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Wood v. Farmers Insurance Company of Idaho

Supreme Court of Idaho

December 20, 2019

DEENA K. WOOD, Plaintiff-Appellant,
v.
FARMERS INSURANCE COMPANY OF IDAHO, TOM WOODS INSURANCE, INC., and THOMAS
v.
WOODS, Defendants-Respondents.

          Appeal from the District Court of the Second Judicial District of the State of Idaho, Nez Perce County. Jay P. Gaskill, District Judge.

         The decision of the district court is affirmed.

          Aherin, Rice & Anegon, Lewiston, for appellant. Darrel W. Aherin argued.

          Elam & Burke, P.A., Boise, for respondent. Jeffrey A. Thomson argued.

          BRODY, JUSTICE.

         This appeal arises from an insurance company's denial of a claim for underinsured motorist benefits ("UIM"). Deena Wood was seriously injured in a car collision. At the time of the collision, Wood had auto insurance through Farmers Insurance Company of Idaho, which included $100, 000 of underinsured motorist coverage but also contained a provision stating that the amount of coverage would be reduced by the liability limit of the at-fault driver. Because the at-fault driver's bodily injury liability limit was equal to Wood's underinsured motorist limit, Farmers determined that no underinsured benefits were owed to Wood. Wood challenged the denial in district court, arguing in a motion for reconsideration that the offset provision should be declared void as against public policy because it "diluted" UIM coverage. The district court rejected Wood's argument. We affirm the district court's decision.

         I. FACTUAL AND PROCEDURAL BACKGROUND

         In January 2015, Deena Wood was seriously injured in an auto collision. Although the at-fault driver offered to pay the bodily injury liability policy limit ($100, 000), Wood's medical expenses exceeded that amount. Wood had $100, 000 of underinsured motorist coverage through her Farmers automobile insurance policy. UIM coverage provides coverage in those situations where the at-fault driver has at least the statutory minimum of bodily injury liability coverage, but the amount of liability coverage is not sufficient to compensate the injured party. See I.C. § 41-2503(2). UIM coverage is often confused with uninsured motorist ("UM") coverage, which provides coverage when the at-fault driver is uninsured or the at-fault driver's liability insurer is unable to pay due to insolvency. See I.C. § 41-2503(1).

         Wood filed a UIM claim with Farmers, her insurer. Farmers denied her claim on the grounds that because the at-fault driver's policy limit met or exceeded her UIM limit, her policy did not provide coverage after the offset. Farmers relied on a provision which stated: "The amount of UNDERinsured Motorist Coverage we will pay shall be reduced by the full amount of any bodily injury liability bonds or policies available to any party held liable for the accident regardless of the insured person's actual recovery from the liable party." (Emphasis in original). Wood filed a complaint in district court seeking recovery under the terms of her policy or alternatively on the basis of misrepresentation, professional negligence, and breach of the duty to properly train. Farmers filed a motion for summary judgment on all of Wood's claims, which the district court granted. Wood filed a motion for reconsideration, arguing that the offset provision violates public policy and should not be enforced. The district court denied Wood's motion for reconsideration. Wood filed a timely notice of appeal. The only issue raised on appeal is whether the offset provision as applied to Wood's claim violates Idaho public policy.

         II. STANDARD OF REVIEW

         "Whether an insurance contract violates public policy presents a question of law for this Court to resolve." Eastman v. Farmers Insurance Company, 164 Idaho 10, 14, 423 P.3d 431, 435 (2018).

         III. ANALYSIS

         Wood argues that the district court erred in its conclusion that the offset provision at issue does not violate public policy. Citing Hill v. American Family Mutual Insurance Company, 150 Idaho 619, 249 P.3d 812 (2011) and Eastman v. Farmers Insurance Company, 164 Idaho 10, 423 P.3d 431 (2018), she argues that any policy provision which "dilutes" UIM coverage is contrary to public policy. Her argument sweeps too broadly. The legislative history and text of Idaho Code section 41-2502 show that the Idaho Legislature envisioned different forms of UIM coverage, including offset coverage.

         Before 2008, this Court rejected public policy challenges to UIM provisions because no Idaho statute required automobile insurers to include, or even to offer, UIM coverage in its policies. The Court concluded that no public policy related to UIM coverage existed. Hill, 150 Idaho at 623, 249 P.3d at 817 (citing Andrae v. Idaho Counties Risk Mgmt. Prog. Underwriters, 145 Idaho 33, 36, 175 P.3d 195, 198 (2007); Erland v. Nationwide Ins. Co., 136 Idaho 131, 133, 30 P.3d 286, 288 (2001); Farmers Ins. Co. v. Buffa, 119 Idaho 345, 347, 806 P.2d 438, 440 (1991); Nationw ...


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