Lead Opinion
[¶ 1.] Connie Phen made a claim against an uninsured motorist provision in her contract of insurance with Progressive Northern Insurance Company (Progressive). Progressive denied the claim and Phen brought suit to force payment of the claim. Phen also alleged that Progressive acted in bad faith when it denied her claim. After hearing cross motions for summary judgment, the circuit court granted 1) Phen’s motion and directed Progressive to pay the $25,000 limit under its uninsured motorist provision. The circuit court denied 2) Progressive’s motion for summary judgment on the bad faith issue finding that there was sufficient evidence to put the question before a jury. In an amended order, the court directed entry of final judgment pursuant to SDCL 15-6-54(b). Progressive appeals both issues. We affirm Issue 1 and reverse Issue 2.
FACTS
[¶ 2.] The parties have stipulated to the facts. On July 4, 2001, Connie Phen was seriously injured when the motorcycle she was on was struck by a vehicle. The motorcycle was owned and driven by Guy Koppinger. Lynne Peterson was driving the other vehicle and her negligence was the proximate cause of Phen’s injuries. Peterson was uninsured. Koppinger’s motorcycle was insured by Financial Indemnity Company (Financial) and in October 2001, Financial paid Phen its uninsured motorist policy limit of $25,000.
[¶ 3.] Phen’s injuries led to approximately $100,000 in medical bills. She sustained injuries to her leg, internal organs
a vehicle, other than a covered vehicle, if uninsured motorist coverage or underin-sured motorist coverage applicable to such vehicle is available.
A “covered vehicle” is defined as a vehicle owned by Phen. This type of “other insurance” clause was deemed void as against public policy in Westphal v. Amco Ins. Co.,
The Limits of Liability under this Part III shall not be added to or stacked upon any uninsured motorist coverage or underinsured motorist coverage applying to other motor vehicles to determine the amount of coverage available to an insured person who sustains bodily injury in any one accident.
[¶ 4.] Phen brought suit to determine whether the policy exclusions violate public policy and are therefore void. Phen also argued that Progressive acted in bad faith when it denied her claim. The court granted Phen’s motion for summary judgment on the policy exclusion and directed Progressive to pay $25,000. The court denied Progressive’s summary judgment motion on Phen’s claim of bad faith. Progressive appeals raising two issues:
1. Whether Progressive’s “other insurance” clause violates public policy.
2. Whether the circuit court properly denied Progressive’s motion for summary judgment on Phen’s claim of bad faith.
We affirm the circuit court on Issue 1 and reverse on Issue 2.
STANDARD OF REVIEW
[¶ 5.] The standard of review for summary judgment is well established. We determine whether a genuine issue of material fact exists and whether the circuit court correctly applied the law. Nickerson v. American States Insurance,
[¶ 6.] Because an insurance policy is a contract, the parties are bound to its terms and insurance companies are allowed, subject to statutory constraints, to limit their liability and impose conditions upon their obligation to pay. Miller v. Queen City Fire Ins. Co.,
[¶7] 1. WHETHER PROGRESSIVE’S “OTHER INSURANCE” CLAUSE VIOLATES PUBLIC POLICY.
[¶ 8.] Progressive contends that the Court should prohibit Phen from “stacking” her uninsured motorist benefits atop those she has already collected from Financial. Phen counters that 1) in proceeding under both policies she is not stacking the policies and 2) the “other insurance” clause in her policy with Progressive is void because it violates public policy.
arises where the same claimant and the same loss are covered under multiple policies, or under multiple coverages contained in a single policy, and the amount available under one policy is inadequate to satisfy the damages alleged or awarded. In essence, stacking describes the phenomenon of insureds or claimants against them adding all available policies together to create a greater pool in order to satisfy their actual loss.
