Alberta Graf v. State Farm Mutual Automobile Insurance Company

MAINE SUPREME JUDICIAL COURT Reporter of Decisions
Decision: 2016 ME 109
Docket: Som-15-11
Submitted
On Briefs: October 21, 2015
Decided: July 14, 2016
Panel: SAUFLEY, C.J., and ALEXANDER, MEAD, GORMAN, JABAR, and HJELM, JJ.
ALBERTA GRAF
v.
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY
SAUFLEY, C.J.
[¶1] Alberta Graf was injured when the car she was driving was struck from
behind by an underinsured motorist. She claimed uninsured/underinsured motorist
(UM/UIM) coverage and medical payments coverage under two separate State
Farm Mutual Automobile Insurance Company policies. Graf and State Farm
agreed to arbitrate the amount of damages caused by the accident, but to leave to
the court the dispute regarding the extent of coverage, if any, available to Graf
through the identified policies. An arbitration panel determined that the accident
caused Graf $378,000 in damages, $125,000 of which were identified as medical
costs. The Superior Court (Somerset County, Mullen, J.) determined that Graf had
coverage under only one of the State Farm policies; deferred to the arbitration
award as to her actual damages; established the amount owed by State Farm; and
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reduced the arbitration award accordingly upon entry of judgment. We affirm the
court’s determination that only one of the policies covered Graf, but we vacate the
court’s decision regarding the amount due under that policy.1
I. BACKGROUND
[¶2] The parties do not dispute that on August 4, 2005, Alberta Graf was
operating her personal vehicle when it was struck from behind by a vehicle
operated by another motorist who was fully responsible for causing the accident.
At the time of the accident, that motorist had liability motorist coverage with
Progressive Insurance Company in the amount of $50,000.
[¶3] Graf and her husband held two State Farm policies at the time of the
accident. The first (Policy 1) was in Graf’s husband’s name; provided $1,000,000
of UM/UIM coverage; provided $100,000 of medical payments coverage; and did
not cover Graf’s vehicle. The UM/UIM section contained a provision entitled
“When [UM/UIM Coverage] Does not Apply” that stated: “There is no coverage
. . . for bodily injury to an insured [sustained] while occupying a motor vehicle
owned by . . . you, your spouse or any relative if it is not insured for this coverage
1
Graf also appeals from the court’s denial of her request for prejudgment interest and other interest,
costs, disbursements, and fees. We agree with the court’s denial of prejudgment interest based on its
conclusion that State Farm had already paid the policy limit and that there were no facts to show that
State Farm acted in bad faith. See 14 M.R.S. § 1602-B (2015); Simpson v. Hanover Ins. Co., 588 A.2d
1183, 1186 (Me. 1991). We are not persuaded by Graf’s remaining arguments regarding her request for
additional interest, costs, disbursements, and fees.
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under this policy.” The medical payments coverage under Policy 1 contained a
similar provision. The second policy (Policy 2) was in Graf’s name; provided
$300,000 of UM/UIM coverage; provided $100,000 of medical payments coverage
for medical expenses incurred for services furnished within three years of the
accident; and covered Graf’s vehicle. It provided: “The uninsured motor vehicle
coverage shall be excess over and shall not pay again any medical expenses paid
under the medical payments coverage.” It also provided that medical payments
coverage would be denied “to the extent workers’ compensation benefits are
required to be payable.”
[¶4] In October 2009, Graf, with State Farm’s consent, settled her claim
against the other motorist for his policy limits of $50,000 through Progressive
Insurance. In September 2011, Graf filed a three-count complaint against State
Farm in the Superior Court (Somerset County) seeking coverage from State Farm
pursuant to both policies.
[¶5] On August 20, 2013,2 as the parties were preparing to go to trial, Graf
filed a motion for stay of proceedings due to an arbitration clause in the policies,
which the court (Nivison, J.) granted. See generally Uniform Arbitration Act,
2
Between 2011 and 2013 the parties prepared for trial, but in June 2013, Graf’s attorney withdrew
and new counsel was retained.
