Allstate Ins. Co. v. Ashley ( 1993 )

United States Court of Appeals,
Fifth Circuit.
No. 92-7609.
ALLSTATE INSURANCE COMPANY, Plaintiff-Appellant Cross-Appellee,
v.
Luther ASHLEY, et al., Defendants,
Luther Ashley, et al., Defendants-Appellees Cross-Appellants.
Aug. 20, 1993.
Appeals from the United States District Court for the Southern District of Mississippi.
Before WISDOM, DAVIS, and SMITH, Circuit Judges.
WISDOM, Circuit Judge:
This case raises two principal issues: (1) Whether Mississippi insurance law requires
uninsured motorist coverage stacking when an uninsured motorist insurance policy contains an
express anti-stacking provision1 and (2) whether charging a higher premium for multiple car coverage
than for single car coverage constitutes charging two separate premiums.
The plaintiff/appellant, Allstate Insurance Company ("Allstate"), issued an automobile
insurance policy to Luther Ashley, one of the defendants/appellees, providing uninsured motorist
coverage for four aut omobiles. Allstate charged Ashley a flat premium based on the fact that the
policy covered multiple vehicles. Allstate charges a lower premium for single car coverage. The
policy contained an express anti-stacking provision.
When four passengers in a vehicle insured under this policy were injured in an accident
involving an uninsured motorist, Allstate filed a declaratory judgment action in federal court seeking
to limit its liability to one full coverage, rather than four stacked coverages. The district court
concluded that Allstate, by charging a higher premium for multiple car coverage, had charged two
1
"Stacking" refers to the practice of allowing an insured to add or stack the limits of each
vehicle covered under a policy of insurance for multiple vehicles to pay for damages sustained in
an accident. For example, if the insured chose $10,000 coverage for bodily injury on two vehicles
covered under a policy, the maximum recovery would be $20,000 ($10,000 plus $10,000).
separate premiums and was, therefore, liable under the policy for two stacked coverages.
On appeal, Allstate argues that it charged only one premium and is, therefore, liable for only
one full coverage. The defendants/appellees argue that they are entitled to stacking for each vehicle
insured under the policy, or four full coverages. Relying on a Mississippi Supreme Court ruling
entered after the district court decided the instant case, we hold that even if Allstate charged a
separate premium for each of the vehicles insured under the policy, it is liable only for the greater of
one full coverage or four stacked statutory minimum coverages. Because we decide the instant case
based on this issue, we do not reach the issue of whether Allstate's higher premium for multiple car
coverage constitutes two separate premiums.
I.
While driving in one of the four vehicles insured under Lut her Ashley's Allstate policy,
Jennifer Ashley, Nell Ashley, Ro nald Rainer, and Ernest Couch were injured by an uninsured
motorist. At that time, the policy provided coverage of up to $50,000 per accident if one person was
injured and up to $100,000 per accident if two or more persons were injured. The parties do not
dispute that more than one person was injured or that their damages/injuries exceed $400,000.
Under t he original policy issued to Luther Ashley, Allstate charged a separate premium of
$49.70 for uninsured motorist coverage for each of the cars insured under the policy. In 1989,
Allstate altered its rate structure. Under the new plan, Allstate charged a single uninsured motorist
premium. Allstate set this premium at two different rates: one rat e for single-car coverage and a
higher rate for coverage of more than one car. This higher rate was a flat fee of $91.90 that remained
the same regardless of the number of vehicles covered. Thus, a two car insured would be charged
the same premium as a three or four car insured.
After submitting its plan to the Mississippi Insurance Commissioner for approval, Allstate sent
notice of these changes to all of its po licyholders, including Luther Ashley. The notice explicitly
stated that no "stacking" would be allowed in the future under this new plan. In the past, under the
old plan, if an insured was injured, although the coverage limits were set at $100,000 per accident,
if the insured paid separate premiums for each of its cars, the coverage on each vehicle would be
stacked. Thus, if the policy provided uninsured motorist coverage for four vehicles, the policyholder
could collect up to $400,000 by stacking the coverage on the four cars.
When the defendants/appellees filed their claim with Allstate, they requested that their
coverage be stacked. At the time of the accident, they had four cars insured under the policy. By
stacking the full coverage limit for each insured vehicle, they claimed $400,000 in coverage. In
response, in November 1990, Allstate filed a declaratory judgment action in the United States District
Court for the Southern District of Mississippi against the Ashleys, Rainer, and Couch seeking a
determination that it had no obligation to stack uninsured motorist bodily injury coverage. Allstate
tendered $100,000, one full coverage amount, to the court with the request that it be divided among
the claimants by the court. Allstate maintained that the policy explicitly prohibited stacking.
The defendants/appellees answered, admitting Allstate's factual allegations but seeking to
stack four coverages. In addition, Rainer counterclaimed for damages caused by Allstate's "bad faith"
in failing to pay their claim fully and immediately. Allstate then moved for summary judgment on the
coverage issue. The district court entered an order on November 15, 1991 concluding that stacking
was required in spite of the anti-stacking provision in the policy. The court reasoned that because
Allstate charged a higher premium for multiple car coverage, it had in effect charged two separate
premiums. In accordance with the Mississippi law at that time, the court stacked two full coverages,
awarding the defendants/appellees $200,000.
