Law Court applies "other-owned vehicle" exclusion

 On Thursday, July 14, 2016, the Law Court (Saufley, J.), in Graf v. State Farm Mutual Automobile Insurance Company, 2016 ME 109, declined to disregard “other-owned vehicle” exclusionary language in a UM/UIM policy for motor vehicle coverage, and held that where an injured motorist has settled with an at-fault party, the resulting settlement amount must be backed out of the available coverage limits when determining the available coverage of an applicable UM/UIM policy.




On August 4, 2005, Alberta Graf (hereinafter Graf) was operating her motor vehicle when she was struck from behind by another motorist. Graf sustained injuries as a result of the collision. The other motorist—who was found to be solely responsible for the accident—was insured by a $50,000 motor vehicle policy. At this time, Graf and her husband held two State Farm policies:


·         The first (hereinafter “Policy 1”), in Graf’s husband’s name, provided $1,000,000 of UM/UIM coverage, and $100,000 medical payments coverage, but did not cover Graf’s vehicle. This policy contained an “other-owned vehicle” exclusion stating that coverage would extend only to injuries sustained in vehicles insured under the policy. Graf’s vehicle was not insured under Policy 1.

·         The second (hereinafter “Policy 2”), in Graf’s name, provided $300,000 of UM/UIM coverage, and $100,000 medical payments coverage for services furnished within three years of an accident, and covered Graf’s vehicle. Policy 2 provided that “. . . coverage shall be excess over and shall not pay again any medical expenses paid under the medical payments coverage,” and that medical payments coverage would be denied “to the extent workers’ compensation benefits are required to be payable.” 




In October 2009, Graf settled her claim against the at-fault motorist for the limits of said motorist’s policy—$50,000—with State Farm’s permission. In September 2011, Graf filed a complaint in superior court against State Farm seeking coverage under Policies 1 and 2.


Prior to trial, in March 2014, Graf and State Farm attended an arbitration hearing. The arbitration panel concluded that Graf  had sustained $378,000 in damages, as a result of the accident—$125,000 of which were attributable to unspecified medical bills. Backing out Graf’s $50,000 settlement with the at-fault motorist, the panel awarded Graf net damages totaling $328,000.


On April 28, 2014, State Farm filed a motion in superior court to reduce the panel damage award to available coverage ($300,000), and presented evidence that a portion of Graf’s medical bills had been paid by workers’ compensation or were for services obtained more than three years after the accident (both of which contravened the terms of Policy 2). Upon review, the lower court granted State Farm’s motion to reduce the panel damage award to available coverage under Policy 2. Backing out the $50,000 settlement with the at-fault motorist, the court held that Graf was entitled to a total of $250,000 for State Farm. Graf timely appealed the decision.




Before the Law Court, Graf argued that the lower court erred in determining:


1.)    That Policy 1 excluded coverage for injury sustained in a vehicle not covered by the policy;

2.)    That the UM/UIM statute entitled State Farm to offset any judgment entered by the court by the $50,000 settlement Graf received from the at-fault motorist, after the arbitration panel had already offset its award by this amount; and

3.)    That the language in Policy 2 prevented Graf from recovering both UM/UIM coverage and medical payments coverage.


The Court, addressing each of Graf’s arguments in turn, first examined whether the policy exclusion in Policy 1 for accidents occurring in “other-owned vehicles” was valid, precluding recovery by Graf under its terms. In so doing, the Court reiterated the standing principle that “policy exclusions are enforced as long as they are unambiguous, do not conflict with the UM/UIM statute, and are not against public policy.” Gross v. Green Mountain Ins. Co., 506 A.2d 1139 (Me. 1986). Reviewing the language of Policy 1, the Court determined that it was “almost identical” to other exclusionary language previously before the Court that did not conflict with the UM/UIM statute, and that it was not ambiguous. As such, the Court held that the exclusionary language in Policy 1 was valid, and precluded coverage of Graf’s vehicle.


Examining Graf’s next argument—that it was improper for the lower court to offset available coverage by the $50,000 settlement where the arbitration panel had already offset its damages award by this amount—the Court stated that “[w]hen the total damages are greater than the amount of UM/UIM coverage, we have previously determined that this language mandates that insurers offset the amount of coverage available in the UM/UIM policy, rather than the amount of damages incurred, by the amount actually paid by the tortfeasor.” Citing Farthing v. Allstate Ins. Co., 2010 ME 131, ¶ 7, 10 A.3d 667 (emphasis in original). The Law Court further explained that “the reason for doing so” is to “provide an injured insured the same recovery [that] would have been available had the tortfeasor been insured to the same extent as the injured party.” Tibbetts v. Dairyland Ins. Co., 2010 ME 61, ¶ 12, 999 A.2d 930. Thus, concluded the Court “it was proper to offset the amount of available coverage with the [at-fault] motorist’s payment, with the coverage then applied against the total damages determined by the arbitration panel.”


Lastly, the Court examined whether Graf was entitled to any of the $100,000 medical payments coverage under Policy 2, separate from the UM/UIM coverage provided thereunder. Reviewing the language of Policy 2, the Law Court determined that the policy required medical payments coverage to be determined first, and precluded the duplication of payment.  Therefore, concluded the Court “any damages that fall within the $100,000 medical payments coverage should be paid first and remaining damages should be paid from the UM/UIM coverage.” Where the superior court did not determine the amount of medical expenses incurred within three years of the accident or whether any expenses were payable by workers’ compensation, the Court remanded the matter for consideration to determine how much, if any, of the $125,000 of the panel award for medical expenses were incurred within three years of the accident and were not payable by workers’ compensation.


Judgment affirmed in part, remanded in part.


N. Laurence Willey, Jr., Esq. for Graf

James Main, Esq. for State Farm