Hayes-Schneiderjohn et al v. Geico General Insurance Company
Filing
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MEMORANDUM AND ORDER - IT IS HEREBY ORDERED that Defendant GEICO General Insurance Companys Motion for Summary Judgment, (ECF No. 18 ), is GRANTED, and Plaintiffs claims are DISMISSED WITH PREJUDICE. A separate judgment will accompany this Memorandum and Order. Signed by District Judge Jean C. Hamilton on 4/10/15. (KJS)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
COLLEEN A.
HAYES-SCHNEIDERJOHN, et al.,
Plaintiffs,
v.
GEICO GENERAL INSURANCE
COMPANY,
Defendant.
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No. 4:14-CV-01547-JCH
MEMORANDUM AND ORDER
This matter is before the Court on Defendant GEICO General Insurance Company’s
(“Geico”) Motion for Summary Judgment. (ECF No. 18). The Motion has been fully briefed and
is ready for disposition.
BACKGROUND
The essential facts are not in dispute. “On September 16, 2009, Plaintiff Colleen HayesSchneiderjohn [(“Hayes-Schneiderjohn”)] was driving her 2002 Infiniti QX4 on the Daniel
Boone Bridge in Saint Charles, Missouri.” (Geico Uncontroverted Material Facts, “GUMF,”
ECF No. 20, ¶ 1). At that time, the erratic driving of an unknown driver caused traffic to slow.
Id. ¶ 3. Timothy Wylder, a driver for Beckmann Distribution Services, Inc. (“Beckmann”), failed
to slow down with the traffic and rear-ended Hayes-Schneiderjohn’s car. Id. ¶¶ 2-4. HayesSchneiderjohn and her husband, Plaintiff John Schneiderjohn (“Schneiderjohn”) then filed suit
against Wylder and Beckmann for personal injuries and loss of consortium on January 19, 2012.
Id. ¶ 5. On August 20, 2013, that suit settled for $100,000, an amount paid to Plaintiffs by an
insurance company on behalf of Beckmann and Wylder. Id. ¶¶ 8-9.
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At the time of the accident, Plaintiffs were covered under a motor vehicle insurance
policy issued by Geico (the “Policy”), which included uninsured motorist coverage (“UM
Coverage”). Id. ¶ 11. “The Policy provided a $50,000 per person UM Coverage limit, which,
when stacked for the two vehicles insured under the [P]olicy, combines for a total of $100,000 in
available UM Coverage.” Id. ¶ 13. On June 5, 2014, Plaintiffs filed suit against Geico “for
uninsured motorist coverage, loss of consortium and vexatious refusal to pay.” (Plaintiffs’
Uncontroverted Material Facts, “PUMF,” ECF No. 25, ¶ 2). Geico timely removed the case to
this Court on September 10, 2014, (Removal Notice, ECF No. 1), and now seeks summary
judgment against Plaintiffs.
SUMMARY JUDGMENT STANDARD
Under the Federal Rules of Civil Procedure, courts must “grant summary judgment if the
movant shows that there is no genuine dispute as to any material fact and the movant is entitled
to judgment as a matter of law.” Fed. R. Civ. P. 56(a). Summary judgment is particularly
appropriate in a situation such as this one, in which there are no factual disputes and disposition
of the motion turns on the purely legal question of insurance policy interpretation.
DISCUSSION
Geico contends it is entitled to summary judgment because Plaintiffs’ claims are subject
to “a liability limitation that provide[s] a setoff of the policy limits for ‘all amounts (a) paid by
or for all persons or organizations liable for the injury . . .’” (Motion at 2). Since Plaintiffs
have already recovered $100,000 in settlement of their lawsuit against Wylder and Beckmann,
this setoff provision precludes recovery under the Policy, which has a $100,000 limit in this
particular case. Id. at 3. Moreover, the setoff provision is not contrary to Missouri public policy
and cannot be avoided on that basis. Id. at 4.