12 Lee R. Russ <& Thomas F. Segalla, Couch on Insurance § 169:4 (3d Ed. 1999).
[¶ 10.] The trial court relied on this Court’s decision in Westphal in granting summary judgment to Phen on the ground that the other insurance clause is void because it violates public policy. In West-phal, this Court adopted the holding of Safeco Insurance Company of America v. Jones, which provided:
We hold that our statute sets a minimum amount for recovery, but it does not place a limit on the total amount of recovery so long as that amount does not exceed the amount of actual loss; that where the loss exceeds the limits of one policy, the insured may proceed under other available policies; and that where the premiums have been paid for uninsured motorist coverage, we cannot permit an insurer to avoid its statutorily imposed liability by its insertion into the policy of a liability limiting clause which restricts the insured from receiving that coverage for which the premium has been paid.
Westphal,
[¶ 11.] Progressive argues that Westphal no longer represents the public policy of this state because the Legislature has never codified the holding and because the Legislature subsequently enacted anti-stacking laws. Progressive failed to show that Westphal no longer represents public policy. We affirm the trial court on this issue and hold that the “other insurance” clause of the policy is void in this circumstance.
[¶ 12.] This Court has consistently noted that the Westphal holding remains sound. See Nickerson,
No policy insuring against loss resulting from liability imposed by law for bodily injury or death suffered by any person arising out of the ownership, maintenance or use of a motor vehicle shall be delivered or issued for delivery in this state with respect to any motor vehicle registered or principally garaged in this state unless coverage is provided therein or supplemental thereto in limits forbodily injury or death set forth in 32-35-17, for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured motor vehicles ... because of bodily injury, sickness or disease, including death, resulting therefrom; provided, that the named insured shall have the right to reject such coverage[.]
(Emphasis supplied.) SDCL 58-11-9 now provides in pertinent part:
No policy insuring against loss resulting from liability imposed by law for bodily injury or death suffered by any person arising out of the ownership, maintenance, or use of a motor vehicle may be delivered or issued for delivery in this state with respect to any motor vehicle registered or principally garaged in this state, except for snowmobiles, unless coverage is provided therein or supplemental thereto in limits for bodily injury or death equal to the coverage provided by such policy for bodily injury and death, for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured motor vehicles and hit-and-run motor vehicles because of bodily injury, sickness, or disease, including death, resulting therefrom. However, the coverage required by this section may not exceed the limits of one hundred thousand dollars because of bodily injury to or death of one person in any one accident and, subject to the limit for one person, three hundred thousand dollars because of bodily injury to or death of two or more persons in any one accident, unless additional coverage is requested by the insured.
SDCL 58-11-9 (emphasis supplied). As the emphasized language suggests, there have been two relevant changes in the statute since Westphal was decided.
First, uninsured motorist coverage is now mandatory whereas before the insured had the option of rejecting coverage. Second, the coverage required by the statute cannot exceed $100,000 unless the insured specifically requests additional coverage. Progressive asserts that these changes remove the underpinnings of the Westphal decision. However, this Courts writings have taken these modifications into account and do not appear to have changed the holding of Westphal. We will address each amendment separately.
[¶ 13.] The language in the statute that made uninsured motorist coverage mandatory was inserted in 1972. Progressive argues that in Westphal the insured had a choice whether to obtain uninsured motorist protection and that choice justified the Court’s holding that stacking should be allowed “where the premiums have been paid for uninsured motorist coverage.” Westphal,
Premiums for uninsured motorist coverage are charged on each vehicle merely to cover the increased risk. Therefore, premiums are paid for the insured’s “protection” that she will be guaranteed a minimum recovery. The fact that premiums are paid for the coverage is not the conclusive determination that the insured is entitled to the full amount of coverage without deduction. In other words, the insured who contracts for [underinsured motorist] coverage is contracting for the assurance that he will be able to recover, at a minimum, anamount equal to the [underinsured motorist] coverage. This right of recovery applies when the insured has uncompensated damages up to the [underinsured motorist] policy limits without regard to the number of policies, vehicles or the amount of premiums paid.
