Monteith v. Jefferson Insurance Co.

 NOTICE:  This opinion is subject to motions for reargument under V.R.A.P. 40
 as well as formal revision before publication in the Vermont Reports.
 Readers are requested to notify the Reporter of Decisions, Vermont Supreme
 Court, 109 State Street, Montpelier, Vermont 05609-0801 of any errors in
 order that corrections may be made before this opinion goes to press.


                                 No. 91-244


 Joseph Monteith                              Supreme Court

                                              On Appeal from
      v.                                      Washington Superior Court

 Jefferson Insurance Company                  May Term, 1992
 of New York and Peerless
 Insurance Company



 Alan W. Cheever, J.

 Richard H. Saudek of Cheney, Brock & Saudek, P.C., Montpelier, for
    plaintiff-appellant

 Samuel Hoar, Jr. and Frederick S. Lane III of Dinse, Erdmann & Clapp,
    Burlington, for defendant-appellee Jefferson Insurance Company of New
 York

 David L. Cleary and Ellen J. Abbott of David L. Cleary Associates, Rutland,
    for defendant-appellee Peerless Insurance Company



 PRESENT:  Gibson, Dooley, Morse and Johnson, JJ., and Peck, J., (Ret.),
           Specially Assigned



      JOHNSON, J.      Plaintiff was injured when he was struck by an
 automobile while riding his motorcycle.  He suffered total personal injury
 damages exceeding $200,000, and recovered only $100,000 from the insurer for
 the driver of the other vehicle, whose negligence caused the accident.  He
 appeals from a trial court decision holding that two insurers with whom he
 had policies are not liable for his additional damages under policy pro-
 visions covering accidents with underinsured motorists.  We reverse.
      At the time of the accident, plaintiff had a policy with defendant
 Jefferson Insurance Company of New York covering his motorcycle and
 providing $100,000 in uninsured motorist/underinsured motorist (UM/UIM)
 coverage.  Plaintiff also had a policy with defendant Peerless Insurance
 Company covering plaintiff's automobiles and providing $300,000 of UM/UIM
 coverage.
      Plaintiff brought a declaratory judgment action, claiming that both
 Jefferson and Peerless were obligated under their respective policies to pay
 him the difference between the damages he suffered and the amount he
 recovered from the underinsured tortfeasor, up to the maximum amount of
 $400,000 available to him under the two policies.
      Defendant Peerless moved for summary judgment on the grounds that
 plaintiff's policy contained an explicit provision excluding from coverage
 any injuries sustained while "occupying . . . any motor vehicle owned by you
 . . . which is not insured for coverage under this policy . . .".  Defendant
 Jefferson moved for summary judgment on the grounds that plaintiff was
 covered for only $100,000 under his policy with Jefferson, an amount
 already recovered by plaintiff from the tortfeasor thus discharging
 Jefferson's duty to plaintiff.  Jefferson further argued that its policy
 could not be "stacked" with the Peerless policy to create a total available
 coverage amount of $400,000, because the exclusion provision of the Peerless
 policy barred any recovery against Peerless.
      In opposing defendants' joint motion for summary judgment, plaintiff
 argued that the tortfeasor was underinsured under 23 V.S.A. { 941(f), thus
 allowing a claim against Peerless, whose $300,000 UIM limit was clearly in
 excess of the $100,000 maximum recovery limit of the tortfeasor's insurer,
 as well as against Jefferson, since the total underinsurance coverage
 available under the two policies, pursuant to { 941(f), was $400,000.
 Plaintiff claimed that he should be permitted to "stack" the UIM coverage of
 the two policies at issue.
       The trial court granted Peerless's summary judgment motion, holding
 that the exclusion provision contained in its policy barred recovery for
 injuries suffered by plaintiff because his motorcycle was a motor vehicle
 owned by plaintiff and not covered under the Peerless policy.  The court
 also granted Jefferson's summary judgment motion, holding that its UIM
 coverage limit of $100,000 matched the $100,000 recovery limit of the
 tortfeasor's insurance, thus eliminating any claim of underinsurance.  The
 present appeal followed.

