NATIONWIDE PROPERTY & CASUALTY INSURANCE COMPANY v. IRIZARRY

MEMORANDUM OPINION AND ORDER

WALLACE, J.

Plaintiff, Nationwide Property & Casualty Insurance Company brings this declaratory judgment action against Defendant, Angel Irizarry, Jr., seeking to affirm Nationwide's denial of coverage obligation to Mr. Irizarry for uninsured/underinsured ("UI/UIM") motorist benefits. Mr. Irizarry counterclaims for declaratory judgment that UI/UIM benefits are available to him.

Currently before the Court is Nationwide's Motion for Summary Judgment. The parties seek the Court's determination whether policy provisions purporting to preclude payment are valid and enforceable, or whether they are precluded pursuant to Delaware's UM statute ("§ 3902") and its UIM subsection ("§ 3902(b)").1

For the reasons stated below, Nationwide's summary judgment motion is DENIED.

I. FACTUAL AND PROCEDURAL BACKGROUND

Nationwide and Mr. Irizarry do not dispute the material facts in this action and jointly submitted a "Statement of Undisputed Material Facts and Procedural History" setting forth those uncontested facts as set forth below.2 This Stipulation includes the undisputed text of the subject insurance policy.

A. FACTUAL BACKGROUND

Luis Velez obtained an automobile insurance policy3 from Nationwide on December 9, 2016.4 Mr. Velez, solely through his own negligence, lost control of the insured vehicle while driving it on April 2, 2017, causing a one-vehicle accident on Barley Mill Road in New Castle, Delaware.5 Mr. Irizarry was an innocent passenger in the vehicle and sustained an injury to his right hand.6 The Policy covered Mr. Irizarry as a guest passenger.7 This coverage includes personal injury, bodily injury, and UM/UIM coverage.8

The Policy's UIM provision extends the definition of "uninsured motor vehicle" to include:

The Policy goes on to exclude from its definition "any motor vehicle insured under the liability coverage of this policy," and asserts that "[Nationwide] will make no duplicate payment to or for any insured for the same element of loss."10

Nationwide paid Mr. Irizarry's medical providers the Personal Injury Protection ("PIP") limit of $15,000,11 and later settled a Bodily Injury ("BI") claim for the policy limit of $15,000 with Mr. Irizarry.12 The BI claim settlement followed a demand letter from Mr. Irizarry through counsel for a sum larger than the policy limit.13 Having exhausted those forms of coverage, Mr. Irizarry demanded UIM payment from Nationwide for the alleged excess.14 Nationwide denied Mr. Irizarry's UIM claim via letter. According to Nationwide, Mr. Irizarry could not combine UIM and BI coverage as the passenger in a one-car accident.15

B. PROCEDURAL HISTORY

Nationwide commenced this action seeking a declaratory judgment supporting its denial decision.16 Mr. Irizarry answered the Complaint with a counterclaim.17

After submitting the Stipulation, the parties submitted their respective briefs on Nationwide's Motion for Summary Judgment.18 Following argument, the Court reserved decision and later received certain requested and unsolicited supplemental submissions.19

II. STANDARD OF REVIEW

Summary judgment is appropriate when the record shows no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.20 The record is viewed in the light most favorable to the non-movant,21 as the purpose of summary judgment is to determine whether genuine issues of material fact exist rather than to resolve them.22 The Court accepts as true the factual stipulations of the parties.23

The proper construction of a contract is purely a question of law.24 "[W]hen the language of an insurance contract is clear and unequivocal, a party will be bound by its plain meaning because creating an ambiguity where none exists could, in effect, create a new contract with rights, liabilities and duties to which the parties had not assented."25 "A contract is not rendered ambiguous simply because the parties do not agree upon its proper construction. Rather, a contract is ambiguous only when the provisions in controversy are reasonably or fairly susceptible of different interpretations or may have two or more different meanings."26 The true test of a contract's potential ambiguity is not what the parties to the contract intended it to mean, but what a reasonable person in the position of the parties would have thought it meant.27

Lastly, this Court applies settled principles of statutory interpretation, giving effect to the plain language of an unambiguous statute, and applying the literal meaning of the statute's words.28 "[T]he meaning of a statute must, in the first instance, be sought in the language in which the act is framed, and if that is plain . . . the sole function of the courts is to enforce it according to its terms."29 A statute is ambiguous only if it is "reasonably susceptible to different interpretations, or if giving a literal interpretation to the words of the statute would lead to an unreasonable or absurd result that could not have been intended by the legislature."30