Allstate requested leave to file an interlocutory appeal from this order. Instead of granting
this request, the district court asked the parties to brief it on the remaining issues to enable it to
resolve the entire case. After doing so, the parties again moved for summary judgment. On July 31,
1992, the court entered its final order, 795 F. Supp. 809. The court found that two premiums had
been charged; thus, two coverages were to be stacked ($200,000). Further the court held that as a
matter of law, Allstate had not acted in bad faith. On a motion to reconsider, the court clarified its
earlier order, granting the defendants/appellees $200,000, $100,000 to be awarded from the amount
placed with the court by Allstate and the rest to be provided by Allstate directly. Later in an
Amended Judgment, the court stated that Allstate was to be credited with the amount paid into the
registry, but not with the interest that money had accrued. The court directed the clerk to pay the
interest to the defendants/appellees. Further the court ordered Allstate to pay interest on the
remaining $100,000 from the date of its final order, July 31, 1992.
Allstate appeals the court's finding that the higher rate for multiple car coverage constitutes
multiple premiums. The defendants/appellees appeal arguing that they are entitled to stacking for all
four covered vehicles, not stacking for just two premiums. Rainer also appeals the court's decision
that Allstate did not act in bad faith as a matter of law. Finally, the defendants/appellees request that
post judgment interest be granted from the date of the original order on November 15, 1991, not from
the final order on July 31, 1992.
II.
The district court held that the anti-stacking language in the policy clearly and unambiguously
precludes stacking. The policy states in part:
Combining Limits of Two or More Autos Prohibited
If you have two or more autos insured in your name and one of these autos is involved in an
accident, only the coverage limits shown on the declarations page for that auto will apply....
The limits available for any other auto covered by this policy will not be added to the
coverage for the involved or chosen auto....
Limits of Liability
The limits shown on the declarations page are the maximum we will pay for any single auto
accident.... The insuring of more than one person or auto under this policy will not increase
our liability limits beyond the amount shown for any one auto, even though a separate
premium is charged for each auto.2
In addition to this language in the new po licy, Allstate sent an explanation of the changes to the
Ashleys. The explanation clearly states that the old policy of stacking is no longer in effect.
Consequently, coverage is limited to the amount stated in the policy. The defendants/appellees
contend that because Allstate charged multiple premiums in conjunction with this contract language,
the language was rendered ambiguous. Their argument is illogical and unfounded. The language is
clear and the district court correctly recognized this fact.
2
Allstate Automobile Policy, Complaint Ex. A, at 3-7, Record on Appeal p. 0015-19.
Mississippi public policy provides that stacking of uninsured motorist coverage may not be
prohibited where the insurance company has charged multiple premiums.3 The district court was
aware of this rule of law. Applying it to the instant case, it concluded that Allstate was obligated to
stack two coverages because two premiums had been charged. The district court reasoned that
because Allstate charged a higher premium for coverage of more than one car, it had in effect charged
two separate premiums: one for the first car covered and another for any additional cars covered.
The court relied on Pride v. General Agents Ins. Co. of America, Inc.,4 in which the court held that
a lump sum premium does not defeat stacking where this sum really constitutes a single charge for
multiple premiums.5 The parties do not dispute the basic rule applied by the district court; rather,
they each contend that the court erred in determining how many premiums were charged.
Allstate argues that Mississippi's public policy requiring stacking where multiple premiums
are charged does not apply to its single, although higher, premium. The defendants/appellees argue
that by statistically accounting for all automobiles covered in the state, Allstate in effect charged a
3
See Wickline v. U.S. Fidelity & Guar. Co., 530 So. 2d 708, 714 (Miss.1988). See also
Government Employees Ins. Co. v. Brown, 446 So. 2d 1002 (Miss.1984). In Brown, the
Mississippi Supreme Court held that where multiple premiums are charged for uninsured motorist
coverage on several cars covered by the policy, stacking is required. Id. at 1006. The Court
reasoned that since stacking would be required if the insured had purchased separate policies on
the vehicles, the same should hold true when the insured purchases a single policy with multiple
premiums for multiple coverages. Although the Court did not clearly articulate the reasons for
this decision, at least one court from another state has. The Oklahoma Supreme Court explained
its identical holding as follows:
Uninsured motorist coverage is not dependent on the insured occupying a vehicle
named in the policy.... [The insured] is entitled to recover under his policy ...
because uninsured motorist coverage protects an insured, even though he is not
occupying a vehicle named in the policy. If we limit [the insured's] uninsured
motorist coverage to [a single coverage], he will not have gained anything by
paying the [extra] premium[s], because the uninsured motorist premium which he
paid for his first car would cover the [single coverage]. In effect, [the insurer] will
have gained a windfall by collecting the [extra] premium[s]. Richardson v.
Allstate Ins. Co., 619 P.2d 594, 597 (Okla.1980) (quoting Federated American
Ins. Co. v. Raynes, 88 Wash.2d 439, 563 P.2d 815, 820 (1977)).
