Atkinson v. Penske Logistics, LLC

Present: All the Justices
WILLIAM ATKINSON
v. Record No. 032037 OPINION BY JUSTICE DONALD W. LEMONS
June 10, 2004
PENSKE LOGISTICS, LLC, ET AL.
FROM THE CIRCUIT COURT OF THE CITY OF NORFOLK
John C. Morrison, Jr., Judge
In this appeal, we consider whether the decision by a
single named insured on a business automobile insurance policy
to waive uninsured motorist insurance coverage higher than the
statutory minimum is binding upon all other named insureds on
the policy under Code § 38.2-2206.
I. Facts and Proceedings Below
On May 19, 2000, William Atkinson ("Atkinson"), an
employee of Penske Logistics, Inc., which has since merged
with another company and changed its name to Penske Logistics
Corp., LLC (collectively, "Penske Logistics"), was operating a
tractor-trailer in the course of his employment. The tractor
was owned by Penske Truck Leasing Co., L.P., ("Penske Truck
Leasing") but leased to Penske Logistics. Penske Logistics
owned the trailer. Atkinson was injured in an accident with
an unknown operator of a motor vehicle.
At the time of the accident, Penske Logistics and Penske
Truck Leasing were named insureds on a motor vehicle liability
insurance policy issued by Old Republic Insurance Co. ("Old
Republic"). The parties stipulated that the tractor and
trailer involved in the accident were covered under the policy
and that Atkinson qualifies as an insured under the policy.
In his "First Amended Motion for Declaratory Judgment,"
Atkinson sought a declaratory judgment declaring "the extent
of coverage each carrier owes . . . determin[ing] the total
coverage available, and declar[ing] the priority of payment
between the insurance carriers."1 He also sought a declaration
"that Old Republic is obligated to provide coverage . . . in
an amount of its policy limits, under policy ML 14804-06, of
$2,000,000.00."2 Because the injuries to Atkinson were alleged
to have been caused by a "John Doe" unknown driver, the focus
of the declaratory judgment action was the availability of
uninsured and underinsured motorist ("UM/UIM") coverage.
Old Republic, Penske Logistics, and Penske Truck Leasing
(collectively, "Defendants") filed a motion for summary
judgment "on the grounds that the named insured, Penske Truck
Leasing Co., L.P., et al., effectively rejected the higher
[UM/UIM] coverage for bodily injury equal to its full
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Defendants at trial were Penske Logistics, LLC, Penske
Truck Leasing Company, L.P., Old Republic Insurance Company,
State Farm Mutual Automobile Insurance Company, Allstate
Insurance Company, and Government Employees Insurance Company.
The only policy at issue on appeal was issued by Old Republic.
Etta Brunell was a plaintiff in the trial court but is not an
appellant in this proceeding.
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Atkinson alleged that the tractor and the trailer each
constitutes a separate "auto" under Old Republic's policy;
consequently, the policy limits of $1,000,000 should be
doubled.
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liability coverage of $1,000,000.00 and instead selected
[UM/UIM] coverage equal to Virginia's minimum financial
responsibility limits of $25,000 per person." In pretrial
filings, Atkinson acknowledged that Penske Truck Leasing
waived higher UM/UIM coverage limits but maintained that its
waiver was ineffective to bind Penske Logistics.
Following a hearing at which the trial court received
exhibits and heard testimony from one witness, the trial court
issued a letter opinion which was later memorialized in a
final decree. The trial court held that Penske Truck
Leasing's rejection of higher UM/UIM limits was binding on
Penske Logistics because, under Code § 38.2-2206, "rejection
of the higher limits by one named insured is binding on all
named insureds and all other insureds as defined in § 38.2-
2206(B)." Atkinson appeals the adverse judgment of the trial
court.
II. Analysis
Atkinson argues that the trial court erred in three ways.
