Policy Definition of Uninsured Motor Vehicle Unenforceable
In Progressive Ins. Co. v. Brown ex., 2008 WL 2941397 (Vt.), Progressive Insurance Company appealed the superior court's ruling in favor of Kyle Brown for uninsured motorist coverage. The superior court concluded that the policy definition of “uninsured motor vehicle,” which excluded any vehicle owned by the insured or a relative, was unenforceable because it violated the public policy expressed in Vermont's UM statute. Progressive argued that Brown was not entitled to UM coverage based on the definition in the policy.
Brown was injured after he gave his friend permission to drive his leased Jeep Cherokee and the friend lost control of the car and collided with a tree. The friend did not have insurance and Brown carried no insurance on the Jeep. Brown sought UM insurance coverage under a policy issued by Progressive to his mother, who he lived with at the time. The policy provided UM coverage for an insured person “entitled to recover from the owner or operator of an uninsured motor vehicle.” The UM section defined “insured person” to include a relative of the policy holder. It also explained that a vehicle owned by the policy holder or a relative is not an uninsured vehicle.
Progressive denied the claim because Brown was injured while in a vehicle that fell outside the policy definition of “uninsured vehicle.” Brown asserted that the policy term on which Progressive relied to deny coverage was indistinguishable from that which the court had found invalid in Monteith v. Jefferson Insurance Co. of New York, 159 Vt. 378 (1992), because it violated 23 V.S.A. §941(a).
Progressive argued that Brown was not entitled to UM coverage because the vehicle involved in the accident was not an “uninsured vehicle” under the policy definition, which excluded coverage for vehicles owned by the insured or a relative. Progressive argued that in Monteith the driver had purchased some insurance, whereas here, no coverage was ever purchased for Brown. The superior court rejected Progressive's claims and granted Brown summary judgment, concluding that under Montieth the policy's attempt to exclude UM coverage for persons in vehicles owned by the insured or a relative violated §941(a).
On appeal, Progressive reiterated its prior arguments, and asserted for the first time: (1) Brown was not an “insured” under the policy's liability coverage section at the time of the accident; (2) as a result Brown was not a person “insured thereunder” as those words are used in §941(a) and that section did not require UM coverage in this case; (3) Monteith was applicable only to situations where §941(a) required UM coverage, the situation in that case; and (4) the policy did not otherwise violate public policy because it implicated only private interests and the Department of Banking, Insurance, Securities and Health Care Administration approved its terms. Brown argued that we should not reach these questions because Progressive failed to raise them in the superior court.
The Supreme Court of Vermont agreed that Progressive did not preserve its new arguments for review and two basic preservation rules were applicable. First, an insurer waived additional defenses that were not raised or reserved in an initial denial of coverage and second, in order to rely upon an argument on appeal, an appellant must properly preserve it by presenting it to the trial court “with specificity and clarity.” The court stated that Progressive complied with neither rule.
The court explained that the insurance-defense-waiver rule applied in this case because Progressive failed to assert these new arguments as part of its denial of coverage and if an insurer initially denied coverage on a specified basis and did not reserve the right to later raise other grounds, it waived any additional defenses. The court noted that an appeal was not an opportunity to retry a case and assert new arguments where those originally asserted were not successful. Preservation was determined by a party's actions in the trial court, the court stated, not by a hindsight analysis of what should have been argued or addressed.
Thus the court addressed on appeal only whether Progressive could deny UM coverage, consistent with §941 and Monteith, based on the definition of uninsured vehicle in the policy. The Progressive policy's definitions section explained that an “'uninsured motor vehicle' did not include any vehicle or equipment: … owned by you or a relative.” Based on this language, Progressive asserted that Brown was not entitled to coverage because he was injured while in a vehicle owned by him.
The Supreme Court agreed with the superior court that Progressive's limitation of UM coverage on this basis was unenforceable under §941(a), as explained in Monteith. The statute required policies “insuring against liability” to provide coverage “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.” The court explained that in Monteith, it had concluded that a clause in an automobile insurance policy excluding UM coverage for accidents occurring while the insured operated a vehicle owned by him but not insured under the policy was inconsistent with Vermont law and unenforceable.
The court further explained that the exclusion in Monteith placed a significant limitation on the plaintiff's UM/UIM protection, as the Monteith plaintiff could not recover under his policy if he was not traveling in a vehicle specifically insured by that policy, despite the fact that UM/UIM insurance was legislatively intended to be a portable form of insurance against uninsured vehicles in general.
The court explained that the same reasoning equally applied in this case, as the definition of uninsured vehicle in this Progressive policy sought to place a “significant limitation” on Brown's UM coverage, just as the exclusion in Monteith sought to do. Under §941(a), however, Brown's UM coverage was portable and provided him with protection whenever he was injured by an uninsured motorist, regardless of whether he was injured while walking down the street, or sitting in his own uninsured vehicle.
Although Progressive attempted to distinguish the case from Monteith because the injured party in Monteith paid premiums and had some coverage for the vehicle involved in the accident, whereas Brown did not pay for any coverage on the vehicle involved in the accident, the court explained that it did not see the relevance of whether the vehicle involved in the accident was minimally insured or not insured at all.
Therefore, because Progressive failed to preserve the new arguments raised on appeal and the superior court properly rejected the claim, the court affirmed the superior court's order granting summary judgment to Brown.