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Mar 13, 2014

Who is the "Insured" in a UM Wrongful Death Claim: UM Exclusions Limiting Stacking Following Floyd-Tunnell v. Shelter Mut. Ins. Co.

ABSTRACT: Even under a "potential liability" standard, there is no liability coverage for a settlement where the applicable law does not recognize the claim as a viable cause of action.

In October 2011, Jerry Floyd, father and husband to the plaintiffs, died from injuries sustained in an automobile collision with a car driven by an uninsured driver, Eric Krugler. Floyd was a named insured (along with his wife Doris, one of the plaintiffs) on three policies issued by Shelter Mutual Insurance Company on the Chevrolet Cavalier Floyd was driving at the time of the accident and two other cars owned by the Floyd family. The policies each provided for uninsured motor vehicle coverage of uncompensated damages up to $100,000: "If the owner or operator of an uninsured motor vehicle is legally obligated to pay damages, we will pay the uncompensated damages; but this agreement is subject to all conditions, exclusions, and limitations of our liability, stated in this policy."

A number of facts were undisputed by Shelter: that plaintiffs had sustained damages of at least $400,000 as a result of Floyd’s wrongful death, that Krugler’s negligence caused the damages, and that Krugler’s vehicle was an “uninsured motor vehicle” under the Shelter policy definitions. However, Shelter argued that a partial exclusion contained in each policy limited the amount it was required to pay out to the plaintiffs. The partial exclusion stated:

PARTIAL EXCLUSIONS FROM COVERAGE E

In claims involving the situations listed below, our limit of liability under Coverage E [UM coverage] is the minimum dollar amount required by the uninsured motorist insurance law and financial responsibility law of the state of Missouri:

. . . .

(3) If any part of the damages are sustained while the insured is occupying a motor vehicle owned by any insured, the spouse of any insured, or a resident of any insured's household; unless it is the described auto.

As a result, Shelter only paid out $150,000 – the max policy limit of $100,000 from the Cavalier policy, and the Missouri statutory minimum of $25,000 from each of the other two vehicle policies. Plaintiffs filed suit seeking the full $100,000 on each policy. Defendant Shelter moved for summary judgment, and the circuit court found for Shelter and granted the motion. Plaintiffs appealed, and on appeal, the Western District Court of Appeals, sitting en banc, split and narrowly affirmed the circuit court’s opinion in a 6-5 decision. See Floyd-Tunnell v. Shelter Mut. Ins. Co., 2013 Mo. App. LEXIS 1346, 2013 WL 5978452 (Mo. App. W.D. Nov. 12, 2013).

The majority found that the plain language of the partial exclusion limited UM coverage where any part of the damages (specifically, the money owed to an insured for a death sustained by that insured and caused by the ownership or use of an uninsured motor vehicle), was sustained while the insured was in a vehicle owned by any insured but not the vehicle listed on the declarations page. See Id.at 12-13. The majority rejected appellants’ argument that Doris Floyd was the “insured” for the purposes of determining application of the partial exclusion, holding “[t]hat Doris Floyd is among the class of persons authorized by statute to assert a cause of action for Jerry Floyd's wrongful death does not transform her into ‘the insured’ for purposes of determining the extent of the UM coverage for his wrongful death.” Id.at 10. Jerry Floyd’s status as “the insured” and his presence in occupying a car owned by an insured at the time damages were sustained thus resulted in application of the partial exclusion for the policies held on the two cars Jerry Floyd was not driving at the time of the injury.

The majority also rejected the argument that the policy was ambiguous, holding that, when the policies were read as a whole, the language of the policy discussing UM coverage, the existence of exclusions and limitations, and the partial exclusion all indicate that the partial exclusion was not susceptible to any different interpretations.

The dissent disagreed with these two primary issues. The primary dissenting opinion opined that the Shelter insurance policies were irreconcilable with the application of Missouri’s wrongful death laws because the damages contemplated in the insuring agreement and partial exclusion only compensate physical injury losses owed to the decedent and do not address the pecuniary damages owed to the statutory death beneficiaries under R.S. Mo. 537.080 and 537.090. In addition, both the primary dissenting opinion and the concurring dissenting opinion cite the partial exclusion clause’s alleged ambiguity as a reason for rejecting the circuit court’s opinion.

Given the 6-5 split at the appellate level, this case seems to be a likely candidate for appeal to the Missouri Supreme Court. Insurers should closely monitor the progress of this case. Even if the case is not appealed or the Missouri Supreme Court affirms the appellate court’s decision, the narrow margin by which the appellate court affirmed the circuit court should serve as notice to insurers to be aware of a potential shift in position in the near future.