First, he maintains that the trial court "erroneously presumed
the existence of an 'agency' relationship between Penske Truck
Leasing Co., L.P. and Penske Logistics, Inc. (even though
'agency' was never pled)." Second, he argues that the trial
court "should have ruled that Penske Logistics, Inc. was
required to execute its own rejection of higher UM[/UIM]
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limits, and that [Code § 38.2-2206(B)] did not authorize one
entity to act for the other." Third, he asserts that the
trial court "erroneously ruled that Penske Logistics, Inc. was
not required to receive separate notice from Old Republic of
its right to reject higher UM[/UIM] limits" under Code
§§ 38.2-2202 and –2206. The Defendants assign cross-error to
the trial court's "ruling that Atkinson could seek a
declaratory judgment on issues not specifically pleaded in
[his motion] for declaratory judgment."
Because the cross-error, if sustained, would end this
appeal, it will be addressed first. Defendants assert that
since Atkinson never alleged in his pleadings that Penske
Truck Leasing could not waive higher UM/UIM coverage for
Penske Logistics, the trial court erred in addressing the
issue at all. Additionally, Defendants assert that Atkinson
did not raise the issue of separate notice to Penske Logistics
in his pleadings. The flaw in Defendants' assignment of
cross-error is readily apparent. Defendants raised the issue
of waiver and the subsumed issue of separate notice in their
responsive pleadings. Had they wished a response in the form
of a pleading from Atkinson, they could have availed
themselves of the provisions of Rule 3:12 which provides:
If a plea, motion or affirmative defense sets
up new matter and contains words expressly
requesting a reply, the adverse party shall
within twenty-one days file a reply admitting
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or denying such new matter. If it does not
contain such words, the allegation of new
matter shall be taken as denied or avoided
without further pleading. All allegations
contained in a reply shall be taken as denied
or avoided without further pleading.
Atkinson responded to Defendants' defenses in memoranda and
argument to the trial court. He was not required to
anticipate Defendants' defenses in his initial motion for
declaratory judgment. The assignment of cross-error is
without merit.
We now consider Atkinson's assignments of error. His
first assignment of error is predicated upon a faulty premise.
He asserts that the trial court "erroneously presumed the
existence of an 'agency' relationship" between Penske Truck
Leasing and Penske Logistics, "even though 'agency' was never
pled." A review of the trial court's two letter opinions and
its final order reveals no mention of agency as a theory
underlying the trial court's ruling. It is clear that the
trial court based its ruling upon statutory interpretation,
not a common law theory of agency. Atkinson's first
assignment of error is without merit.
We will consider Atkinson's second and third assignments
of error together. He maintains that the trial court erred in
holding that Penske Logistics was not required to have
separate notice of its right to reject higher UM/UIM coverage
and further erred in holding that one named insured's waiver
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of UM/UIM coverage binds another named insured under the
policy.
In 1994, we rendered an opinion in the case of State Farm
Mut. Auto. Ins. Co. v. Weisman, 247 Va. 199, 441 S.E.2d 16(1994). The Weisman case involved a family auto policy
listing both husband and wife as named insureds. Both husband
and wife received statutory notice pursuant to Code § 38.2-
2202(B) informing them of their right to UM/UIM coverage equal
to liability coverage and their right to waive such an
increase in coverage. A form permitting rejection of the
higher coverage was provided for husband and wife. However,
only the husband executed the form declining the higher UM/UIM
coverage. Id. at 201-02, 441 S.E.2d at 17-18.
At the time Weisman was decided, Code § 38.2-2206(A),
referring to UM/UIM coverage, stated in pertinent part:
Those limits shall equal but not exceed the
limits of the liability insurance provided by
the policy, unless the insured rejects the
additional uninsured motorist insurance
coverage by notifying the insurer as provided
in subsection B of § 38.2-2202.
Code § 38.2-2206(A)(1994). We held that the statutory
language then utilized required "that each named insured under
an automobile insurance policy" had to reject the higher
coverage in order for the lower limits to be in effect. Id.
at 202-03, 441 S.E.2d at 18–19.
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In an obvious reaction to the Weisman decision, the
General Assembly, in 1995, amended the statutory language at
issue in Code § 38.2-2206(A) to add the provision in effect
today:
Those limits shall equal but not exceed the
limits of the liability insurance provided by
the policy, unless any one named insured
rejects the additional uninsured motorist
insurance coverage by notifying the insurer as
provided in subsection B of § 38.2-2202.
