Thе question here is whether an injured driver’s recovery under his two automobile insurance policies is reduced because of workers’ compensation benеfits he received for the same injury. On the basis of exclusions and limitations in the policies, the trial court answered the question in the affirmative. The court of appeals disagreed and so do we.
Plaintiff McClure suffered severe injuries in an automobile accident. He was driving his employer’s vehicle at the time and was acting in the course of his employment. The tortfeasor’s insurer paid McClure $100,000 and McClure also received a $251,024.19 settlement from his employer’s workers’ compensatiоn carrier.
*449 Claiming he was damaged in excess of $25,000,000 McClure brought this suit under coverages he purchased from defendants Northland Insurance Companies ($100,000) and LeMars Mutuаl Insurance Company ($25,000). Both policies contained provisions which allowed the insurers to reduce the underinsured motorist coverage limits by the amounts received from workers’ compensation and other insurance. Because the $351,024.19 McClure had already received exceeded the underin-sured motorist covеrage limits of the policies, both insurance companies denied they owed McClure anything.
Northland and LeMars based their denials of coverage on the policies’ exclusions and limitations. It remains the insurers’ position that their coverage should be reduced (in effect erased) by the amount recovered from wоrkers’ compensation and other insurance.
The trial court accepted the insurers’ view and affirmed their motions, for summary judgment. It held that the exclusion and limitation clauses cited are permissible under Iowa Code section 516A.2 (1985). The court stated:
An “other insurance” limitation or exclusion is a valid limitation or exclusion provided it does not reduce uninsured and underinsured protection below the statutory minimum of $10,000 for each person and $20,000 for each accident.
Because in each case the exclusion reduced McClure’s right of recovery to zero he was held barred from any recovery. On appeal the court of apрeals reversed this holding. We granted further review.
In
American States Insurance Co. v. Tollari,
As pointed out in Comment,
Underinsured Motorist Coverage in Iowa: American States Insurance Cо. v. Tollari,
71 Iowa L.Rev. 1569,1575-76 (1986), there are two competing views on who is an underin-sured motorist. Under what has become called the broad coverage view a motorist is underinsured when the tortfeasor’s liability coverage is less than the damages suffered by the victim of the underinsured motorist. Under the narrow coverage view a motorist is undеrinsured when the applicable liability coverage is less than the victim’s underinsured motorist policy limit.
See also Kluiter v. State Farm Mut. Auto. Ins. Co.,
These two different approaches reflect contrasting views of the underlying purpose of underinsured motorist coverage. The broad coverage rationale is that the underinsured motоrist coverage was intended to indemnify insureds for unpaid judgments.
Kluiter,
In the uninsured motorist coverage area, we have traditionally takеn a narrow coverage view, subtracting from the policy limit any recovery from other sources.
See Davenport v. Aid Ins. Co. (Mut),
334
*450
N.W.2d 711 (Iowa 1983);
McClure v. Employers Mut. Casualty Co.,
Any other interpretation of underinsu-rance would mean that the victim cannot recover part of the underinsurance limit he has bought аnd paid for, and that portions of the limits also would be illusory. For example, if the Tollari estate had to deduct $24,000 of liability insurance received from its underinsurancе limits of $50,000, the estate would recover only $26,000 of underinsured coverage and the remaining $24,000 of underinsu-rance that was purchased would be unavailable to the estate — notwithstanding a loss of $100,000.
Id. The distinction between McClure and Tollari is a perceived difference in the roles of uninsurance and underinsurance: uninsurance is designed to establish a minimum amount which a victim may recover when injured by a person with less liability insurance than that required by Iowa Code section 321A.1(10). Underinsurance coverage, on the other hand, is designed to make the victim whole.
The insurance companies contend that the result reached in Tollari conflicts with the last sentence of section 516A.2, which states that insurance policies “may include terms, exclusions, limitations, conditions, and offsets which are designed to avoid duplication of insurance or other benefits.” We think the answer to this contention lies in the purpose of underinsurance which we have said is аimed at full compensation of the victim. With this purpose we see no duplication of benefits until the victim has been fully compensated.
It is also alleged by the defendant companies that McClure’s position conflicts with a case that followed
Tollari.
In
Tri-State Insurance Co. of Minnesota v. De Gooyer,
We disagree. In
De Gooyer,
the insured had several policies with the same insurer under which he tried to collect for one accident. Our finding that section 516A.2 аllows limitations on the “stacking” of coverages is consistent with
Tollari.
As pointed out in
Kluiter,
potential duplication existed in
De Gooyer
“because the insured was seeking to recover as if he had two separate policies.”
The court of appeals was correct in reversing the trial court’s entry of summary judgment.
DECISION OF COURT OF APPEALS AFFIRMED; DISTRICT COURT JUDGMENT REVERSED AND REMANDED.