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Plaintiffs respond that the setoff provision is ambiguous and therefore should be
construed against Geico. (Plaintiff Response, ECF No. 23, at 4-8). The provision is ambiguous,
Plaintiffs maintain, both because of the way in which it is arranged and because its language is
unclear. Id. at 5-8. Plaintiffs contend in the alternative that the setoff provision violates Mo. Rev.
Stat. § 379.203, under which every car insurance policy in Missouri must have at least $25,000
in UM Coverage. Id. at 8. Any attempt by an insurance company to reduce coverage below the
statutory minimum violates the public policies underlying the statute. Id. at 10.
A. Whether the Setoff Provision is Ambiguous
It is first necessary to determine whether the setoff provision can be applied to reduce
Plaintiffs’ recovery, which requires interpretation of the Policy. In Missouri, the language of an
insurance policy must “be given its plain meaning. If the language is unambiguous the policy
must be enforced according to such language.” Robin v. Blue Cross Hosp. Serv., Inc., 637
S.W.2d 695, 698 (Mo. 1982) (en banc) (internal citations omitted). Where policy language is
ambiguous, however, the language “will be construed against the insurer.” Id. “In an insurance
policy, ambiguity arises when there is duplicity, indistinctness or uncertainty of meaning. When
the language of an insurance policy is reasonably and fairly open to different constructions it is
ambiguous.” Nixon v. Life Investors Ins. Co. of Am., 675 S.W.2d 676, 679 (Mo. Ct. App. 1984)
(internal citation omitted).
The setoff provision appears in the “Limits of Liability” subsection of the Policy’s UM
Coverage section as follows:
LIMITS OF LIABILITY
Regardless of the number of autos or trailers to which this policy applies:
1. The limit of liability for Uninsured Motorists Coverage stated in the
declarations as applicable to “each person” is the limit of our liability
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for all damages, including those for care or loss of services, due to
bodily injury to one person as the result of one accident.
2. The limit of liability stated in the declarations as applicable to “each
accident” is, subject to the above provision respecting each person, the
total limit of our liability for all such damages, including damages for
care and loss of services, because of bodily injury to two or more
persons as the result of one accident.
The amount payable under this Coverage will be reduced by all
amounts:
(a) Paid by or for all persons or organizations liable for the injury;
(b) Paid or payable under the Bodily Injury Coverage; or
There will be no reduction in the amount payable under this coverage
for amounts paid or payable for medical payments coverage, workers’
compensation or any disability benefits or similar law.
(Policy, ECF No. 20-10, at 16).
Plaintiffs contend first that the format of the setoff provision creates an ambiguity.
Specifically, they contend that the setoff provision seems to modify only subparagraph 2, which
means only “the applicable ‘each accident’ UM Coverage limit is reduced by specified
amounts.” (Plaintiff Response at 6). The setoff therefore does not apply “to the ‘per person’
limits available to Hayes-Schneiderjohn.” Id. Geico responds that the “Coverage” referenced in
the opening line of the setoff provision is plainly UM Coverage, and the setoff provision
therefore applies to UM Coverage as a whole. (Geico Reply, ECF No. 30, at 4-5). Focusing
solely on the placement of the provision distorts the clear meaning of the provision and violates
the principle that “courts are to ‘read insurance policies as a whole to determine the parties’
intent . . . .’” Id. (quoting Doe Run Res. Corp. v. Certain Underwriters at Lloyd’s London, 400
S.W.3d 463, 474 (Mo. Ct. App. 2013)).
Plaintiffs are correct that the format of the setoff provision is confusing. There is no
separate numbering or other mode of demarcation to indicate that the first phrase of the setoff
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provision, “The amount payable under this Coverage[,]” is intended to establish a new line of
limitations. Because of this lack of demarcation, the setoff provision appears at first glance to be
a continuation of, and therefore a modification only of, the paragraph establishing limitations for
“each accident.” But this poor drafting is not enough to create an ambiguity because, despite the
confusing format, the actual language used is susceptible to only one reasonable construction.