III. DISCUSSION

On five occasions before five different judges, beginning with Baunchalk v. State Farm, this Court has applied and interpreted the interactions between § 3902(b) UIM coverage with other forms of coverage under the same policy when the victim is a passenger or pedestrian not expressly named in the policy.31 In every case, this Court found § 3902(b) defines "underinsured" solely in terms of the magnitude of the injury the victim suffered relative to the total coverage paid out, irrespective of the source of those payments.32 Where an innocent passenger of the policyholder-driver has injuries in excess of BI or PIP limits, the policyholder-driver's UIM coverage applies as well.33

This interpretation of has been consistent; any policy language putatively narrowing the coverage terms of a UIM policy governed by § 3902(b) is superseded and void.34 This Court has specifically addressed both types of narrowing language Nationwide invokes here, finding both are superseded by and void under § 3902(b). Even while this matter was pending, the Court again addressed the types of contractual provisions Nationwide seeks to invoke to avoid payment. It again found them superseded by § 3902(b).35

Nationwide concedes that Baunchalk and its progeny set mandatory minimum coverage terms for UIM clauses, that if the Court here applied its earlier precedents the additional UIM coverage for Mr. Irrizary is mandated, and therefore summary judgment for Nationwide would be precluded.36

A. STARE DECISIS'S ROLE IN CONSTRUING § 3902(b) HERE.

The doctrine of stare decisis in Delaware provides that a point of law settled by a judicial decision is thereafter controlling precedent for the same Court and is to be reexamined only upon a showing of both (1) "urgent reason" and (2) a "clear manifestation of error."37 Of course, while not done lightly, such a decision—and those of the same Court following it—may be departed from, overruled, or set aside by a higher appellate tribunal.38 But undoubtedly, deference to prior decisions is a necessary manifestation of the principle that individuals must be afforded "an opportunity to know what the law is and to conform their conduct accordingly."39 The United States Supreme Court has gone so far as to describe stare decisis as being "of fundamental importance to the rule of law."40

Of particular note here: the Baunchalk line of cases are decisions on statutory interpretation. Any concerted judicial misconstruction of a statute is subject to corrective tuning by the legislature, and thus prior statute-interpreting rulings gain approving harmony from ensuing legislative silence.41 The Court in Baunchalk-type innocent-passenger cases has previously answered Delaware insurers' policy arguments by urging them "to pursue legislative clarification," since the statutory language is unambiguous and controlling.42

B. NATIONWIDE'S INVOCATION OF STATE FARM v. KELTY.

Nationwide urges the Court to view the UIM coverage under the Policy as a supplemental policy offering excess coverage outside of the strictures of § 3902(b) entirely.43 Nationwide interprets Baunchalk as forbidding excess UIM policies outside of the narrow terms permitted by § 3902(b), which in its view contravenes Delaware public policy encouraging insurance coverage and protecting freedom of contract.44

Nationwide relies heavily on State Farm v. Kelty, which addressed supplemental clauses.45 The Kelty policy included an excess PIP provision with a pedestrian exclusion that itself made an exception for family members of the insured.46 Such exclusions would be invalid on baseline PIP coverage, but the Kelty Court found that, because the policy at issue contained baseline coverage with a conforming PIP clause up to the minimum requirement, the excess PIP clause could permissibly include limitations and exclusions that would be impermissible for baseline PIP.47

Nationwide emphasizes that UIM coverage: (a) is supplemental and optional—not compulsory like no-fault insurance generally; (b) is opt-in rather than opt-out;48 and (c) permits motorists to obtain varying levels of coverage, down to nothing at all.49 As purely excess coverage, Nationwide argues that Baunchalk and its progeny erred by failing to recognize Kelty controls, and thereby permits insurer and insured to negotiate more limited UM/UIM coverage than § 3902(b).50

C. NATIONWIDE NEVER OFFERED CONFORMING UM/UIM COVERAGE.

But there is a chink in Nationwide's Kelty armor. While insurer and insured have the capacity to create a policy that conforms to Delaware law without any UM/UIM coverage, doing so requires the insured to explicitly reject UM coverage "in writing, on a form furnished by the insurer."51 There are fewer formalities for rejecting UIM coverage, but the insurer is nevertheless obligated to offer a conforming UIM package.52 This offer must be detailed enough to permit the insured to make an informed decision, must include a price term, and the insurer bears the burden of showing that the offer of UIM coverage was made and declined.53