                                     I.
      The focus of dispute with regard to the Peerless policy is a clause
 providing in pertinent part:
           We do not provide Uninsured Motorists Coverage (FN1) for,...
 bodily injury sustained by any person:

               1.  While occupying . . . any motor vehicle owned by
              you . . . which is not insured for this coverage under
              this policy.

 Plaintiff does not dispute that this clause excludes coverage, but argues
 that it violates Vermont law.  We agree.  23 V.S.A. { 941(a)(emphasis
 supplied) provides, in pertinent part, that:
         No policy insuring against liability arising out of the
         ownership, maintenance or use of any motor vehicle may
         be delivered or issued for delivery in this state with
         respect to any motor vehicle registered or principally
         garaged in this state unless coverage is provided
         therein, or supplemental thereto, for the protection of
         persons insured thereunder 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, and for
         property damages resulting from the ownership, mainten-
         ance or use of such uninsured, underinsured or hit-and-
         run motor vehicle.
 Referring to { 941(a), we stated in Sanders v. St. Paul Mercury Ins. Co.,
 148 Vt. 496, 498-99, 536 A.2d 914, 915-16 (1987)(citations
 omitted)(emphasis supplied):
         This statute protects insured motorists from uninsured,
         financially irresponsible drivers.  Recovery is not
         limited to situations involving the motor vehicle of the
         insured.  Though no cases have reached this Court on
         the question, the language of { 941 extends coverage to
         insured persons wherever they may be, provided that they
         are injured by an uninsured motorist, and that is the
         interpretation of similar statutes elsewhere. No policy
         can be issued which reduces the amount of coverage
         mandated by statute.