(Internal citations omitted.) What Progressive neglects to mention about Nick-erson is that this Court specifically distinguished Westphal in Nickerson and reiterated, the Westphal holding is sound[.] Nickerson,
The language of the statute is plain, unambiguous and mandatory ... Stated in the affirmative, every policy must have this coverage. Only after the mandatory offer is made can the insured reject it in writing. Nowhere in the statute does the legislature attempt to fix any maximum amount of recovery less than the amount of the loss. The lack of pro ration language in the statute is conspicuous and can only weigh in favor of an inference of allowing stacking recovery.
Westphal,
[¶ 14.] This Court has also addressed the addition of the $100,000 limit on the amount of uninsured motorist coverage which is automatically written into policies without the insureds request for additional coverage. In Union Insurance Co. v. Stanage, the Court explained:
This modification of the statute reflects a legislative determination that the maximum amount set forth in the statute is sufficient to protect those insureds who may be legally entitled to recover against an uninsured motorist.
Union Insurance Co. v. Stanage,
[¶ 15.] This Courts interpretation of the uninsured motorist statute in Westphal and subsequent decisions appears to be that an insured is allowed to stack insurance policies up to the $100,000 statutory maximum unless the insured has requested greater coverage. However, the insured may not collect an amount greater than his or her actual loss. See Westphal,
[¶ 16.] As Progressive correctly asserts, the Legislature has created several anti-stacking statutes since 1973. However, not one of these statutes addresses our holding in Westphal. For example, when the Legislature enacted the under insured motorist provision in 1975, it specifically limited the amount the insured could recover to “the difference of the policy limits
[¶ 17.] In 1986, the Legislature directly addressed the issue of stacking in three statutes. First, an insured may not add their uninsured motorist coverage to their underinsured motorist coverage to determine the limit of coverage for an injured person for any one accident. SDCL 58-11-9.7.
[¶ 18.] Next, an insured may not add together the limit of liability for underin-sured motorist coverage for two or more of the insureds vehicles to determine the limit of coverage available to an injured person for any one accident. SDCL 58 — 11— 9.9.
[¶ 19.] Finally, SDCL 58-11-9.8 prohibits an insured from adding together the limits of liability for uninsured motorist coverage for two or more of the insureds vehicles to determine the limit of coverage available to an injured person for any one accident. SDCL 58-11-9.8.
[¶ 20.] It is clear that the Legislature is aware of the concept of stacking and that in certain circumstances the Legislature has specifically prohibited stacking. By enacting SDCL 58-11-9.8, the Legislature has even gone so far as to codify this Court’s decision in Cunningham which held that although the Court’s decision in Westphal was sound, the Court would not expand it to allow an insured to stack his own uninsured motorist coverage of two vehicles. Cunningham v. Western Cas. Sur. Co.,
[¶ 21.] Had the Legislature determined that “other insurance” clauses were in accord with public policy in this type of circumstance, it clearly could have addressed the issue in one of the numerous changes and additions to the uninsured and underinsured motorist statutes. The Legislature has chosen to allow the rule of Westphal to stand, and this Court has consistently noted that the holding is sound. The trial court did not err in relying on Westphal to grant summary judgment to Phen. Furthermore, to the extent that the anti-stacking clause attempts to prohibit the insured from collecting under the policy when other uninsured motorist coverage is available, it also violates public policy.
[¶ 22.] The Legislature has clearly enunciated a public policy of requiring in
[¶ 23.] 2. WHETHER THE TRIAL COURT PROPERLY DENIED PROGRESSIVE’S MOTION FOR SUMMARY JUDGMENT ON PHEN’S CLAIM OF BAD FAITH.
