Opinion
1180497
12-31-2020
Darlene HOUSTON v. GEICO CASUALTY COMPANY
Mark Erdberg of Jaffe & Erdberg, P.C., Birmingham, for appellant. David R. Wells and Jud C. Stanford of Mudd, Bolvig, Luke & Wells, LLC, Birmingham, for appellee.
Mark Erdberg of Jaffe & Erdberg, P.C., Birmingham, for appellant.
David R. Wells and Jud C. Stanford of Mudd, Bolvig, Luke & Wells, LLC, Birmingham, for appellee.
On Application for Rehearing
BOLIN, Justice.
APPLICATION OVERRULED; NO OPINION.
Shaw, Wise, Bryan, Sellers, and Mitchell, JJ., concur.
Parker, C.J., and Mendheim and Stewart, JJ., dissent.
PARKER, Chief Justice (dissenting).
Darlene Houston appeals from a summary judgment in favor of GEICO Casualty Company ("GEICO") in her lawsuit based on GEICO's denial of uninsured-motorist ("UM") benefits. When this case was originally submitted to this Court, I authored a no-opinion affirmance of the judgment. However, Houston's arguments in her application for rehearing have led me to conclude that, on original submission, this Court misapprehended this complex area of the law.
This case turns on the issue whether, when an automobile-accident plaintiff has settled with the defendant's automobile-liability insurer, that settlement automatically means that the defendant's liability policy limit was "available" for purposes of calculating the plaintiff's own UM benefits. I believe that Houston's settlement with the insurer of the driver who allegedly injured her did not automatically mean that the driver's policy limit was "available." Accordingly, I would reverse the judgment.
I. Facts
In 2013, Houston was injured in an accident while riding in a vehicle driven by Diana Lampasona. Lampasona had an automobile-insurance policy issued by Victoria Select Insurance Company ("Victoria Select") with a bodily-injury-liability limit of $100,000. The policy excluded coverage of "bodily injury arising out of the use of your auto in the business or occupation of you" (emphasis omitted). Lampasona operated D&L Transport, LLC ("D&L"), a business that was paid to transport Houston on the day of the accident.
Houston sued Lampasona in the Jefferson Circuit Court and later amended her complaint to add D&L as a defendant. When Victoria Select, which was providing Lampasona's defense, learned of D&L's alleged involvement, Victoria Select asserted a reservation of rights as to coverage based on the above business-use exclusion. During mediation of the case, Victoria Select offered Houston $35,000, stating that, if she refused the offer, Victoria Select would seek a judgment declaring that the accident was not covered under Lampasona's policy because of the business-use exclusion. Houston accepted the offer and released Lampasona and D&L.
Houston then amended her complaint, seeking UM benefits from GEICO. Houston and GEICO stipulated that Houston's bodily-injury damages were $85,000. GEICO filed a motion for clarification, arguing that GEICO was entitled to a $100,000 setoff based on Lampasona's liability-policy limit. Houston responded that her injury had not been covered by the policy because of the business-use exclusion and that her settlement with Victoria Select did not establish coverage as a matter of law. Thus, Houston contended that GEICO was entitled only to a $35,000 setoff based on the amount she actually received from Victoria Select. The court agreed with GEICO and entered an order stating that GEICO was "entitled to the full liability limits of $100,000 as a credit prior to [Houston's] being entitled to claim any [UM] benefits."
GEICO moved for a summary judgment, arguing that, because its $100,000 setoff was greater than Houston's damages of $85,000, as a matter of law Houston was not entitled to UM benefits. The court agreed and entered a summary judgment in GEICO's favor. Houston appealed.
II. Analysis
Section 32-7-23(a), Ala. Code 1975, requires automobile insurers to provide coverage "for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured motor vehicles." Section 32-7-23(b) defines "uninsured motor vehicle" in part as follows:
"The term uninsured motor vehicle shall include, but is not limited to, motor vehicles with respect to which:
"....
"(4) The sum of the limits of liability under all bodily injury liability bonds and insurance policies available to an injured person after an accident is less than the damages which the injured person is legally entitled to recover."
