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Current Issues in Underinsured and Uninsured Insurance Coverage in Missouri

Shelter Mutual Insurance Company v. Straw

In Shelter Mutual Insurance Company v. Straw, the Southern District found the limits of insured’s liability clause language to be nearly identical to that in Lynch and therefore unambiguous and enforceable. 334 S.W.3d 592, 596 (Mo. App. S.D. 2011). In Straw, Loyd Straw was injured in an automobile collision caused by Paula Heiskell. Id. at 594. Straw received $100,000 from Heiskell’s liability insurer, Farmers Insurance Group. Id. Straw also had an underinsured motorist policy with a $100,000 limit with Shelter Mutual Insurance Company. Id.Shelter filed a Declaratory Judgment motion to determine whether their insurance policy provided UIM coverage for Straw for this collision. Id. Shelter argued the policy contained a set-off provision reducing the coverage limit by the amount of other damages paid to the insured. Id. at 595. With $100,000 coverage limit and $100,000 in damages already paid to Straw by Farmers Insurance, Shelter would not owe Straw anything. Id. at 597-98.The parties agreed to a joint stipulation of facts including a value of damages greater than or equal to $200,000 and stipulated that the court could find either Straw had no coverage under the UIM policy with Shelter or that the Shelter policy provided $100,000 in coverage to Straw. Id. at 594. The trial court could reach no other result. Id. The trial court ruled for Straw and found Shelter owed him $100,000 because of a layperson’s reasonable interpretation that an offset would come from total damages rather than from the policy limits. Id.Shelter appealed and the Southern District found for Shelter, largely due to the precedent it had set in Lynch. Id. at 596. The court compared the two policies and found “only insignificant variations in language.” Id.

Applicable UIM Coverage, Set-off Provision & Definitions for Lynch	Applicable UIM Coverage, Set-off Provision & Definitions Straw
INSURING AGREEMENT FOR COVERAGE E-1If an insured sustains bodily injury as a result of an accident involving the use of a motor vehicle, and is entitled to damages from any person as a result of that bodily injury, we will pay the uncompensated damages subject to the limit of our liability stated in this endorsement.	INSURING AGREEMENT If:(a) an insured sustains bodily injury as a result of an accident involving the use of an underinsured motor vehicle; and(b) the owner or operator of that underinsured motor vehicle is legally obligated to pay some or all of the insured’s damages, we will pay the uncompensated damages, subject to the limit of our liability stated in this coverage.
Uncompensated damages means the portion of the damages which exceeds the total amount paid or payable to an insured by, or on behalf of, all persons legally obligated to pay those damages.	Uncompensated damages means the portion of the damages that exceeds the total amount paid or payable to an insured by, or on behalf of, all persons legally obligated to pay those damages.
LIMIT OF OUR LIABILITYThe limit of liability for this Coverage will be the limit of liability stated for this particular endorsement number in the Declarations, subject to the following limitations:(2) The limit of liability stated in the Declarations will be reduced by all amounts paid or payable to the insured making the claim by, or on behalf of, all persons legally obligated to pay any portion of the damages to that insured.Straw, 334 S.W.3d at 596.	LIMITS OF OUR LIABILITYThe limits of liability for this coverage are stated in the Declarations and are subject to the following limitations:(4) The limits are reduced by the amount paid, or payable, to the insured for damages by, or for, any person who:(a) is legally liable for the bodily injury to that insured; or (b) may be held legally liable for the bodily injury to that insured. Straw, 334 S.W.3d at 596.

While the court was “inclined to agree” with Straw that an average person would likely believe he or she had $100,000 in UIM coverage, the policy language in this case was nearly identical to that in Lynch. Id. Therefore, the reasoning of Lynch applied with the “subject to” clause in the limits of liability provision clearly indicating limits on recovery and the provision further specifying the policy limits would be reduced by other amounts the insured received for damages. Id. at 597. Noting the permissibility of set-off provisions that deduct from coverage limits as long as appropriate language is used, the court found the Shelter policy limited UIM damages to $100,000 minus the $100,000 previously recovered from Farmers and consequently Shelter did not owe Straw for his uncompensated damages. Id. at 596-98.

Lynch v. Shelter Mutual Insurance Company

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