHEPHERD, Circuit Judges.
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BENTON, Circuit Judge.
Ronald E. and Melissa L. Daughhetee were injured in a truck accident that
killed their daughter Allison. After settling with the tortfeasor, the Daughhetees
received payment for underinsured motorist (UIM) coverage from a State Farm policy
insuring their truck. They sued for additional payment under a State Farm policy
insuring another vehicle. It had identical UIM coverage. The district court1 granted
State Farm summary judgment, citing anti-stacking language in the policies. The
Daughhetees appeal. Having jurisdiction under 28 U.S.C. § 1291, this court affirms.
In June 2011, the Daughhetees’ Ford F-150 truck collided with another vehicle.
Ronald was driving the F-150. Passengers included Melissa, and children Abby and
Allison. Ronald, Melissa and Abby were injured; Allison died. The Daughhetees
settled with the tortfeasor for the full limits of liability coverage.
The F-150 was insured under a State Farm policy with UIM coverage up to
$500,000 for all claims arising out of all injuries in one accident. State Farm paid the
$500,000 limit of that policy.
The Daughhetees also owned a Hyundai, insured by a separate State Farm
policy with identical UIM coverage. They demanded the limit of that policy from
State Farm. State Farm refused to pay. The Daughhetees sued in state court for the
limit of the Hyundai policy.
In a subsection of the UIM coverage entitled “If Other Underinsured Motor
Vehicle Coverage Applies,” the Hyundai policy has this “other coverage” provision:
1. If Underinsured Motor Vehicle Coverage provided by this policy
and one or more other vehicle policies issued to you or any
resident relative by the State Farm Companies apply to the same
bodily injury, then:
1
The Honorable Ortrie D. Smith, United States District Judge for the Western
District of Missouri.
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a. the Underinsured Motor Vehicle Coverage limits of such
policies will not be added together to determine the most
that may be paid; and
b. the maximum amount that may be paid from all such
policies combined is the single highest applicable limit
provided by any one of the policies. We may choose one or
more policies from which to make payment.
2. The Underinsured Motor Vehicle Coverage provided by this
policy applies as primary coverage for an insured who sustains
bodily injury while occupying your car.
a. If:
(1) this is the only vehicle policy issued to you or any
resident relative by the State Farm Companies that
provides Underinsured Motor Vehicle Coverage
which applies to the accident as primary coverage;
and
(2) underinsured motor vehicle coverage provided by
one or more sources other than the State Farm
Companies also applies as primary coverage for the
same accident,
then we will pay the proportion of damages payable as
primary that our applicable limit bears to the sum of our
applicable limit and the limits of all other underinsured
motor vehicle coverage that apply as primary coverage.
b. If:
(1) more than one vehicle policy issued to you or any
resident relative by the State Farm Companies
provides Underinsured Motor Vehicle Coverage
which applies to the accident as primary coverage;
and
(2) underinsured motor vehicle coverage provided by
one or more sources other than the State Farm
Companies also applies as primary coverage for the
same accident,
then the State Farm Companies will pay the proportion of
damages payable as primary that the maximum amount that
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may be paid by the State Farm Companies as determined
in 1. above bears to the sum of such amount and the limits
of all other underinsured motor vehicle coverage that apply
as primary coverage.
3. Except as provided in 2. above, the Underinsured Motor Vehicle
Coverage provided by this policy applies as excess coverage.
a. If:
(1) this is the only vehicle policy issued to you or any
resident relative by the State Farm Companies that
provides Underinsured Motor Vehicle Coverage
which applies to the accident as excess coverage;
and
(2) underinsured motor vehicle coverage provided by
one or more sources other than the State Farm
Companies also applies as excess coverage for the
same accident,
then we will pay the proportion of damages payable as
excess that our applicable limit bears to the sum of our
applicable limit and the limits of all other underinsured
motor vehicle coverage that apply as excess coverage.
b. If:
(1) more than one vehicle policy issued to you or any
resident relative by the State Farm Companies
provides Underinsured Motor Vehicle Coverage
which applies to the accident as excess coverage;
and
(2) underinsured motor vehicle coverage provided by
one or more sources other than the State Farm
Companies also applies as excess coverage for the
same accident,
then the State Farm Companies will pay the proportion of
damages payable as excess that the maximum amount that
may be paid by the State Farm Companies as determined
in 1. above bears to the sum of such amount and the limits
of all other underinsured motor vehicle coverage that apply
as excess coverage.
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After removing the case to federal court, State Farm moved for summary
judgment, arguing the anti-stacking language of the “other coverage” provision
prevents recovery from the Hyundai policy. The Daughhetees moved for summary
judgment, arguing the “other coverage” provision is ambiguous and should be
construed in favor of coverage. The Daughhetees also asserted that State Farm’s
construction of the “other coverage” provision renders the Hyundai policy illusory.
The district court granted summary judgment for State Farm. It found that the
“other coverage” provision—read in its entirety and context—unambiguously
prohibited UIM stacking. The court ruled that such a construction was not illusory.