(Emphasis added.)
Houston argues that the circuit court erred in entering a summary judgment in GEICO's favor because, she asserts, GEICO failed to demonstrate, as a matter of law, that Lampasona's vehicle was not an "uninsured motor vehicle." Houston contends that the vehicle was uninsured under subparagraph (4) above because, as a result of the business-use exclusion, the limit of liability coverage "available" to her was $0. In response, GEICO argues that it was entitled to a setoff in the amount of Lampasona's policy limit -- $100,000.
A UM insurer is entitled to a setoff in the amount of any liability-policy limit that is available to the plaintiff. Isler v. Federated Guar. Mut. Ins. Co., 594 So. 2d 37, 40 (Ala. 1991). That entitlement is predicated, however, on the availability of the policy limit. Thus, GEICO had to show that Lampasona's policy limit was available to Houston.
In GEICO's motion for clarification, GEICO argued that Lampasona's policy limit of $100,000 was available to Houston because Victoria Select neither denied coverage nor sought a judgment declaring that there was no coverage. However, Victoria Select's failure to deny coverage or to file a declaratory-judgment action indicates merely that the coverage issue, and consequently the availability of Lampasona's policy limit, was not legally resolved before Houston settled with Victoria Select. Victoria Select's election to settle rather than to litigate coverage did not establish coverage as a matter of law.
GEICO further argues that Lampasona's policy limit was available because Houston accepted a settlement from Victoria Select. GEICO relies on State Farm Mutual Automobile Insurance Co. v. Scott, 707 So. 2d 238, 242 (Ala. Civ. App. 1997), in which the Court of Civil Appeals held:
"[ Section] 32-7-23 does not mandate that [a UM] insurer ... pay any portion of its insured's damages that fall within the available limits of another liability policy. Indeed, an injured person electing to accept from a tortfeasor's insurer an
amount less than the limits of coverage under the tortfeasor's liability policy will necessarily forgo any right provided by § 32-7-23 to collect the shortfall from his or her [UM] insurance carrier ...."
(Footnote omitted.) See also Illinois Nat'l Ins. Co. v. Kelley, 764 So. 2d 1283, 1285 (Ala. Civ. App. 2000) (recognizing that UM insurer is entitled to setoff when plaintiff accepts a settlement for less than available policy limit); Omni Ins. Co. v. Foreman, 802 So. 2d 195 (Ala. 2001) (holding that plaintiff who accepted settlement of less than available policy limit could seek UM benefits for damages that exceeded policy limit). GEICO essentially argues that Houston's acceptance of the settlement established the availability of Lampasona's policy limit as a matter of law. However, Scott, Kelley, and Foreman do not support GEICO's argument. Under those decisions, a plaintiff who accepts a settlement when the policy limit is available forgoes the right to collect any shortfall from his UM insurer. Nothing in those decisions indicates that the policy limit is available because the plaintiff accepts a settlement.
Further, nothing in the language of the UM statute supports GEICO's argument. Under § 32-7-23(b)(4), the relevant question is simply whether a particular policy limit is "available." Naturally, the answer to that question depends on the terms of the policy (and sometimes other insurance statutes affecting coverage) as applied to the facts of the case. See Wilbourn v. Allstate Ins. Co., 293 Ala. 466, 468, 305 So. 2d 372, 373 (1974) (noting that courts have held that a motorist is uninsured when the liability policy "fails to cover the injury involved"). Settlement offers, on the other hand, are often not based directly on the terms of the policy or the clarity of coverage under them. Indeed, settlement offers can often be based on an insurer's desire to avoid the expense of litigating coverage issues. Thus, nothing in a plaintiff's acceptance of a settlement from a liability insurer necessarily implies that coverage exists such that the policy limit is available under the UM statute.