On a closer reading, subparagraph 2 and the setoff provision are too incongruous to relate
to each other in the sense suggested by Plaintiffs. Subparagraph 2 sets definite limits on payouts
resulting from bodily injury to two or more persons. The setoff provision then limits “[t]he
amount payable under this Coverage[,]” which is plainly a reference to UM Coverage in general.
This reference to UM Coverage is an indication that the setoff provision applies to all UM
Coverage claims. Moreover, the “each accident” and “each person” limits expressly relate to
each other under the language of the provision.1 They are not distinct categories of recovery such
that a setoff could apply to one and not the other, but rather distinct limitations on claims under
UM Coverage. Plaintiffs’ effort to separate them into two entirely distinct categories and apply
the setoff provision to one, while it has some facial appeal due to the formatting, is therefore not
a reasonable way to construe the provision. Thus, while the Court has some reservations about
the lack of the setoff provision’s clarity, it is not reasonably susceptible to differing constructions
based on the formatting.
Nor are Plaintiffs’ efforts to inject ambiguity into the language itself availing. Plaintiffs
contend that “[t]he policy states the UM coverage limits will be reduced by all amounts paid by
or for all persons or organizations liable for the injury and paid or payable under the Bodily
Injury Coverage, or there will be no reduction in the amount payable under this coverage for
Subparagaph 2 makes the each accident limit “subject to the above provision respecting each
person . . . .”
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amounts paid or payable for medical payments coverage, workers compensation or any disability
benefits or similar law.” (Plaintiff Response at 7). It relies for this position in part on the “; or”
that follows the “Paid or payable under the Bodily Injury Coverage . . . .” Id. Defendants respond
that Plaintiffs’ position “is at war with a plain reading of the set-off provision because there is no
and linking subsections (a) and (b) of the set-off provision.” (Geico Reply at 6).
Geico has the better of this argument because Plaintiffs’ construction is not a reasonable
one. First, Geico is correct to point out that Plaintiffs’ reading of the setoff provision would
require a conjunctive “and” to be possible. Reading a conjunctive into the provision where none
has been included is too much of a strain. See Haggard Hauling & Rigging Co. v. Stonewall Ins.
Co., 852 S.W.2d 396, 401 (Mo. Ct. App. 1993) (“The rule requiring that an insurance policy be
construed favorably to an insured in cases of ambiguity does not permit a strained interpretation
of the language of the policy in order to create an ambiguity”). Moreover, obvious typographical
errors are insufficient to create an ambiguity in Missouri. Mendota Ins. Co. v. Ware, 348 S.W.3d
68, 71-74 (Mo. Ct. App. 2011). The “; or” at the end of subparagraph (b) of the setoff provision,
which is part of the basis for Plaintiffs’ theory, is clearly misplaced. A reasonable insured would
understand that a typographical error caused the “; or” to be placed at the end of subparagraph
(b) instead of subparagraph (a). Any other reading strains common sense. There is therefore no
ambiguity in the language of the setoff provision, which establishes a reduction in recovery for
any amount “paid by or for all persons or organizations liable for the injury . . . .”
B. Whether the Setoff Provision Violates Missouri Public Policy
Plaintiffs next contend that Defendants should not be granted summary judgment because
the setoff provision violates Missouri public policy to extent it would reduce Plaintiffs’ recovery
under the UM Coverage below Missouri’s statutory minimum. (Plaintiff Response at 8).
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Plaintiffs note that Mo. Rev. Stat. § 379.203 “mandates that every policy of insurance issued in
the State of Missouri have at least $25,000 per person and $50,000 per occurrence available in
UM coverage.” Id. According to Plaintiffs, any attempt to reduce Plaintiffs’ recovery below that
amount violates the policy underlying § 379.203. Id.