4
697 F. Supp. 1417 (N.D.Miss.1988).
5
Id. at 1420.
separate premium for each of the four cars covered under Luther Ashley's policy.6 In the light of the
Mississippi Supreme Court's recent decision in In re Koestler for Ben. of Koestler,7 we decline to
decide the instant case based on this issue.
In Koestler, the Mississippi Supreme Court held that where an uninsured motorist insurance
policy contains clear anti-stacking language, insurers are required to stack only the legislative
minimum coverages rather than stacking the full policy coverages. In Koestler, the insured purchased
uninsured motorist coverage for five vehicles. The policy expressly prohibited stacking. The policy
provided for $250,000 of coverage for each vehicle per accident. Stacking the full coverage limit for
each covered vehicle would provide $1,250,000 per accident. Instead of requiring the insurance
company to pay this amount, the court held that although public policy required stacking where
multiple premiums were charged, all that this entailed was stacking of the legislative minimum
coverages. Because of the anti-stacking provision in the policy, stacking of the full amount was not
required. Thus, the court held the insurance company liable for the greater of either one full coverage
amount ($250,000) or five stacked minimum coverages ($50,000: 10,000 × five coverages).
Allstate argues t hat this holding limits its liability to either $100,000 (one full coverage
amount) or $80,000 (4 × $20,000 per accident minimum).8 We agree. The Ashleys attempt to
distinguish Koestler from the present dispute on the grounds that Koestler dealt with a dispute
between two insurers not between an insured and an insurer. This distinction is immaterial. The
dispute between the two insurance companies in Koestler centered on the policyholder's rights under
the uninsured motorist insurance policy. Koestler purchased uninsured motorist coverage from one
6
The defendants/appellees allege that Allstate accounts for all the cars it insures in Mississippi,
then calculates the multiple car coverage premium based on these numbers. According to the
defendants/appellees, this practice has the effect of spreading the cost of "separate" premiums for
each covered vehicle among the insureds in the state. Hence, they argue that Allstate charges a
separate premium for each vehicle covered in spite of the fact that it charges a flat rate for
multiple car coverage to each individual policyholder.
7
608 So. 2d 1258 reh'g denied (Miss.1992).
8
At the time of the accident and to date, the legislative minimum coverage for uninsured
motorist bodily injury in Mississippi is $10,000 per person per accident, with a limit of $20,000
per accident. Miss.Code Ann. § 63-15-11 (1972 & Supp.1992).
insurance company and personal excess liability insurance from the second. The two insurers settled
out of court with Koestler for $1,100,000, agreeing to pursue the proper division of this agreed upon
liability in court. The division of this liability turned on the very issue presented in the present
case—i.e. whether the uninsured motorist insurer was liable for the stacked amount of Koestler's five
full coverages ($1,250,000) or whether its liability was limited to a single unstacked coverage
($250,000). The Mississippi Supreme Court held that at most, the uninsured motorist insurer was
liable for the greater of five stacked legislative minimum coverages or one full coverage. The
minimums totalled only $50,000; thus, the court held the insurer liable for one full coverage of
$250,000. Based on this determination, the court divided the liability between the two insurance
companies accordingly—$250,000 for the uninsured motorist insurer and $850,000 for the personal
excess liability insurer.
The Koestler holding is clear. The parties are free to contract to limit stacking in excess of
the statutory minimums even when the insurer charges separate premiums. In the instant case, the
statutory minimum for each coverage was $20,000 on the date of the accident. Assuming for
purposes of argument that Allstate charged a separate premium for each of the Ashleys' four cars as
alleged by the defendants/appellees, the maximum dictated by stacking would be $80,000. Allstate
concedes that it owes at least one full coverage ($100,000), as that is the greater of the two options
provided by Koestler.9
As a final matter, Rainer argues that the district court erred in holding as a matter of law that
Allstate did not act in bad faith by failing to pay the full $400,000 claim. They argue that Allstate
knew or should have known that its anti-stacking language in the new policy was "plainly" contrary
to public policy. We disagree. Allstate responded immediately to the Ashleys' claims. Although it
did not pay the requested $400,000, it did place what it believed it owed, and in fact does owe, with
the court when it promptly filed this suit for declaratory judgment. Contrary to Rainer's contentions,
9
The Ashleys argue that Koestler is not reliable law. They rely on two facts: the vote was
split 5-4 on the case and one of the majority votes was cast by the now retired Chief Judge. This
state of affairs does not detract from the simple reality that the case is currently good law.
Further, the Court denied a rehearing in the case, which strengthens its position on the matter.
all of the issues raised in this case are not well settled. This was made clear by the district court's
decision to award only $200,000 and is reinforced by this Court's decision to reduce that judgment
to $100,000. The district court correctly held that Allstate had not acted in bad faith as a matter of
law.
Because we hold that Allstate is liable for only $100,000, the Ashleys appeal of the district
court's interest award is moot.
III.
In conclusion, we hold that Allstate is liable for $100,000 under the policy it issued to Luther
Ashley. Consequently, We REVERSE the district court's decision and RENDER judgment in favor
of Allstate.