4
14 M.R.S. §§ 5927-5949 (2015). An arbitration hearing was held on March 18,
2014.
[¶6] Before the hearing, the parties signed an arbitration agreement. The
agreement stated that the purpose of arbitration was to determine whether the
accident caused Graf damages, and if so, in what amount. In the agreement, the
parties left “jurisdiction” with the Superior Court to decide any issues relating to
the amount of UM/UIM coverage available to Graf after the arbitration panel
determined the amount of damages caused by the accident. Specifically, the
agreement stated, “The court shall . . . retain jurisdiction to decide any issues
relating to the amount of UM/UIM coverage available to Alberta Graf if there is a
dispute regarding the available coverage after the panel award.” The agreement
did not specifically direct the arbitration panel or the court to determine the amount
of medical expenses incurred within three years after the accident or the amount of
expenses required to be payable by workers’ compensation.
[¶7] The panel found that the accident caused Graf damages of $378,000. It
determined that $125,000 of these damages were attributable to unspecified
medical bills. After subtracting the $50,000 from the settlement with the other
motorist, it reported that Graf’s net damages totaled $328,000.
[¶8] On April 28, 2014, State Farm filed a motion in the Superior Court to
reduce the panel damage award to available coverage. The court (Mullen, J.) held
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a hearing on October 6, 2014. At the October 6 hearing, State Farm presented
evidence to the court to show that some of Graf’s medical bills resulting from the
accident had been paid by workers’ compensation or were for services obtained
more than three years after the accident. The court granted the motion to reduce
the panel damage award, determining that Graf had UM/UIM coverage pursuant
only to her own policy—Policy 2; that she was not entitled to medical payments
coverage pursuant to either policy; and that, because the available uninsured
coverage on her policy totaled $300,000 and Graf had already received $50,000,
she was entitled to a total of $250,000 from State Farm. Graf filed a timely notice
of appeal. See 14 M.R.S. §§ 1851, 5945 (2015).
II. DISCUSSION
A. Standard of Review
[¶9] Generally, pursuant to the Uniform Arbitration Act, an arbitration
award can be modified by the Superior Court only for certain limited reasons, and
our review of the court’s action is similarly limited. See 14 M.R.S. § 5939;
Randall v Conley, 2010 ME 68, ¶ 11, 2 A.3d 328. Here, however, the court did not
question the accuracy of the panel’s determination regarding damages, and its
judgment did not constitute a modification of an arbitration decision. Nor do the
parties challenge the amount of damages determined through arbitration. Rather,
the parties agreed in the arbitration agreement to allow the court to “retain
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jurisdiction to decide any issues relating to the amount of UM/UIM coverage
available to Alberta Graf.”
[¶10] Thus, the court acted as the original adjudicator when it interpreted
the policies and reduced the amount available to Graf based on its conclusion that
Graf was only insured under one of the policies. Therefore, our standard of review
for confirmation or modification of an arbitration award pursuant to statute is not
applicable here. See Randall, 2010 ME 68, ¶ 11, 2 A.3d 328.
[¶11] Instead, we review the trial court’s interpretation of the insurance
policies de novo. Travelers Indem. Co. v. Bryant, 2012 ME 38, ¶ 8, 38 A.3d 1267.
“If the language of [a] policy is unambiguous, we apply its plain meaning.”
Dickau v. Vt. Mut. Ins. Co., 2014 ME 158, ¶ 13, 107 A.3d 621. We also review the
trial court’s statutory interpretation de novo. Strout v. Cent. Me. Med. Ctr., 2014
ME 77, ¶ 10, 94 A.3d 786.
[¶12] Graf argues that the court erred in determining (1) that Policy 1
excluded coverage for injury sustained in a vehicle not covered by the policy;
(2) that the UM/UIM statute, 24-A M.R.S. § 2902 (2015), entitled State Farm to
offset any judgment entered by the court with the $50,000 settlement Graf received
from the other motorist, after the arbitration panel had already offset its award with
the settlement amount; and (3) that the language in Policy 2 prevented her from
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recovering both UM/UIM coverage and medical payments coverage. We address
each of these arguments in turn.