[¶ 24.] In order to establish that an insurance company acted in bad faith in denying a claim, the insured must show an absence of a reasonable basis for denial of policy benefits [or failure to comply with a duty under the insurance contract] and the knowledge or reckless disregard [of the lack] of a reasonable basis for denial. Stene v. State Farm Mut. Auto. Ins. Co.,
[¶ 25.] The simple fact that Progressive asserted a policy defense is insufficient grounds upon which to find a genuine issue of material fact as to whether it acted in bad faith. The stipulated facts do not present a genuine issue of material fact but raise a legal question as to whether the facts constitute bad faith. In this instance, this is clearly a legal question to be determined de novo. In the thirty years since Westphal, changes in the un-derinsured motorist statutes and our cases regarding the same could lead a reasonable insurer to believe that Westphal no longer represented the public policy of this state. Indeed, the trial court even indicated that he felt the law in this area was “a little murky.” Because the question whether the policy exclusion was void was fairly debatable, we hold that the trial court improperly denied Progressive’s summary judgment motion on Phen’s claim of bad faith.
Notes
. There are other forms of stacking in insurance law and by defining stacking this way for the purpose of this case, we do not intend to restrict the definition so that it does not apply in other contexts.
. A review of this Court’s holdings regarding underinsured motorist coverage accounts for Progressive’s belief that Phen should only be entitled to collect up to the amount she bargained for with Progressive. See e.g. Union Ins. Co.,
Concurrence Opinion
(concurring in result).
[¶ 28.] I agree that Westphal controls this appeal, and Westphal invalidates Progressive’s policy clauses that prohibit the stacking of coverage. I concur in result only because I part company with the Court’s conclusion that our decisions since Westphal continue to reflect a public policy against “anti-stacking” exclusions in uninsured motorist insurance policies. In my view, Progressive correctly points out that this Court’s more recent decisions reflect a public policy permitting such exclusions as long as the statutorily required minimum uninsured motorist coverage is provided. Nevertheless, I concur in result because Westphal remains the law of this State, and that decision invalidates Progressive’s anti-stacking exclusions.
[¶ 29.] There is no dispute that “[t]he Legislature has clearly enunciated a public policy of requiring insurers to provide uninsured motorist coverage to every insured in the state.” Supra ¶ 22. Therefore, I agree that, to the extent that Progressive’s exclusionary clauses “purport[] to eliminate an insurance company’s liabili
[¶ 30.] However, I disagree with the Court’s conclusion that anti-stacking provisions also violate public policy as expressed in “our precedent since Westphal. ...” Supra n. 2 and ¶ 15. On the contrary, Progressive presents a colorable case that public policy, as expressed in our decisions after Westphal, permits anti-stacking provisions as long as the insured is provided the minimum limits of coverage.
[¶ 31.] A state’s public policy “is not static, but may change as the relevant factual situation and the thinking of the times change.” American Home Assurance Co. v. Cohen,
[¶ 32.] This Court’s decisions after Westphal reflect that the uninsured motorist statutes are not intended to provide the insured with a full recovery for the amount of actual loss when that loss exceeds the statutorily required coverage. Instead our more recent decisions indicate that:
The purpose of the uninsured motorist statutes is to provide the same insurance protection to the insured party who is injured by an uninsured or unknown motorist that would have been available to [the insured] had [the insured] been injured as a result of the negligence of a motorist covered by the minimum amount of liability insurance.
Canal Ins. Co. v. Abraham,
[¶ 33.] Under these post -Westphal pronouncements, Progressive correctly points out that we have not held that the uninsured coverage statute (SDCL 58-11-9) requires stacking. Indeed, there is nothing in the language of SDCL 58-11-9 that even suggests the existence of a public policy requiring stacking. Therefore, if public policy does not require stacking, it is difficult to argue that public policy prohibits anti-stacking contracts of insurance. As we noted in Bartron:
Until firmly and solemnly convinced that an existent public policy is clearly revealed, a court is not warranted in applying the principle under consideration. It has been well said, “that the right ofprivate contract is no small part of the liberty of the citizen, and that the usual and most important function of courts of justice is rather to maintain and enforce contracts than to enable parties thereto to escape from their obligation on the pretext of public policy, unless it clearly appear that they contravene public right or the public welfare.”