In support of its position, GEICO relies on a plurality opinion of this Court in Knowles v. State Farm Mutual Automobile Insurance Co., 781 So. 2d 211 (Ala. 2000). In that case, the plaintiff fell off a flatbed trailer during a "haunted hayride" at a fraternal-lodge event. The trailer was being pulled by a vehicle driven by a volunteer. The lodge had a commercial general-liability insurance policy with a limit of $1 million. The plaintiff sued both the driver and the lodge, and the plaintiff sued his own automobile insurer for UM benefits. It was later determined that, because the driver was a volunteer, his liability was precluded by the Volunteer Service Act, § 6-5-336. Nevertheless, the lodge's insurer agreed to pay the plaintiff $32,500 in settlement of his claims. The plaintiff's UM insurer moved for a summary judgment on the UM claim, arguing that the lodge's policy limit of $1 million had been available to the plaintiff and that his damages did not exceed that amount. The trial court agreed and entered a summary judgment in the UM insurer's favor. On appeal, a plurality of this Court opined that, despite the driver's lack of liability under the Volunteer Service Act, the lodge's policy limit was available because the plaintiff accepted the settlement:
"The fact that [the plaintiff] could not recover damages from [the driver], because of the application of the Volunteer Service Act, would, standing alone, suggest that he might be entitled to benefits under the [UM] provisions of the State Farm policy. See Hogan v. State Farm Mut. Auto. Ins. Co., 730 So. 2d 1157 (Ala. 1998). However, we have before us the additional fact that [the plaintiff] settled his claims against [the lodge] for
$32,500. It follows that if [the driver] was an agent of [the lodge], and [the plaintiff] accepted $32,500 from [the lodge's] liability-insurance carrier, $32,500 out of $1 million in available insurance proceeds, then State Farm would have had no obligation to pay [UM] benefits. Isler v. Federated Guar. Mut. Ins. Co., 594 So. 2d 37, 39-40 (Ala. 1991)."
781 So. 2d at 214 (footnote omitted). The plurality's statement seems to have suggested that a plaintiff's acceptance of a settlement from a tortfeasor's liability insurer precludes a finding that the tortfeasor's policy limit was not available to the plaintiff.
Similarly, in McDole v. Alfa Mutual Insurance Co., 875 So. 2d 279 (Ala. 2003), the plaintiff accepted a settlement from the tortfeasor's insurer that was less than the policy limit. A plurality of this Court, relying on Knowles, concluded that the plaintiff could not claim that the policy limit was not available.
Both Knowles and McDole were plurality opinions, and neither provided any explanation of why a plaintiff's settlement with the tortfeasor's insurer would legally establish the availability of the policy limit. It appears that the rationale underlying the conclusion in those opinions was the doctrine of judicial estoppel, which prevents a party from taking inconsistent positions at different stages of a proceeding. The elements of judicial estoppel are:
"(1) ‘a party's later position must be "clearly inconsistent" with its earlier position’; (2) the party must have been successful in the prior proceeding so that ‘judicial acceptance of an inconsistent position in a later proceeding would create "the perception that either the first or second court was misled" ’ (quoting Edwards v. Aetna Life Ins. Co., 690 F.2d 595, 599 (6th Cir. 1982) ); and (3) the party seeking to assert an inconsistent position must ‘derive an unfair advantage or impose an unfair detriment on the opposing party if not estopped.’ [ New Hampshire v. Maine,] 532 U.S. [742,] 750–51, 121 S.Ct. 1808, 149 L.Ed.2d 968 [(2008)]."
Ex parte First Alabama Bank, 883 So. 2d 1236, 1244–45 (Ala. 2003).
In this case, none of the elements of judicial estoppel were present. As for the first element, Houston's position that Lampasona's liability coverage was not available to her was not "clearly inconsistent" with any position she had taken earlier in the litigation. Nothing in Houston's claims against Lampasona and D&L or her settlement with Lampasona and D&L expressed or necessarily implied a position that Lampasona's insurance policy covered Houston's injury. As for the second element, Houston cannot be said to have been successful in asserting coverage because, as just noted, she did not assert coverage and because there was never a judicial determination of coverage.