This court reviews de novo a grant of summary judgment, viewing the record
most favorably to the nonmoving party and drawing all reasonable inferences for that
party. Chambers v. Pennycook, 641 F.3d 898, 904 (8th Cir. 2011). This court
reviews de novo the district court’s construction of an insurance policy and its
interpretation of state law.2 Arkansas Power & Light Co. v. Hartford Steam Boiler
Inspection & Ins. Co., 257 F.3d 853, 856 (8th Cir. 2001) (insurance policy); Salve
Regina Coll. v. Russell, 499 U.S. 225, 239 (1991) (state law).
“‘Stacking’ refers to an insured’s ability to obtain multiple insurance coverage
benefits for an injury either from more than one policy, as where the insured has two
or more separate vehicles under separate policies, or from multiple coverages
provided for within a single policy, as when an insured has one policy which covers
more than one vehicle.” Niswonger v. Farm Bureau Town & Country Ins. Co. of
Mo., 992 S.W.2d 308, 313 (Mo. App. 1999). Because Missouri does not require UIM
coverage, “the existence of the coverage and its ability to be stacked are determined
2
The parties agree Missouri law applies.
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by the contract entered between the insured and the insurer.” Rodriquez v. General
Accident Ins. Co. of Am., 808 S.W.2d 379, 383 (Mo. banc 1991).
Under Missouri law, general rules of contract construction apply when
interpreting an insurance policy. Todd v. Missouri United Sch. Ins. Council, 223
S.W.3d 156, 160 (Mo. banc 2007). “The key is whether the contract language is
ambiguous or unambiguous.” Peters v. Emp’rs Mut. Cas. Co., 853 S.W.2d 300, 302
(Mo. banc 1993). If unambiguous, the policy will be enforced as written, absent
statutory or policy considerations. Rodriquez, 808 S.W.2d at 383. If ambiguity
exists, the court interprets the policy in favor of the insured. Todd, 223 S.W.3d at
160. “An ambiguity exists when there is duplicity, indistinctness, or uncertainty in
the meaning of the language in the policy. Language is ambiguous if it is reasonably
open to different constructions.” Burns v. Smith, 303 S.W.3d 505, 509 (Mo. banc
2010), quoting Seeck v. Geico Gen. Ins. Co., 212 S.W.3d 129, 132 (Mo. banc 2007).
“Courts should not interpret policy provisions in isolation but rather evaluate policies
as a whole.” Ritchie v. Allied Prop. & Cas. Ins. Co., 307 S.W.3d 132, 135 (Mo. banc
2009). Courts must “endeavor to give each provision a reasonable meaning and to
avoid an interpretation that renders some provisions useless or redundant.” Dibben
v. Shelter Ins. Co., 261 S.W.3d 553, 556 (Mo. App. 2008). Courts must apply “the
meaning which would be attached by an ordinary person of average understanding
if purchasing insurance.” Seeck, 212 S.W.3d at 132, quoting McCormack Baron
Mgmt. Servs., Inc. v. American Guarantee & Liab. Ins. Co., 989 S.W.2d 168, 171
(Mo. banc 1999).
The parties agree that paragraph 1 unambiguously precludes stacking. This
anti-stacking paragraph says UIM coverage in different State Farm policies will “not
be added together” to determine the most an insured is paid. “[T]he maximum
amount that may be paid from all such policies combined is the single highest
applicable limit provided by any one of the policies.” An ordinary reader would
understand this prohibition.
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The Daughhetees argue that the policy is ambiguous because the first sentence
of paragraph 3 refers to “excess” coverage. If a policy has “clauses that claim to
prohibit ‘stacking’ and also contain[s] clauses that appear to authorize ‘stacking,’”
coverage is ambiguous and must be resolved in favor of the insured. Jordan v.
Safeco Ins. Co. of Ill., 2014 WL 128692, at *2 (8th Cir. Jan. 15, 2014).
The Daughhetees focus on one sentence, yet the Hyundai policy must be
evaluated as a whole. See Ritchie, 307 S.W.3d at 135. This court will “endeavor to
give each provision a reasonable meaning.” Dibben, 261 S.W.3d at 556. This court
is “not permitted to create an ambiguity in order to distort the language of an
unambiguous policy.” Rodriquez, 808 S.W.2d at 382. The issue is whether, read in
its entirety, the Hyundai policy unambiguously prohibits UIM stacking.
Paragraph 1 expressly prohibits stacking. Paragraphs 2 and 3 categorize the
UIM coverage as either primary or excess and establish State Farm’s rules for
proportioning payment when third-party coverage exists. Paragraphs 2 and 3 each
direct the reader to the anti-stacking language in paragraph 1: “the State Farm
Companies will pay the proportion of damages payable . . . as determined in 1.
above.” By focusing only on the first sentence of paragraph 3, the Daughhetees
ignore both the remainder of the paragraph and its relation to the rest of the policy.
A reasonable person, reading the Hyundai policy in its entirety, would know the
stacking of UIM policies is prohibited. Accord Ballard v. State Farm Mut. Auto.
Ins. Co., 2012 WL 1085489 (E.D. Mo. Mar. 30, 2012); Lee v. State Farm Mut.
