NAII Hails Vt. Supreme Court Decision in Pair of UIM Cases

February 5, 2003

The National Association of Independent Insurers (NAII) has endorsed two recent decisions by the Vermont Supreme Court that settled two insurance-related cases dealing with underinsured motorist (UIM) coverage, by ruling that insurance policy and state law take precedent in settling such claims.

“We were involved in both of these cases, and are gratified to see that the Vermont Supreme Court has deferred to state law in settling them,” Gerald Zimmerman, NAII senior counsel, remarked. “The Court’s view of the issue is a clear victory for the integrity of the insurance contract.”

The NAII bulletin described the facts and the decisions in the two cases as follows:

In its Jan. 31 ruling on Derosier V. Pawtucket Mutual, the high court reversed a superior court ruling that the liability limits in accidents with multiple injured parties be compared with the per accident rather than per-person liability limits of the injured policyholders’ uninsured/underinsured (UM/UIM) coverage to determine whether the at-fault driver was underinsured.

The at-fault driver in the Derosier case reportedly had $60,000 single limit liability coverage. Two claimants were injured, with one receiving $59,000 and the other $1,000. The driver was insured for UM/UIM under his mother’s policy with $50,000 per person / $100,000 per accident split UM/UIM limits. Derosier argued that because there were multiple injured parties, it was necessary to compare the per-accident UM/UIM limit with the at-fault driver’s liability limits because he was underinsured by $40,000.

The Supreme Court rejected this argument based on the plain language of state law defining underinsured motor vehicle coverage, and the UM/UIM endorsement in claimant’s insurance policy.

The Court also decided Colwell v. Allstate, and held that an at-fault driver’s vehicle is not underinsured when the driver’s liability limits are equal to or greater than the claimant’s UM/UIM limits — even if the UM/UIM claimant receives something less than his UM/UIM limits from the driver due to coverage exhaustion by multiple liability claimants.

The Court essentially agreed with the key points of the arguments against coverage presented by the NAII in its amicus brief – that when a single injured policyholder claims UIM coverage, comparing per-accident liability limits would not be consistent with either state law or the claimant’s insurance policy.

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