Geico responds that because Plaintiffs have already received more than the statutory
minimum in a separate recovery, any setoff of their UM Coverage does not violate Missouri
public policy. (Geico Reply at 9-10). The setoff provision therefore can be used to reduce
Plaintiffs’ recovery in its entirety, rather than only to the $25,000 statutory minimum. Id. at 9. It
relies for this proposition on Tatum v. Van Liner Ins. Co. of Fenton, Mo., 104 F.3d 223 (8th Cir.
1997), an Eighth Circuit case it contends is controlling here.
As a preliminary matter, Geico’s contention that Tatum is “controlling law” in this case,
(Geico Reply at 8), is incorrect. This is a diversity case involving the application of Missouri
state law. In such cases, federal courts “are bound by state court decisions as well as state
statutes.” Hanna v. Plumer, 380 U.S. 460, 465 (1965) (citing Erie R. co. v. Tompkins, 304 U.S.
64 (1938)). This principle includes state court interpretations of state statutes. Becker v.
Lockhart, 971 F.2d 172, 174-75 (8th Cir. 1992). It also includes matters of first impression under
a state statute, in which case a federal court’s role is not simply to follow the earlier holding of
another federal court, but rather to predict how the state’s highest court would decide the issue.
See, e.g., Brandenburg v. Allstate Ins. Co., 23 F.3d 1438, 1440 (8th Cir. 1994). Tatum therefore
controls this case only to the extent it accurately represents Missouri law on the question of
whether a setoff provision like the one at issue here violates Missouri public policy.
The Missouri public policy implicated in this case is based on § 379.203, which, as
Plaintiffs correctly note above, “requires that policies include uninsured motorist coverage with
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limits at least equaling” $25,000. Am. Standard Ins. Co. of Wisconsin v. Bracht, 103 S.W.3d 281,
288 (Mo. Ct. App. 2003). “The purpose of section 379.203 is to establish a minimum level of
protection equivalent to the liability coverage the insured would have received had the insured
been involved in an accident with an insured tortfeasor.” Rice v. Shelter Mut. Ins. Co., 301
S.W.3d 43, 46 (Mo. 2009) (en banc). The issue in most cases involving a setoff provision is not
whether the setoff provision can be applied at all, but rather whether the setoff provision can be
used to reduce uninsured motorist recovery below the $25,000 statutory minimum. See, e.g.,
Halpin v. Am. Family Mut. Ins. Co., 823 S.W.2d 479, 483 (Mo. 1992) (en banc). Applying these
principles, Missouri courts have prohibited setoff provisions from reducing recovery below the
§ 379.203 minimum based, for example, on a prior recovery in the form of worker’s
compensation. Douthet v. State Farm Mut. Auto. Ins. Co., 546 S.W.2d 156, 159 (Mo. 1977) (en
banc).
The Eighth Circuit was faced in Tatum with the question of whether a setoff provision
could, under Missouri law, completely reduce uninsured motorist recovery based on the receipt
of a settlement from an insured responsible party. Tatum involved facts almost identical to the
ones here. The insured in Tatum was driving in a tractor-trailer. Tatum, 104 F.3d at 224. “[A] red
Ford Escort[] swerved in front of the truck. When [the insured] applied his brakes, the truck he
was driving was struck from the rear by a second tractor trailer . . . .” Id. The insured received a
$150,000 settlement in a suit based on that accident. Id. The insured then tried to recover under
his uninsured motorist coverage, which contained a setoff provision almost identical to the one
here in that it reduced the amount payable “by all sums paid by or for anyone who is legally
responsible” for the injuries sustained. Id. The Eighth Circuit held the $150,000 settlement could,
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without violating Missouri public policy, act as a complete setoff of any amount the insurance
company would otherwise have been required to pay in uninsured motorist coverage. Id.