(emphasis added).
Code § 38.2-2206(A)(2002); see also 1995 Va. Acts ch. 189
(adding emphasized language). It is abundantly clear that the
General Assembly specifically intended to permit a single
named insured to bind other named insureds by its rejection of
higher UM/UIM coverage.
Nonetheless, Atkinson argues that because subsection A
also states "[t]his rejection of the additional uninsured
motorist insurance coverage by any one named insured shall be
binding upon all insureds under such policy as defined in
subsection B of this section," we must look to subsection B
for definitions that somehow restrict or modify the ability of
any one named insured to bind other named insureds.
Subsection B of Code § 38.2-2206 states in part:
"Insured" as used in subsections A, D, G,
and H of this section means the named insured
and, while resident of the same household, the
spouse of the named insured, and relatives,
wards or foster children of either, while in a
motor vehicle or otherwise, and any person who
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uses the motor vehicle to which the policy
applies, with the expressed or implied consent
of the named insured, and a guest in the motor
vehicle to which the policy applies or the
personal representative of any of the above.
Atkinson asserts that because the definition of "insured"
includes "the named insured" and thereafter refers
specifically to "the spouse of the named insured" and users
"with the expressed or implied consent of the named insured,"
the proper construction of subparagraph A must require
separate rejection by each named insured. Atkinson's
interpretation is not a reasonable construction of the
statute. To reach Atkinson's conclusion requires the term
"named insured" to be read as though the word "named" is
simply an adjective modifying the noun "insured." However,
"named insured," as used in Code § 38.2-2206, is a term of art
with its own definition, separate from the definition of the
term "insured." A "named insured" is the policyholder. An
"insured" is simply a party who may be covered under the
policy. Not all "insureds" are "named insureds."
Where there is more than one named insured, as in this
case, the language of Code § 38.2-2206(A) specifies that "any
one named insured" can waive higher UM/UIM coverage for "all
insureds." It is clear from subsection A that a single named
insured may waive coverage, regardless of the total number of
named insureds. The definition of "insured" in Code § 38.2-
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2206(B) does not alter who may act to waive coverage.
Instead, subsection B defines who may be affected by the
decision of a single named insured to waive higher UM/UIM
coverage. We hold that the trial court did not err in its
judgment that Code § 38.2-2206(A) permitted Penske Truck
Leasing to waive higher UM/UIM coverage and bind another named
insured, Penske Logistics, by its rejection of the higher
coverage.
Finally, Atkinson acknowledges that Penske Truck Leasing
received notice of the right to purchase higher UM/UIM
coverage or reject such coverage; however, he asserts that
Penske Logistics did not receive such notice. Accordingly, he
argues that the waiver by Penske Truck Leasing could not bind
Penske Logistics in the absence of notice to Penske Logistics.
What Atkinson fails to realize is that neither Penske Truck
Leasing nor Penske Logistics were entitled to notice under the
facts of this case.
Code § 38.2-2206(A) refers to required notice under Code
§ 38.2-2202(B), which further provides in part:
B. No new policy or original premium notice of
insurance covering liability arising out of the
ownership, maintenance, or use of any motor
vehicle shall be issued or delivered unless it
contains the following statement printed in
boldface type, or unless the statement is
attached to the front of or is enclosed with
the policy or premium notice:
. . . .
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After twenty days, the insurer shall be
relieved of the obligation imposed by this
subsection to attach or imprint the foregoing
statement to any subsequently delivered renewal
policy, extension certificate, other written
statement of coverage continuance, or to any
subsequently mailed premium notice.
The policy in question in this case is a renewal policy.
Notice under Code § 38.2-2202(B) is not applicable to renewal
policies. GEICO v. Hall, 260 Va. 349, 354-355, 533 S.E.2d
615, 617-618 (2000).
III. Conclusion
For the reasons stated, the trial court did not err and
the judgment of the trial court will be affirmed.
Affirmed.
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