Had Nationwide offered Mr. Velez UIM coverage conforming to § 3902(b), and had Mr. Velez affirmatively rejected that coverage, he and Nationwide could have thereby created a valid automobile insurance policy adhering to Delaware law yet offering no UIM coverage. If the provisions at issue were contained in a supplementary excess rider after conforming UM/UIM had been declined, Nationwide's Kelty theory might properly be before the Court. But Nationwide presents no signed form from Mr. Velez opting out of conforming UM coverage. Nor does Nationwide submit evidence demonstrating Mr. Velez declined a conforming UIM policy.

Where Delaware law requires an automobile insurer to offer an optional coverage provision and the insurer fails to do so, "the insurer is deemed to have made a continuing offer of such additional coverage to the insured" that "remains open even after an accident occurs."54 Thus, even if the Court accepted Nationwide's Kelty argument that the UM/UIM clause in the Policy is a nonconforming supplementary provision outside § 3902(b), having not shown that conforming coverage was offered and rejected likely permits Mr. Velez to retroactively reform the Policy post-accident to add precisely that conforming UM/UIM coverage Nationwide seeks to avoid.55

D. NATIONWIDE'S KELTY GLOSS CANNOT OVERCOME STARE DECISIS.

Nationwide neither discloses any "urgent reason" nor unveils any "clear manifestation of error" justifying discard of this Court's now-well-settled § 3902(b) jurisprudence.56

Nationwide makes no showing that it offered conforming UM/UIM coverage which Mr. Velez rejected. As such, Nationwide's argument that the UM/UIM coverage in the Policy is a supplementary rider § 3902(b) would simply subject the Policy to reformation to add conforming UM/UIM coverage with the precise benefits for Mr. Irizarry that Nationwide now seeks to challenge. So the same result flows from both Nationwide's Kelty theory and adherence to the Baunchalk cases. Nationwide thus cannot demonstrate error of any kind, let alone a "clear manifestation of error."

Neither can Nationwide demonstrate "urgent reasons" to revisit Baunchalk. Like prior insurers in the innocent-passenger UIM cases, Nationwide argues that the Baunchalk rule makes coverage conforming to § 3902(b) more expensive and thereby disincentivizes it in a manner contrary to public policy.57 Had Nationwide in fact offered both conforming § 3902(b) coverage as well as a nonconforming alternative that excludes Baunchalk passengers, the difference in price between the provisions might possibly substantiate this oft-made policy argument and in the proper case justify to this Court or one higher to set Baunchalk aside. But that didn't happen.

Lastly, stare decisis gains force when the legislature and private citizens have ordered their affairs in reliance on previous decisions.58 Contrary to Nationwide's assertion that "outside of the courtroom, there is no individual or societal reliance on Baunchalk," policyholders like Mr. Velez have precisely manifested and procured such an interest. Mr. Velez obtained the Policy from Nationwide more than a year after Baunchalk was handed down. At the time they formed the Policy, Nationwide and Mr. Velez are presumed to have been aware that the UM/UIM clause would combine with the PIP and BI coverage in the event of an accident injuring an innocent passenger of Mr. Velez.59 When underwriting the policy, Nationwide is presumed to have taken such considerations in to account.60 Mr. Velez could reasonably expect that he was purchasing insurance to cover his passengers according to the Baunchalk rule, and thus overturning the rule necessarily gives Nationwide a windfall of the premiums it collected for coverage of which it was later relieved.

IV. CONCLUSION.

First, since Baunchalk was first decided the General Assembly has had almost four years to correct any interpretive error by this Court. It hasn't. Insurers like Nationwide have offered UM/UIM policies thereafter fully aware of the Baunchalk rule and presumably priced accordingly.

Second, Nationwide cannot escape Mr. Irizzary's claim via its alternative theory that the UM/UIM provisions at issue constituted some supplemental nonconforming coverage outside the scope of § 3902 as construed by Baunchalk without a showing that it offered, and Velez rejected, a conforming policy.

So, Nationwide's Motion for Summary Judgment is DENIED.

IT IS SO ORDERED.