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A Delaware court has ruled that exclusions in an automobile insurance policy that purported to eliminate or limit underinsured motor vehicle benefits based on whether the named insured owned the underinsured vehicle or the amount of bodily injury coverage paid out under the policy were inconsistent with Delaware’s uninsured/underinsured motorist law and, therefore, were invalid.
Harry Brown suffered serious injuries in a motor vehicle accident while he was a passenger in Taleah Everett’s automobile after she failed to yield the right of way when making a left turn.
Ms. Everett and her father, George O. Rayfield, jointly owned the motor vehicle, which was insured with USAA General Indemnity Company.
The USAA policy purchased by Mr. Rayfield identified Mr. Rayfield as the “named insured” and listed Ms. Everett as an operator of the vehicles insured under the policy. Under the policy, Mr. Brown was a “covered person” for purposes of the accident because he was an occupant of a covered motor vehicle. The policy provided bodily injury coverage in the amount of $100,000 per person and $200,000 per accident and uninsured/underinsured motorist (“UIM”) coverage in the amount of $100,000 per person and $200,000 per accident.
USAA tendered the policy’s bodily injury coverage limits in satisfaction of Mr. Brown’s negligence claim against Ms. Everett.
Mr. Brown, however, maintained that he also was entitled to recover UIM benefits under Ms. Everett’s policy. For its part, USAA contended that, having tendered the policy limits for bodily injury coverage, it was not also required to pay UIM benefits under the policy. It relied on several exclusions in the policy to support its argument:
(i) The definition of underinsured motor vehicle;
(ii) A limit of liability clause; and
(iii) Various non-duplication clauses.
Mr. Brown conceded that those provisions purported to eliminate his right to seek UIM coverage for the accident, but argued that they contradicted Delaware’s UIM law, 18 Del. C. § 3902, and, therefore, were void as a matter of law.
USAA moved for summary judgment.
The USAA Policy
The USAA policy provided that an:
underinsured motor vehicle do[es] not include any vehicle or equipment: (1) owned by or furnished or available for the regular use of you or any family member. . . .
The policy’s limit of liability clause provided that for any one person injured in an accident, USAA’s:
maximum limit of liability for all resulting damages . . . is the limit of bodily injury liability shown on the Declarations for “each person” for UM coverage.
It also provided that the limit of liability:
represent[s] the most [USAA] will pay regardless of the number of covered persons, claims made, vehicles or premiums shown on the Declarations, or vehicles involved in the accident.
The policy’s non-duplication clause provided that:
When a claim, or part of a claim, is payable under more than one provision of this policy, we will pay the claim only once under this policy.
The Court’s Decision
The court denied USAA’s motion.
In its decision, the court first ruled that the policy’s definition of “underinsured motor vehicle” was inconsistent with Section 3902 and, therefore, that it was void.
The court rejected USAA’s argument that the vehicle in which Mr. Brown was riding was not an underinsured motor vehicle as the policy defined that term because Mr. Rayfield had purchased UIM coverage to protect himself, his family members, and occupants of his vehicles from “the negligence of unknown tortfeasors,” and the coverage was not intended to protect occupants of Mr. Rayfield’s vehicle from the negligent acts of the named insured or his family members.
The court reasoned that Delaware law defined an underinsured motor vehicle by reference to the injured party’s damages and the scope of the available bodily injury coverage, “not by reference to whether the motor vehicle in question was owned by the insured or one of his family members.” The court ruled that the statute did “not permit a policy exclusion” that restricted UIM coverage by reference to who owned the vehicle in question. The court added that by excluding from the definition of underinsured motor vehicle a class of vehicles that fit the statutory definition of that term, the policy contravened the statute and the exclusion was “not enforceable.”
The court then decided that the policy’s limit of liability and non-duplication clauses were invalid because they purported to limit UIM coverage based on the amount of bodily injury coverage paid under the policy.
It ruled that the effect of the limit of liability and non-duplication clauses was “to exclude UIM coverage” where the policy’s bodily injury liability limits already had been paid to the injured party. The court said that policy provisions that purported to reduce UIM coverage by the amount of bodily injury liability coverage paid under the same policy were “invalid” given that Delaware law defined UIM coverage “by the extent of the claimant’s injuries, and not by whether the claimant also received coverage under other provisions within the policy.”
Delaware law, the court concluded, did not preclude a claim for UIM coverage once other coverages within the policy were exhausted.
The case is Brown v. Everett, No. N17C-11-101 AML (Del. Super. Ct. June 4, 2019).
Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. Meyerowitz is the director of the Insurance Coverage Law Center and editor-in-chief of journals on insurance law, banking law, bankruptcy law, energy law, government contracting law, and privacy and cybersecurity law, among other subjects. He can be contacted at email@example.com.