In reaching its conclusion, the Tatum court relied on a Missouri Supreme Court case,
Ragsdale v. Armstrong, 916 S.W.2d 783 (Mo. 1996) (en banc) (per curiam). This reliance makes
the Tatum opinion somewhat problematic, as Ragsdale is a difficult case to understand. The facts
and result are simple enough. The insured was involved in a car accident with another driver and
obtained a $10,000 settlement from the other driver, which was the limit of the other driver’s
liability insurance. Ragsdale, 916 S.W.2d at 784 (Benton, J., concurring in result). The insured
had uninsured motorist coverage under two policies that totaled $150,000. Id. (Benton, J.,
concurring in result). The state circuit court found the insured should be entitled to the stacked
policy limit of $150,000 less the $10,000 he obtained in the settlement, and the Missouri Court
of Appeals affirmed. Id. (Benton, J., concurring in result). The Missouri Supreme Court agreed
that the insured was entitled to recover but disagreed as to the amount. Id. (per curiam opinion).
It held that the insured could only recover $40,000, which amounts to the stacked statutory
minimum for the two policies reduced by the $10,000 already recovered. Id. (per curiam
opinion). Thus, the Missouri Supreme Court held that, where a settlement has been received an
insured responsible party, to reduce recovery below the statutory minimum established by
§ 379.203 does not violate Missouri public policy. See id. (per curiam opinion).
The process by which the Ragsdale court reached this conclusion, however, is not so
straightforward. The court, sitting en banc, issued a short per curiam opinion stating the
conclusion described above.2 But of the four judges who filed separate opinions, only one judge
The whole of the per curiam opinion is as follows: “Four judges would reverse the judgment of the
circuit court. Four judges would allow respondents to recover at least $40,000 under the two policies at
issue. Accordingly, the judgment of the circuit court is reversed and the case is remanded for entry of
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filed an opinion indicating that he agreed fully with the result. Id. at 784 (Price, J., concurring).
Three other judges concurred in the result, but joined in a separate opinion in which they
explained their reasons for believing that “[t]he judgment of the circuit court should be
affirmed[,]” which would have allowed the insured to recover $140,000. Id. at 784-85 (Benton,
J., concurring in result). The three remaining judges dissented, and two of them filed separate
dissenting opinions. Id. at 785-787. In short, the only clear aspect in Ragsdale is the result. The
reasoning and methods underlying that result are, as the Eighth Circuit noted in Tatum,
“enigmatic . . . .” Tatum, 104 F.3d at 225.
Nevertheless, the result in Ragsdale, viewed separately from the conflicting opinions
filed with it, is the best indicator of whether the Missouri Supreme Court would allow a complete
setoff in this particular situation. As noted above, Missouri courts have prohibited a complete
setoff in other situations, such as setoffs based on the receipt of workers’ compensation benefits.
But in a situation similar to this one, where a setoff was sought based on the amount of a
settlement between the insured and an insured responsible party, the Ragsdale court allowed a
reduction of uninsured motorist recovery below the statutory minimum. It is therefore reasonable
to conclude that, faced with the substantially similar facts of this case, the Missouri Supreme
Court would find that a complete setoff does not violate Missouri public policy.
Since the setoff provision at issue here both applies and is not contrary to Missouri public
policy, the $100,000 settlement Plaintiffs obtained acts as a complete setoff of their $100,000
UM Coverage limit. Plaintiffs therefore are not entitled to recover any amount under their UM
Coverage.
judgment in respondents’ favor in the amount of $40,000, plus such other costs or assessments as are
consistent herewith.” Ragsdale, 916 S.W.2d at 783-84.
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Accordingly,
IT IS HEREBY ORDERED that Defendant GEICO General Insurance Company’s
Motion for Summary Judgment, (ECF No. 18), is GRANTED, and Plaintiffs’ claims are
DISMISSED WITH PREJUDICE. A separate judgment will accompany this Memorandum
and Order.
Dated this 10th Day of April, 2015.
/s/ Jean C. Hamilton
UNITED STATES DISTRICT JUDGE
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