      The essence of UM/UIM coverage under { 941 is its portability.  The
 statute does not allow insurers to condition coverage on the location of the
 insured nor the insured's status as a motorist, a passenger in a private or
 public vehicle, or as a pedestrian.  In the language of { 941(a), UM
 coverage is designed "for the protection of persons," not vehicles.  This
 reading is consistent with the basic philosophy of the statute, which is to
 put the insured in the same position as if the negligent driver had been as
 responsible as the insured in obtaining liability insurance.  As we said in
 Muir v. Hartford Accident & Indemnity Co., 147 Vt. 590, 593, 522 A.2d 236,
 238 (1987), "UM coverage protects those insured 'against the unfortunate
 hazard presented by an injury inflicted in an accident with an irresponsible
 operator who is uninsured or has fled the scene.'" (quoting Rhault v.
 Tsagarakos, 361 F. Supp. 202, 205 (D. Vt. 1976)).
      Had plaintiff in this case been a pedestrian, and had the driver
 causing the accident been uninsured, there would be no question that
 plaintiff could have obtained $300,000 in UM recovery from Peerless,
 assuming damages in that amount.  Similarly, if plaintiff had been a
 passenger in an uninsured vehicle in collision with a negligent driver who
 was also uninsured, there would be no question about a UM recovery from
 Peerless, up to $300,000.  It follows that Peerless cannot deny UM coverage
 where an accident occurs while the insured is driving a vehicle owned by the
 insured but not insured by Peerless.  Allowing that kind of exclusion would
 defeat the broad, remedial purpose of UM coverage just as surely as if the
 company attempted to deny coverage if the insured were walking down the
 street or riding in a bus when an accident occurred.  To the extent a
 motorist is underinsured, the same principle applies.
      Courts in other jurisdictions are divided on the validity of an
 exclusion to coverage where a named insured operates a vehicle owned but
 not insured under the policy, but many courts have held that such clauses
 violate state uninsured motorists statutes and are therefore invalid.  See,
 e.g., Mullis v. State Farm Mutual Auto. Ins. Co., 252 So. 2d 229, 237-38
 (Fla. 1971);  Barnett v. Crosby, 5 Kan. App. 2d 98, 99-100, 612 P.2d 1250,
 1252 (1980);  Earl v. Commercial Union Ins. Co., 391 So. 2d 934, 938-39 (La.
 Ct. App. 1980); Nygaard v. State Farm Mutual Auto. Ins. Co., 301 Minn. 10,
 18-19, 221 N.W.2d 151, 157 (1974); Jacobson v. Implement Dealers Mutual Ins.
 Co., 196 Mont. 542, 545-47, 640 P.2d 908, 910-12 (1982); Beek v. Ohio
 Casualty Ins. Co., 135 N.J. Super. 1, 5-6, 342 A.2d 547, 549 (N.J. Super.
 Ct. App. Div. 1975), aff'd, 73 N.J. 185, 373 A.2d 655 (1977) (cited with
 approval in Sanders, 148 Vt. at 503, 536 A.2d at 918).  But see Corso v.
 State Farm Mutual Auto. Ins. Co., 668 F. Supp. 364, 372-73 (D. Del.), aff'd,
 838 F.2d 1205 (1987); Brackett v. Middlesex Ins. Co., 486 A.2d 1188, 1190-91
 (Me. 1985).
      Peerless argues that the language of 23 V.S.A. { 800(a), that "[n]o
 owner or operator of a motor vehicle . . . shall operate . . . the vehicle"
 without required insurance, requires each vehicle owned by an insured to
 have its own insurance.  This, in turn, limits UM/UIM coverage to each
 vehicle's individual policy.   To hold otherwise, Peerless argues, could
 result in coverage of an uninsured vehicle, contrary to the basic intent of
 the Financial Responsibility and Insurance statute (23 V.S.A. ch. 11).
      We disagree.  The point is not that Peerless is made to cover an
 uninsured vehicle under plaintiff's theory, but rather that it is barred
 from writing exceptions to a clear statutory requirement that it cover its
 insureds wherever they become victims of an uninsured or underinsured
 motorist.  The same proposition was well stated by the court in Nygaard:
 "If our interpretation of the intent of the uninsured-motorist statute is
 correct, little room is left for an insurer unilaterally to narrow the
 geographic scope of the statutorily required coverage."  301 Minn. at 19,
 221 N.W.2d  at 157.
      Peerless mistakenly relies on Sanders to support its argument.  In
 Sanders we held that the insurer could write and enforce an intrapolicy
 stacking provision, but we did not extend our rationale to interpolicy
 stacking provisions. 148 Vt. at 503, 536 A.2d  at 918.  We thus
 distinguished between an insurer's power to define the scope of UM coverage
 within a single policy that did cover multiple vehicles under separate
 endorsements, and the absence of an insurer's power to delimit or affect UM
 coverage in policies written by other insurers.  Here, plaintiff's
 motorcycle was not insured by Peerless, and plaintiff's claim is based, not
 on Peerless's policy covering his automobiles (which purported to exclude
 UM/UIM coverage for owned-but-not-insured vehicles), but rather on the
 inadequacy of another insurance policy, that of the negligent driver.
      In sum, the clause in the Peerless policy denying UM coverage for
 accidents occurring while the insured is occupying a vehicle owned by him
 but not insured by the company is inconsistent with Vermont law and is
 unenforceable.
                                     II.
      We next consider whether plaintiff should be allowed to "stack" (FN2) 
 the UM coverage of the Peerless policy ($300,000) and the UM coverage of the
 Jefferson policy ($100,000) to determine whether the tortfeasor was
 underinsured.  Plaintiff argues that { 941(f) mandates consideration of all
 UM coverage "applicable," i.e., all policies providing the insured with UM
 coverage, in determining initially whether a motorist is underinsured.   The
 legislature has mandated that insurers provide UM/UIM coverage as part of
 every policy of insurance issued in this state.  Section 941(f) defines
 underinsurance as follows:
         (f)  For the purpose of this subchapter, a motor
         vehicle is underinsured to the extent that its
         personal injury limits of liability at the time of
         an accident are less than the limits of uninsured
         motorists coverage applicable to any injured party
         legally entitled to recover damages under said
         uninsured motorist coverage.
 (Emphasis added.)  In view of our holding in section I that the UM/UIM
 coverage is portable and attaches to the insured rather than to the vehicle,
 both the Peerless and the Jefferson policies apply to plaintiff's injuries,
 and the total UIM coverage is therefore $400,000.
      Jefferson argues, however, that the limits of its policy should be
 considered in isolation, apart from any other insurance available.  The
 clause of the policy on which Jefferson relies (its so-called "anti-
 stacking" provision) provides as follows:
         "Uninsured motor vehicle" means a land motor vehicle of
         any type:

         . . . .