Id.,
[¶ 34.] Were there any lingering doubt about this Court’s current pronouncements on this subject, Union Ins. Co. clearly held that stacking could be prohibited when it would result in a recovery in excess of the statutory amount set forth in SDCL 58-11-9. Id.,
[¶ 35.] Thus, a number of our decisions after Westphal have upheld anti-stacking provisions, and none have concluded that anti-stacking provisions violate public policy. Id.; see also Cunningham,
[¶ 36.] In light of our recent precedent, I cannot join the majority’s conclusion that “our precedent since Westphal compelfs]” the conclusion that anti-stacking provisions violate public policy, supra n. 2, or that “[t]his Court’s ... subsequent decisions” allow the insured to stack coverage. Supra ¶ 15. On the contrary, were we to review Progressive’s anti-stacking provisions based only upon our decisions since Westphal, we would most likely reach a different result.
[¶ 37.] Nevertheless, I concur in result because of the strength and breadth of the Westphal language, the substantial legislative activity restricting stacking in closely related areas while not restricting it in Westphal scenarios, and the fact that the Legislature has failed to abrogate West-phal despite its active involvement in this area for thirty years.
[¶ 38.] In my view, the analysis of Progressive’s anti-stacking clauses begins and ends with Westphal. Initially, it must be noted that Westphal’s analysis was not restricted to a review of “other insurance” clauses. The clause construed included “other insurance” and “anti-stacking” concepts.
[T]hat ‘other insurance’ provisions, whether in the form of a ‘pro rata,’ ‘excess insurance,’ ‘excess-escape,’ or other similar clause, are invalid as a part of uninsured motorist protection, on the ground that the statute requiring every liability policy to provide this type of protection will not permit the insurer to provide in any way that the coverage will not apply where other insurance is also ‘available,’ despite the fact that the insured may thus be put in a better position than he would be in if the other motorist were properly insured.
Westphal,
[¶ 39.] Thus, this broad language of Westphal applies to both of the Progressive clauses. Moreover, were there any question about the strength of that holding, it must be remembered that it has been repeatedly reaffirmed. Supra ¶ 12. It must finally be remembered that West-phal specifically rejects the rule advocated by Progressive here; i.e. the notion:
[T]hat the design and purpose of uninsured motorist statutes are to provide protection only up to the minimum statutory limits for bodily injuries, and not to provide the insured with greater insurance protection than would have been available had he been injured by an insured motorist, and have held that such ‘other insurance’ provisions are valid where they do not reduce coverage below the minimum statutory limits.
Id.,
Nowhere in the statute does the legislature attempt to fix any maximum amount of recovery less than the amount of the loss. The lack of pro ration language in the statute is conspicuous and can only weigh in favor of an inference of allowing stacking recovery.
Id.,
[¶ 40.] Although these pronouncements are in direct conflict with this Court’s more "recent precedent, Westphal’s fundamental precepts have not been abrogated despite thirty years of legislative activity restricting stacking in this area. Consequently, until changed by the Legislature, Westphal remains the law of the State, and its broad language invalidates Progressive’s “other insurance” and “anti-stacking” provisions.
[¶ 41.] I therefore concur in result on Issue 1 and concur on Issue 2.
[¶ 42.] KONENKAMP, Justice, joins this special writing.
. The Westphal provision stated:
Other Insurance: With respect to bodily injury to an insured while occupying an automobile not owned by the principal named insured, the insurance under this endorsement shall apply only as excess insurance over any other similar insurance available to such insured and applicable to such automobile as primary insurance, and this insurance shall then apply only in the amount by which the limit of liability for this coverage exceeds the applicable limit of liability of such other insurance.
Id.,