Reaching the Outer Limits of Uninsured Motorist Coverage – Maine Supreme Court Holds that Umbrella Insurance Policies Are Not “Motor Vehicle Insurance Policies”

Dickau v. Vermont Mutual Insurance Co., 2014 ME 158, decided by the Maine Law Court on December 31, 2014

The Maine Supreme Court recently held that an umbrella policy, a policy that provides coverage over several other policies, is not a motor vehicle insurance policy (MVIP) for purposes of determining coverage under Maine’s Uninsured Motorist laws. Uninsured motorist coverage (UM coverage) only applies to the primary policy of the insured and not to any additional coverage under an umbrella policy. While most people involved in an auto accident will not be affected, individuals who suffer serious injuries caused by an uninsured or underinsured driver may only be able to recover up to their policy limits on their primary auto policy rather than from both the primary policy and an umbrella policy. 

The facts of the case are this: James Dickau was seriously injured, resulting in damages over $250,000, when his motorcycle was struck by a car driven by Irida Macomber. Macomber had liability coverage of $100,000 while Dickau had an automobile policy, with UM coverage, of $250,000 as well additional liability coverage, up to $1,000,000, through an umbrella policy with Vermont Mutual. Under Maine law, an injured motorist, who is insured under a liability policy on her motor vehicle, may recover damages from her insurer to the same extent that she would have recovered from the liable party, if the liable party had the same coverage as the insured. A mouthful I know. In operation, it works like this. If the liable party’s insurance covers all of the insured’s damages then no additional recovery by the insured from her own insurance company. If, however, the liable party is uninsured (which includes a hit and run accident) or underinsured (meaning that the liable party has less coverage than the injured party), then the insured can recover from her insurance company up to her insurance policy limits less any amounts recovered from the liable party or the liable party’s insurer.

In Dickau’s case, he had two policies, his auto policy of $250,000 and his umbrella policy that covered up to $1,000,000. Under the UM statute, Dickau could collect $150,000 from his primary insurer because Macomber’s insurance covered $100,000 of his damages. The second policy was a bit trickier. Under the umbrella policy, UM coverage was explicitly excluded in the contract but the policy included liability coverage for any damages Dickau caused to another party while operating his motor vehicle (it also included liability for his watercraft, his home, and for any damages he caused more generally). Thus under the statute, if Macomber had his primary coverage and umbrella policy, then, assuming the umbrella policy was included in UM coverage, Dickau could recover from his insurer his damages up to $1,000,000. If not, then Dickau would be capped at $250,000, the total coverage under his primary policy. So the question became, “What is Dickau’s coverage for his injuries under Maine’s UM statute? Is it $250,000 or $1,000,000?”

Vermont Mutual refused Dickau coverage under his policy and so he instituted suit. In court, Dickau’s first argument was that his umbrella policy implicitly covered UM coverage even though the policy explicitly excluded UM coverage. The lower court and the Maine Supreme Court did not agree. Both courts agreed that insurance policy’s language was pretty clear on this point and so no insurance coverage through that route.

Dickau’s second argument was that even if the policy explicitly excluded UM coverage that Maine’s UM statute required Vermont Mutual to cover him. At least from the language of the statute, it appeared that he had a good argument here – the Court was split 4 to 3 on the issue. Majority rules, however, and the Court felt that both the particular characteristics of a MVIP and the implied intent of the statute placed umbrella policies outside the reach of UM coverage.

In the UM statute, the term MVIP is used to describe policies that fall under the umbrella of statute but the term itself is not defined. The Court felt that the term MVIP was a term of art from the insurance industry describing a particular type of insurance policy which covers specific drivers and a specific motor vehicle (or motor vehicles) whereas an umbrella policy applies in a more general way. For example, premiums on primary motor vehicle policies are calculated using certain factors, such as a driver’s age and accident history and a motor vehicle’s age, condition and safety features. While not stated in the opinion, an umbrella policy likely includes some of the same factors as those in a primary policy but in a more general fashion. For the Court, it was the rather general nature of an umbrella policy that put it in another category of insurance than the more specific primary motor vehicle policy. The difference in the nature of a primary policy and an umbrella policy put the umbrella policies outside of the term MVIP.

The Court also felt that the history of the UM statute was one of limiting coverage rather than expanding it. The purpose of the statute is to cover the insured for personal injuries where the liable party is uninsured or underinsured, a purpose that can be fully achieved by applying UM coverage to a motorist’s primary auto policy, which is required by statute.

“We conclude that the Legislature did not intend for [the UM statute] to provide the universe of coverage argued by Dickau; to determine otherwise would be to rewrite [the statute] to accommodate a remedy significantly greater than the Legislature intended.”

In summary, for purposes of determining UM coverage, umbrella policies are not considered MVIPs and therefore excluded from the calculation. This exclusion will likely affect only a small percentage of injured motorists making claims but those affected will also likely be the most seriously injured. Practically speaking, motorists should examine their primary policies to determine if their UM coverage should be increased. It remains to be seen if the legislature will act in response to this ruling. In the past, the legislature has acted in response to a Maine Supreme Court ruling, which it called “clarifying its intent”, but in that case, the legislature took the opportunity to restrict, rather than expanded, the ability of persons to find coverage under the statute, Butterfield v. Norfolk and Dedham Mutual Fire Insurance Company, 2004 ME 124, so I think that it is unlikely the legislature will expand coverage.

Excerpt From the UM Statute

Title 29-A §2902. Uninsured vehicle coverage; insolvency of insurer

1.    A policy insuring against liability arising out of the ownership, maintenance or use of any motor vehicle may not be delivered or issued for delivery in this State with respect to any such vehicle registered or principally garaged in this State, unless coverage is provided in the policy or supplemental to the policy for the protection of persons insured under the policy who are legally entitled to recover damages from owners or operators of uninsured, underinsured or hit-and-run motor vehicles, for bodily injury, sickness or disease, including death, sustained by an insured person resulting from the ownership, maintenance or use of such uninsured, underinsured or hit-and-run motor vehicle.

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