Auto., 2011 WL 5983370 (W.D. Mo. Nov. 30, 2011).
The Daughhetees rely on four decisions finding ambiguity where “excess
coverage” language follows an anti-stacking provision in a UIM policy: Niswonger,
992 S.W.2d at 315; Chamness v. American Family Mutual Insurance Company, 226
S.W.3d 201-02 (Mo. App. 2007); Ritchie, 307 S.W.3d at 137; and Manner v.
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Schiermeier, 393 S.W.3d 58, 64-65 (Mo. banc 2013). The relevant language from
these policies (emphasis added) is:
Niswonger Chamness
“. . . the total limit of the company’s “The total limit of our liability under all
liability under all such policies shall not policies issued to you by us shall not
exceed the highest applicable limit of exceed the highest limit of liability under
liability or benefit under any one such any one policy.
policy. ....
.... But, any insurance provided under this
However, any insurance provided under endorsement for an insured person while
this endorsement for a person insured occupying a vehicle you do not own is
while occupying a non-owned vehicle is excess over any other similar insurance.”
excess of any other similar insurance.”
Ritchie Manner
“1. Any recovery for damages may equal “The total limit of our liability under all
but not exceed the highest applicable policies issued to you by us shall not
limit for any one vehicle under this exceed the highest limit of liability under
insurance or other insurance providing any one policy.
coverage on either a primary or excess ....
basis. . . . But, any insurance provided under this
2. Any coverage we provide with respect endorsement for an insured person while
to a vehicle you do not own shall be occupying a vehicle you do not own is
excess over any other collectible excess over any other similar insurance.”
underinsured motorist coverage.”
In each of these UIM policies, courts found ambiguity where an exception for
a non-owned vehicle follows an anti-stacking provision. An “‘ordinary person of
average understanding’ reasonably could conclude that the ‘other insurance’ clause
set out an exception to this anti-stacking provision ‘in the special situation where the
insured is injured while occupying a non-owned vehicle.’” Manner, 393 S.W.3d at
65, quoting Ritchie, 307 S.W.3d at 137. Paragraph 3 of the “other coverage”
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provision in the Hyundai policy is different. Its first sentence says: “Except as
provided in 2. above, the Underinsured Motor Vehicle Coverage provided by this
policy applies as excess coverage.” This sentence does not create the ambiguity
present in the Manner, Ritchie, Niswonger and Chamness policies.
The Daughhetees also rely on DeMeo v. State Farm Mutual Auto Insurance
Company, 639 F.3d 413 (8th Cir. 2011). A tortfeasor there injured a pedestrian while
operating a non-owned vehicle insured by another company. The tortfeasor was
insured under four State Farm liability coverage policies. Citing the anti-stacking
provisions in each policy, State Farm paid on only one policy. Each policy also had
an “other coverage” provision: “If a . . . non-owned car . . . has other vehicle liability
coverage on it . . . then this coverage is excess over such insurance.” This court held
that the phrase “other vehicle liability coverage” was a specific antecedent restricting
excess coverage to third-party insurance (i.e., the other company’s policy). DeMeo,
639 F.3d at 416. The Daughhetees claim that this rationale controls the interpretation
of their policy. This reads DeMeo too broadly. DeMeo held that an antecedent
phrase before the word “excess” was sufficient to render the policy unambiguous. It
does not follow that an antecedent phrase is necessary for a policy to be
unambiguous. Rather, the policy must be evaluated “as a whole.” Ritchie, 307
S.W.3d at 135.
The Daughhetees also argue that a construction of the Hyundai policy that
prohibits UIM stacking renders the policy illusory. Under Missouri law, an illusory
promise is one that appears to be a promise, but in fact promises nothing. See Cordry
v. Vanderbilt Mortg. & Fin., Inc., 445 F.3d 1106, 1110 (8th Cir. 2006). The district
court correctly ruled that the Hyundai policy is not illusory. Paragraph 1 permits
payment of the highest applicable limit of any one State Farm UIM policy. That the
applicable limits are the same does not render the policy illusory.
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The Daughhetees rely on Buck v. American Family Mutual Insurance Co., 921
S.W.2d 96 (Mo. App. 1996) and Miller v. Ho Kun Yun, 400 S.W.3d 779 (Mo. App.
2013). In both cases, according to the insurer, payments from the tortfeasor should
be offset against UIM coverage. The Buck court found this “duplicitous and
deceptive,” rendering “illusory the very coverage the policy purports to provide.”
Buck, 921 S.W.2d at 98-99. The Miller court found that the offset provision created
“confusion and ambiguity.” Miller, 400 S.W.3d at 793. Here, the parties agree that
the tortfeasor’s payment does not offset the Daughhetees’ UIM coverage.
Because the district court found that the Hyundai policy unambiguously
precluded policy stacking, it did not address State Farm’s alternative argument that
the UIM “Exclusions” in the Hyundai policy bar recovery for any insured other than
Ronald or Melissa Daughhetee. This court similarly declines to address the issue.
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The judgment of the district court is affirmed.
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