The Virginia Supreme Court’s opinion in Virginia Farm Bureau Mutual Insurance Co. v. Williams(Record 81900), issued June 4, 2009, brings sweeping change to uninsured motorist coverage law in Virginia. It does so by potentially increasing the amount of UM coverage available for an injured insured if more than one auto is on the same policy. Beyond that more obvious issue, which has already been reported in Virginia Lawyer’s Weekly, the Williams opinion also addresses two other points that help insureds in coverage disputes with their carriers.
Intra-policy stacking
Coverage specialists use the term “intra-policy” stacking to describe the practice of increasing coverage if more than one auto is covered by a single policy. Virginia allows UM carriers to prohibit intra-policy stacking only if their policies clearly and unambiguously state such stacking is not allowed. (Virginia has long required inter-policy stacking. That means an insured covered by more than one separate policy can add the limits available under each policy to determine the total aggregate UM coverage available for any one accident.)
Back in the 1970’s, Virginia cases allowed intra-policy stacking. Then the Virginia Supreme Court issued Goodville Mutual Casualty Co. v. Borror, 221 Va. 967, 275 S.E.2d 625 (1981). That case found that the policy language before it unambiguously prohibited intra-policy stacking. Since then, most if not all insurance companies adopted policy language similar to the anti-stacking language approved in Borror.
Now, however, the Virginia Supreme Court has found that a policy with that Borror anti-stacking language did not unambiguously prohibit stacking. To distinguish Borror¸ the court looked beyond the anti-stacking provisions to the policy as a whole. Specifically, it looked to how the declarations listed the autos covered and the UM coverage available. Those declarations differed from Borror, as they listed UM limits three times, next to each auto listed on the declarations.
Analyzing policy ambiguity
In reaching that result, the Virginia Supreme Court also expressly confirmed the following. Whether a specific term or phrase is ambiguous is not analyzed in the abstract. Rather, the term must be analyzed in context of the entire policy – all its terms. Just because the anti-stacking provisions were unambiguous in Borror does not mean they are not ambiguous when surrounded by different words. Context matters. So courts and attorneys arguing before them need to focus on how all the policy parts fit together. The insured’s lawyer’s diligence in doing so in Williamsadded $550,000 in available coverage for his client.
Allowing only reasonable exclusions
Williams also more clearly states a rule from an earlier case that can help insureds for all types of coverage. It holds that “when an insured seeks to limit coverage under a policy, the insurer must use language that is reasonable, clear, and unambiguous.” (Emphasis supplied.) (Slip Op. at 7). It cites Granite State Ins. Co. v. Bottoms, 243 Va. 228, 233, 415 S.E.2d 131, 134 (1992) for that proposition.
That word “reasonable” carries enormous power for the insured in arguing for coverage. The Virginia Supreme Court has said that exclusions must be “reasonable.” So now insureds can more easily argue that exclusions are not valid if unexpected or unusual, or if they significantly limit or erode coverage. For example, an insured could use this reasonability requirement to counter a carrier who tries to use an absolute pollution exclusion to exclude coverage for damages caused by anything other than traditional environmental exclusion like toxic waste. The rule stated in Williams also leaves open whether the exclusion must be objectively reasonable, or whether an insured’s own subjective assessment of reasonability can affect coverage.
In short, beyond re-opening Virginia law to intra-policy stacking of UM limits, the Williams case also offers insureds two additional arrows for their coverage argument quiver. Any attorney who regularly helps with coverage disputes would do well to read the case several times.