Regarding the third element, in Houston's claim against GEICO, her assertion of the unavailability of Lampasona's coverage did not derive an unfair advantage for Houston or impose an unfair detriment on GEICO. If the circuit court had denied GEICO's motion for clarification, GEICO would still have had a full opportunity to litigate the issue of Lampasona's coverage. Houston, as the plaintiff in the UM claim, would have borne the burden of establishing that Lampasona's policy did not cover her injury. State Farm Mut. Auto. Ins. Co. v. Griffin, 51 Ala. App. 426, 431, 286 So. 2d 302, 306 (1973). If Houston had failed to carry her burden, then GEICO would have been entitled to a setoff in the amount of the policy limit. If, on the other hand, Houston had carried her burden of establishing lack of coverage, then GEICO would have been in the same position it would have been in if Victoria Select had denied coverage or obtained a judgment declaring no coverage: GEICO would have received a setoff of $35,000 for the amount that Houston actually received, as Houston concedes, see Houston's brief, p. 15 (conceding that, under GEICO's policy, "[t]he amount payable under this [UM] Coverage will be reduced by all amounts paid by or for all persons or organizations liable for the injury"). Accordingly, the elements of judicial estoppel are not met, and that doctrine does not provide a basis for following Knowles and McDole in this case.
Further, I see no equitable reason why acceptance of a settlement should establish availability as a matter of law. Allowing Houston to seek UM benefits would not permit her to obtain double recovery. Houston concedes that GEICO would be entitled to a $35,000 setoff based on the amount she actually received from Victoria Select. She seeks UM benefits only in the amount of the difference between the stipulated damages and the setoff. Moreover, allowing Houston to recover this shortfall would comport with the purpose of the UM statute -- to allow plaintiffs injured by an uninsured motorist to receive the same protection they would have received had the motorist been properly insured, Criterion Ins. Co. v. Anderson, 347 So. 2d 384, 387 (Ala. 1977). As two commentators have observed:
"When an individual asserting a claim for uninsured motorist insurance had entered into a settlement agreement that included a release for a joint tortfeasor, courts in several states have concluded that the claimant had thereby lost the right to recover uninsured motorist insurance coverage benefits. When the claimant's recovery exceeds the damages sustained, this is certainly a rational result. However, when a claimant has not been fully indemnified, such a settlement should not invariably foreclose the right to indemnification from an otherwise applicable uninsured motorist coverage."
1 Alan I. Widiss & Jeffrey E. Thomas, Uninsured and Underinsured Motorist Insurance § 8.2 (3d ed. 2005) (footnotes omitted; emphasis added).
For these reasons, I believe that Houston's acceptance of the settlement from Victoria Select did not establish the availability of Lampasona's policy limit as a matter of law. Instead, on GEICO's motion for clarification seeking a setoff in the amount of Lampasona's policy limit (which was in substance a motion for a partial summary judgment), GEICO was first required to make a prima facie showing that the policy limit was legally available to Houston. See Ex parte General Motors Corp., 769 So. 2d 903 (Ala. 1999) (explaining that, when summary-judgment nonmovant has burden of persuasion, movant satisfies its burden to make prima facie showing by presenting evidence that there is no triable issue of fact). GEICO failed to make that showing. As explained above, the existence of coverage was not evidenced by Victoria Select's failure to deny coverage or to seek a judicial determination of coverage, nor by Houston's settlement with Lampasona and D&L. Further, even if GEICO had made a prima facie showing, Houston met her summary-judgment responsive burden by submitting substantial evidence of lack of coverage. Houston submitted Lampasona's insurance policy, which contained the business-use exclusion precluding coverage for "bodily injury arising out of the use of your auto in the business or occupation of you" (emphasis omitted). Houston also submitted her deposition testimony that D&L was transporting her when the accident occurred and that D&L was being paid to do so. In addition, Houston submitted affidavit testimony of a Victoria Select claims representative stating that Lampasona was operating D&L and that D&L was being paid to transport Houston at the time of the accident.
Accordingly, there was a genuine issue of material fact regarding whether Lampasona's policy limit was available to Houston. Therefore, I would reverse the summary judgment.