In a much welcomed decision, the Missouri Court of Appeals recently gave insurers more room to restrict uninsured motorist coverage where the insured received workers’ compensation or other similar benefits. In Rice v. Shelter Mut. Ins. Co., 2009 WL 585903 (Mo. App. W.D. March 10, 2009), the Western District of the Missouri Court of Appeals upheld an exclusion in a Shelter policy mandating that if the insured received any benefit under a “compensation law,” the insured would automatically receive the statutory-mandated minimum under Missouri’s Motor Vehicle Financial Responsibility Law (“MVFRL”).
The plaintiff in Rice was injured while a passenger in a vehicle involved in an accident with an uninsured motorist. It was undisputed that the plaintiff was working at the time of the accident and received workers’ compensation benefits. At the time of the accident, he was insured under three Shelter policies issued to his parents, with $600,000 of “stacked” uninsured motorist coverage available subject to the terms of the policies.
The plaintiff demanded $600,000 from Shelter, but Shelter instead paid $75,000, the statutory minimum ($25,000) for each of the three policies. The plaintiff brought suit to recover $525,000 and both parties moved for summary judgment. The trial court ruled for the plaintiff, holding the Shelter exclusion was illusory and void under Missouri public policy.
On appeal, the Missouri Court of Appeals held the following provisions of the Shelter policy were not illusory and did not violate the Missouri public policy contained in Section 379.203, R.S.Mo. 2000. The first paragraph under the section “Exclusions” is a type of “savings clause,” which by its own terms has application only where some policy provision is rendered unenforceable.
COVERAGE E-UNINSURED MOTORISTS
If an applicable uninsured motorist insurance law or financial responsibility law renders any exclusion provision of this policy unenforceable, we will provide only the minimum limits required by such law. However, if other insurance covers our insured’s claim and provides those required minimum limits, the exclusion provisions of this policy are fully enforceable.
Following the savings clause is the list of exclusions, including the “compensation law” exclusion at issue:
Coverage E does not apply:
(3) To damages sustained by an Insured if benefits are:
a) payable to, or on behalf of, such insured under any compensation law to be provided to, or on behalf of, such insured as a result of the same accident, or
b) required by any compensation law to be provided to, or on behalf of, such insured as a result of the same accident.
This exclusion does not apply to the amounts of coverage mandated by any uninsured motorist insurance law or financial responsibility law applicable to the accident, but does apply to coverages which are not mandated by such laws.
Following the list of exclusions is a section with another “savings clause” identical to the first, entitled “EFFECT OF UNINSURED MOTORIST INSURANCE LAWS OR FINANCIAL RESPONSIBILITY LAWS.” The court first interpreted whether the exclusion itself was valid before having to interpret the savings clauses.
In reading the entire UM section of the Shelter policy, the insured is afforded at least the statutory minimum in all instances. Rice, at *4. By stating in the exclusion that it does not apply to the MVFRL, Shelter avoids the conflict with Missouri public policy altogether. According to the court: “Because we have determined that section 379.203 mandates only $25,000 of UM coverage per person, per accident, there is no statute that requires more than this amount. Therefore, as in the case of underinsured motorist coverage, the rights of the parties are governed by contract law.” Id at *8.
The Rice decision is significant because the Shelter policy appears to be the first UM/compensation exclusion written to withstand the public policy requirements contained in Section 379.203. Previously, insurers had unsuccessfully attempted to enforce UM exclusions on several occasions because they did not afford claimants the statutory mandated minimum of $25,000 per person, per occurrence in uninsured motorist coverage. Cano v. Travelers Ins. Co., 656 S.W.2d 266 (Mo. banc 1983); Douthet v. State Farm Mut. Auto. Ins. Co., 546 S.W.2d 156 (Mo. banc 1977).
While this exclusion may only be used in limited circumstances, it is strong in effect. The Shelter provision in Rice is as close to a pure exclusion as possible while still complying with the MVFRL. Insurers should keep the Rice decision in mind when redeveloping policy language to create effective UM exclusions as they relate to duplicate payments or benefits. The insurer’s policy should adopt the language that has been upheld by the Missouri Court of Appeals in attempting to limit exposure in UM matters when workers compensation benefits have been paid to the injured insured. This decision creates a road map for developing an effective exclusion in this area.