B. Policy 1
[¶13] Graf argues that the court erred in determining that a valid
“other-owned vehicle” exclusion in Policy 1 prevents her entitlement to
$1,000,000 of coverage under the policy. Graf is included as an insured party
under Policy 1; the question is whether the policy exclusion for accidents occurring
in other-owned vehicles is valid and prevents coverage in this case.
[¶14] Policy exclusions are enforced as long as they are unambiguous, do
not conflict with the UM/UIM statute, and are not against public policy. See Gross
v. Green Mountain Ins. Co., 506 A.2d 1139, 1141-43 (Me. 1986). The
“other-owned vehicle” exclusion in Policy 1 provides: “There is no coverage . . .
for bodily injury to an insured while occupying a motor vehicle owned by or leased
to you, your spouse or any relative if it is not insured for this coverage under this
policy.” We have previously considered almost identical “other-owned vehicle”
exclusions, and have consistently determined that they do not conflict with the
UM/UIM statute and are not against public policy. See Estate of Galipeau v. State
Farm Mut. Auto. Ins. Co., 2016 ME 28, ¶¶ 11-15, 132 A.3d 1190; Lewis v.
Concord Gen. Mut. Ins. Co., 2014 ME 34, ¶ 12 n.9, 87 A.3d 732; cf. Tibbetts v.
Dairyland Ins. Co., 2010 ME 61, ¶¶ 22-24, 999 A.2d 930. Contrary to Graf’s
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assertion, this language unambiguously excludes coverage for injury that occurs in
a vehicle not covered under the policy.3
[¶15] Because the exclusion is not ambiguous, does not conflict with the
UM/UIM statute, and is not against public policy, the exclusion is valid. The court
did not err in denying coverage under Policy 1.
C. Offset of the Other Motorist’s Payment
[¶16] Graf argues that it was improper for the court to offset available
coverage with the $50,000 of settlement proceeds because the arbitration panel had
already offset the damages award with the same settlement amount.
[¶17] “In the event of payment to any person under uninsured vehicle
coverage . . . the insurer shall be entitled to the proceeds of any settlement or
recovery from any person legally responsible for the bodily injury . . . .”
24-A M.R.S. § 2902(4). When the total damages are greater than the amount of
UM/UIM coverage, we have previously determined that this language mandates
that insurers offset the amount of coverage available in the UM/UIM policy, rather
than the amount of damages incurred, by the amount actually paid by the
tortfeasor. Farthing v. Allstate Ins. Co., 2010 ME 131, ¶ 7, 10 A.3d 667. We have
3
Graf argues that because the policy language is found under a heading “When [UM/UIM
Coverage] Does Not Apply,” the exclusion only applies when one has not opted into UM/UIM coverage.
She further argues that the language is ambiguous. We are not persuaded. If the provision only applied
to an insured who was not entitled to UM/UIM coverage in the first place, there would be no reason to list
the exclusion. As the policy language is not reasonably susceptible to different interpretations, it is not
ambiguous. Cambridge Mut. Fire Ins. Co. v. Vallee, 687 A.2d 956, 957 (Me. 1996).
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explained that the reason for doing so is that “[t]he goal of the UM statute [i]s to
provide an injured insured the same recovery [that] would have been available had
the tortfeasor been insured to the same extent as the injured party.” Tibbetts, 2010
ME 61, ¶ 12, 999 A.2d 930 (quotation marks omitted). Thus, it was proper to
offset the amount of available coverage with the other motorist’s payment, with the
coverage then applied against the total damages determined by the arbitration
panel.
[¶18] Mathematically, however, the offset applies only once. After the
issue of medical payments coverage, addressed below, has been resolved, the court
will determine the remaining damages and compare that to the total UM/UIM
coverage available to determine how to offset the other motorist’s payment.
Because Graf has received $50,000 of the $300,000 she was entitled to pursuant to
Policy 2’s UM/UIM coverage, she will only be able to recover a maximum of
$250,000 in UM/UIM coverage.