           2.  To which a liability bond or policy applies at
         the time of the accident.  In this case its limit of
         liability must be less than the limit of liability for
         this coverage.

 Since Jefferson's UM coverage of $100,000 was equal to the liability limits
 of the tortfeasor, Jefferson argues that it owes nothing.  Moreover,
 Jefferson argues that its antistacking provision is not the kind of "excess-
 escape" clause that was found to violate { 941 in Goodrich v. Lumbermen's
 Mut. Cas. Co., 432 F. Supp.  at 843, because it does not seek to reduce
 statutorily mandated benefits, but rather defines "uninsured motor vehicle"
 in an acceptable manner.
      The interpretation of the clause Jefferson urges us to adopt, however,
 would reduce the benefits required under law, whatever its original purpose.
 By limiting the situations in which its underinsured motorist's coverage
 will apply, Jefferson has effectively removed its policy as one "applicable"
 to the insured, despite the clear language of { 941(f) defining UIM as
 including all applicable UM coverage.  Giving effect to Jefferson's anti-
 stacking clause violates the plain language of the statute and undercuts the
 policy and purpose of UM/UIM statutes.
      The rationale for uninsured motorist coverage is "to permit the
 insured injured person the same recovery which would have been available to
 him had the tortfeasor been insured to the same extent as the injured
 party."  Connolly v. Royal Globe Ins. Co., 455 A.2d 932, 935 (Me. 1983).  As
 the court said in Beek:
           [T]he requirement for the inclusion of UM coverage
           applies to every policy issued in this State and the
           statute contains no suggestion that relief from this
           obligation is to be implied when a person owning two
           vehicles has purchased two policies of insurance from
           two different carriers.

           135 N.J. Super at 5, 342 A.2d  at 549.
      Courts considering the question have generally supported the right of
 an insured to stack multiple policies of UM coverage owned by the insured.
 State Farm Mut. Auto. Ins. Co. v. Hancock, 164 Ga. App. 32, 295 S.E.2d 359,
 360 (1982);  Connolly, 455 A.2d  at 935; American Motorist Ins. Co. v
 Sarvela, 327 N.W.2d 77, 79 (Minn. 1982); Shepherd v. American States Ins.
 Co., 671 S.W.2d 777, 780 (Mo. 1984); Beek, 135 N.J. Super. at 5-6, 342 A.2d 
 at 549; Employers' Fire Ins. Co. v. Baker, 119 R.I. 734, 747-48, 383 A.2d 1005, 1009-10 (1978); see also Barnett v. Crosby, 5 Kan. App. 2d at 98, 612 P.2d  at 1250 (court recognizes that injured motorcyclist could have stacked
 UM provisions in car and motorcycle policies, had he purchased UM coverage
 on motorcycle).  But see Mitchell v. State Farm Mutual Auto. Ins. Co., 227
 Va. 452, 458-59, 318 S.E.2d 288, 292 (1984)(words "this insurance"
 interpreted to mean that insurance coverage limits refer only to policy to
 which attached, and that each policy must be considered independently to
 determine whether tortfeasor is underinsured).
      We are persuaded that, to effectuate the purposes of Vermont's
 uninsured motorist statute, it is inconsistent to permit an insurer to limit
 its liability for mandatory UM coverage by reliance on antistacking
 provisions.  Although we implied some disapproval of interpolicy anti-
 stacking provisions in Sanders, 148 Vt. at 503, 536 A.2d  at 918, we now
 explicitly hold that interpolicy, antistacking provisions violate the terms
 of { 941 and will not be enforced.
      There is no rationale for treating UIM coverage differently from UM
 coverage with respect to stacking.  UIM statutes were widely adopted
 following recognition by many states that failure to consider the
 underinsured motorist often led to anomalous and unjust results.  As the
 Georgia court held in State Farm Mut. Auto. Ins. Co. v. Hancock:
           Thus, while a motorist insured over the minimum coverage
           could obtain full redress to the maximum of his policies
           when the tortfeasor was uninsured, he was denied any
           recovery of excess damages through his own coverage when
           the tortfeasor was only minimally insured.  This created
           the anomalous situation whereby a prudent motorist with
           maximum insurance coverage was actually penalized if
           injured by a tortfeasor who was in compliance with the
           minimum no fault coverage requirements.

