Maine Supreme Court Strikes Down Policy Limitation on Uninsured Motorist Coverage

October 4, 2004

The Maine Supreme Judicial Court in a 5-2 vote has ruled that insurers may not restrict their liability under uninsured motorists coverage to less than what Maine law requires.

The Sept 30 ruling in Butterfield v. Norfok & Dedham Mutual Fire Insurance Co. involved a claim by Gregory Butterfield for damages related to the death of his 21-year old daughter, who was killed in an accident in which the driver of the car his daughter was in as well as the other driver were uninsured.

Norfolk & Dedham Mutual Fire Insurance Co. denied Butterfield´s claim, saying the daughter was not covered because she did not reside with her father and thus was not “a named insured” under the policy.

Butterfield´s policy defined family members eligible for uninsured motorist recovery as relatives living with the insured. Butterfield´s daughter was living with her mother at the time of her death and was insured under her mother´s auto liability policy, which paid the $50,000 uninsured motorist limit.

A Cumberland County Superior Court judge ruled in favor of Butterfield and the insurer appealed.

The Supreme Judicial Court last week has denied Norfolk´s appeal because, it said, the insurer’s definition and related coverage under its uninsured motorist policy failed to meet the minimum coverage standards set by statute.

The high court had previously ruled that under Maine’s uninsured motorist statute, liability extends to cover not only named insureds, but any individual for whom a named insured is legally entitled to bring a claim for damages caused by an uninsured motorist.

The court said this Butterfield case raised the question of whether an insurer may use limiting language in an uninsured motorist policy, restricting its coverage to claims brought by named insureds, for injuries sustained by named insureds.

This ruling provides the answer: insurers may not limit uninsured motorist coverage by adding restrictive language to their uninsured motorist policies.

The court noted that it always construes conditions and exceptions of the insurance contract strictly against the insurer and liberally in favor of the insured.

Norfolk’s uninsured motorist policy did not precisely track Maine’s uninsured motorist law. Under Maine’s uninsured motorist statute, insurance policies issued in Maine must include “protection of persons insured thereunder who are legally entitled to recover damages from . . . uninsured, underinsured or hit-and-run motor vehicles, for bodily injury.”

Norfolk’s policy deviated by limiting uninsured motorist coverage to damages an insured is legally entitled to recover because of bodily injury “sustained by an insured.”

Norfolk suggested that the broader coverage is permissible under the statute, but not required. But the courtr reejcetd this argument. “This makes little sense as Maine’s uninsured motorist statute outlines the bare requirements that an insurer must satisfy prior to issuing a policy in Maine,” the court stated..

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