D. Policy 2
[¶19] Graf is an insured party under Policy 2, and she is entitled to
UM/UIM coverage under that policy. The relevant question here is whether Graf
is also entitled to any medical payments coverage under Policy 2, separate from
UM/UIM coverage.
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[¶20] Pursuant to the policy, Graf is entitled to $100,000 of medical
payments coverage “for services furnished within three years of the date of the
accident.” That section also provides: “There is no coverage . . . to the extent
workers’ compensation benefits are required to be payable.” The UM/UIM
coverage provides: “The uninsured motor vehicle coverage shall be excess over
and shall not pay again any medical expenses paid under the medical payments
coverage.”
[¶21] The language at issue here—that “coverage shall be excess over and
shall not pay again”—requires the medical payments coverage to be determined
first and precludes the duplication of payment. See Ostransky v. State Farm Ins.
Co., 566 N.W.2d 399, 401 (Neb. 1997) (“State Farm’s position is clear: No insured
can recover for medical expenses under the underinsured motorist coverage if such
expenses have already been paid by the medical payment coverage.”). Thus,
pursuant to the policy, any damages that fall within the $100,000 medical
payments coverage should be paid first and remaining damages should be paid
from the UM/UIM coverage.4
4
The math would work as follows. Graf has up to $100,000 of medical payments coverage for
medical costs that fall within the policy descriptions, and she has up to $250,000 in available UM/UIM
coverage (policy limits of $300,000 less the other motorist’s payment of $50,000). See Farthing v.
Allstate, 2010 ME 131, ¶ 7, 10 A.3d 667. Graf’s damages total $378,000, which is actually less than the
potential maximum of her available payments and coverage of $400,000 ($100,000 in medical payments
coverage and $300,000 from the combined payments of the other motorist and the UM/UIM coverage). If
all of the medical costs fall within the medical payments coverage, Graf would be entitled to $100,000 in
medical payments coverage. That would leave $278,000 in remaining damages to be paid from the other
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[¶22] The arbitration panel did not determine the amount of medical
expenses that were incurred within three years after the accident or whether any of
these expenses were required to be payable by workers’ compensation. Instead,
the parties presented to the court the limited issue of whether the medical bills
identified by the arbitration panel were covered by the medical payments provision
because they fell within the period of coverage and were not offset by workers’
compensation.5 Because the court found the medical payments coverage not to be
applicable, it did not reach this question, and the issue must be remanded to the
Superior Court to determine how much, if any, of the $125,000 of
arbitration-awarded medical expenses were incurred within three years after the
accident and were not required to be paid by workers’ compensation. After the
court makes this determination, the parties should be able to calculate State Farm’s
remaining obligation. If not, pursuant to the original arbitration agreement, the
motorist and the UM/UIM coverage. Because she has received $50,000 from the other motorist and
$100,000 from the medical payments coverage, her remaining damages of $228,000 could be fully
covered by her UM/UIM coverage. She would receive $328,000 total from State Farm ($100,000 in
medical payments and $228,000 in UM/UIM coverage) and $50,000 total from the other motorist, fully
covering her total damages of $378,000.
On the other hand, if none of the medical bills fall within the medical payments coverage, that would
leave $378,000 in damages to be paid from the other motorist and the UM/UIM coverage. Thus, she
would be entitled to a total of $250,000 from State Farm, augmenting the $50,000 from the other
motorist, for a total of $300,000.
5
The accident occurred in 2005, and Graf underwent surgery in 2011, beyond the point of medical
payments coverage. However, other medical costs may have been incurred within the three-year limit.
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court will determine the amount of coverage available to Graf and enter judgment
accordingly.
The entry is:
Judgment affirmed in part. Remanded to the
Superior Court for proceedings consistent with this
opinion.
On the briefs:
N. Laurence Willey, Jr., Esq., Willey Law Offices, Bangor, for
appellant Alberta Graf
James B. Main, Esq., Hoy & Main, P.A., Gray, for appellee
State Farm Mutual Automobile Insurance Company
Somerset County Superior Court docket number CV-2011-18
FOR CLERK REFERENCE ONLY