Written by Helen Jhun, Esq.
Edited by Bill Pfund, Esq.
In motor vehicle accidents involving very serious injuries where the wrongdoing party has no liability coverage or limited liability coverage, injured parties must seek uninsured and underinsured coverage from any other policy which may be available, wherever they can. There are various ways an injured party can be considered an “insured” under these UM/UIM policy. The Virginia Court of Appeals very recently decided on a case which limits just how far the Court would be willing to extend the coverage.
In Virginia, uninsured motorist coverage is meant to protect an insured motorist, his family and permissive users of his vehicle against the peril of injury by an uninsured wrongdoer, not to provide insurance coverage upon each and every uninsured vehicle to everyone. Bayer v. Travelers Indem. Co., 221 Va. 5, 267 S.E.2d 91, 91 (Va. 1980).
In the recently decided case of Levine v. EmpIrs Ins. Co., the United States Court of Appeals for the Fourth Circuit looked to this definition of UIM coverage and limited coverage under a Third Party’s UIM policy to the vehicles strictly identified in the policy’s Declarations Pages, refusing to extend coverage to include the broader definition found under Virginia’s required UIM statutory endorsement. 218 U.S. App. LEXIS 9146 (April 12, 2018). Specifically, the Court addressed the question as to how to interpret the policy where Virginia’s required UIM endorsement has a definition of “covered auto” that is broader than the UIM limitation of the Declarations Pages.
Background Facts
Purnell Furniture Services was a Virginia furniture company who hired Carlos Bolanos Castillo and Marco Gabarette as independent contractors to deliver furniture in Northern Virginia. Purnell generally had independent contractors use their own vehicles for deliveries, but in this particular case, Purnell allowed Castillo and Gabarette to use a vehicle Purnell had rented from Penske. Unfortunately, during the course of the delivery, Castillo was killed and Gabarette was injured when another motorist struck the Penske rental vehicle. Castillo’s estate and Gabarette brought suit against the other driver they alleged was at fault.
The at fault driver had limited liability coverage. Unfortunately, Castillo and Gabarette also had no or limited UIM coverage under their own policies. Therefore, they looked to Purnell Furniture’s policy to seek Third Party UIM coverage under Purnells’ policy with Wausau insurance.
Wausau Policy
As with many commercial automobile liability policies, Purnell had a policy with Wausau which included a Declarations Page, with a “Schedule of Coverages and Covered Autos.” In the Schedule, those vehicles for which the UIM coverage applied were “owned vehicles only.” The policy only listed three vehicles under “owned vehicles,” none of which were the rented Penske truck.
However, in addition to the Schedule, the Declarations Pages also referenced the Virginia UIM endorsement for the limits of that particular coverage. This endorsement provided that Wausau would “pay in accordance with the Virginia Uninsured Motorists Law, all sums the insured is legally entitled to recover as damages from the owner or operator of an uninsured motor vehicle.” For UIM purposes, an insured party is defined as “[a]nyone . . . occupying a covered auto.” The UIM endorsement defines “covered auto” as “a motor vehicle, or a temporary substitute, with respect to which the bodily injury or property damage liability coverage of the policy applies.”
Under the definition of “covered auto” found in the Declarations Pages, the Penske truck would not be covered. Under the definition of “covered auto” found in the Virginia UIM endorsement, the Penske could be covered.
Court’s Ruling
The Court ultimately ruled that the definition governing the Declarations Pages, where the Schedule enumerated which vehicles were covered by the UIM policy controlled. In its finding, the Court relied heavily on two Virginia Supreme Court cases. In the cases of Bayer v. Travelers Indemn. Co., 221 Va. 5, 167 S.E.2d 91, 91 (Va. 1980) and Nationwide Mut. Ins. Co. v. Hill, 247 Va. 78, 439 S.E.2d 335, 337 (Va. 1994), the Supreme Court was clear that the designating language of the declarations page determines the applicability of UIM coverage. In both cases, the Supreme Court addressed the issue of whether insurance policies can limit the definition of a “covered auto” when Virginia’s statutory endorsement had a broader definition. In both cases, the Supreme Court allowed policies to limit their definition of “covered auto.”
In responding to the Plaintiff’s argument that the two definitions were contradictory and thus should be ruled ambiguous, the Court in Levine held the two provisions could be interpreted together. It ruled that the UIM endorsement was generic, whereas the Declarations page was specific. Under Virginia’s principles of contract construction, the specific trumps the general, and therefore, the Declarations Pages trumped the Endorsement. Furthermore, the Policy’s UIM endorsement was a creature of the State Corporation Commission, which required insurers to use their specific language. The requirement to include that language did not prevent the insurance company from being able to negotiate contracts. The Court could not ignore the language which the parties contracted to. Levine citing Bartolomucci v. Fed. Ins. 289 Va. 361, 770 S.E.2d 451 (Va. 2015).
The rationale behind this Court’s decision was to give effect to the meaning found in the Bayer case, which held that uninsured motorist coverage is meant to protect an insured motorist, his family and permissive users of his vehicle against the peril of injury by an uninsured wrongdoer, not to provide insurance coverage upon each and every uninsured vehicle to everyone. To do so, the Court must look to the Declarations Page to find the limits of coverage.