 164 Ga. App. at 33, 295 S.E.2d  at 360.  The purpose of the legislation that
 ensued in Georgia and other states, including Vermont, was to place UM and
 UIM cases on the same equitable footing, providing the prudent motorist with
 maximum insurance coverage with the same remedy against an underinsured
 motorist as against one that was uninsured.  See Comment, Stacking of
 Uninsured Motorist Coverage, 49 Mo. L. Rev. 571 (1984).  As we said in Webb
 v. United States Fidelity & Guaranty Co., 3 Vt. L.W. 62, 63 (1992)(citations
 omitted):
             Vermont's statutory underinsured motorist provision
           provides what is sometimes referred to as "gap"
           coverage, because it "fills the 'gap' between the
           tortfeasor's liability coverage and the underinsured
           motorist's coverage."  North River Ins. Co. v. Tabor,
           934 F.2d 461, 464 (3d Cir. 1991). Gap coverage "places
           the insured party in the same position that he would
           have been in had the tortfeasor carried liability
           insurance in the amount of the insured's underinsured
           motorist policy limit."  Id.

       Against the backdrop of these policy considerations, Jefferson's
  argument that it should be allowed to cordon off its UM/UIM insurance and
  measure underinsurance by comparing only its coverage with the liability
  limit of the tortfeasor's vehicle, offends the basic concept of UM/UIM
  coverage in two ways.  First, it fails to provide "the insured injured
  person the same recovery which would have been available to him had the
  tortfeasor been insured to the same extent as the injured party," Connolly,
  455 A.2d  at 935, and second, it limits plaintiff to a smaller recovery
  against an underinsured motorist than he would have recovered from an
  uninsured motorist. Id.
       An examination of the facts before us illustrates the second of these
  points.  If the tortfeasor in the present case had been an uninsured
  motorist, plaintiff's maximum recovery (assuming damages equalled or
  exceeded such amount) would have been $400,000 -- $100,000 under the
  Jefferson policy and $300,000 under the Peerless.  Under Jefferson's
  theory, (FN3) plaintiff would be penalized $100,000 for having an accident 
  with an underinsured, rather than uninsured, motorist.  This would violate 
  the purpose of { 941(f).
       Therefore, we hold that plaintiff may stack the UM/UIM provisions of
  the Jefferson and Peerless policies, and that insurance policies purporting
  to prohibit antistacking violate the statutory language and underlying
  purpose of Vermont's UM/UIM statute.
       Reversed and remanded.


                                               FOR THE COURT:




                                               ____________________________
                                               Associate Justice


 FN1.   "Uninsured motor vehicle" is defined in the
  policy as "a land motor vehicle . . . of any type:
             2.  To which a liability bond or policy
                 applies at the time of the accident
                 but its limit of liability is less
                 than the limit of liability for this
                 coverage."

FN2.  "Stacking" refers to the ability of the insured, when covered by more
 than one insurance policy, to obtain benefits from a second policy on the
 same claim when recovery from the first policy would be inadequate.  See
 Goodrich v. Lumbermen's Mutual Casualty Co., 423 F. Supp. 838, 842 (D. Vt.
 1976); Blakeslee v. Farm Bureau Mutual Ins. Co., 388 Mich. 464, 473, 201 N.W.2d 786, 790 (1972).

FN3.    I.e., the theory that plaintiff was not underinsured as to the
 Jefferson policy because the amount of the tortfeasor's insurance equalled
 the amount of Jefferson's UM/UIM coverage.