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State Farm Mutual Automobile Insurance Co. v. Arrington5/26/1998
Although the Arringtons were fully compensated from the underinsured motorist ("UIM") coverages of their policies with State Farm Mutual Automobile Insurance Company for their damages suffered in a vehicle accident, they sought further payments under the UIM coverages of other policies they held with the same insurance company. The trial court ruled that they were not entitled to duplicative recovery. We affirm.
FACTS AND PROCEDURAL HISTORY
Larry Arrington, his wife Barbara and their daughter Cynthia were involved in an automobile accident caused by Alberto Contreras. Larry was driving Cynthia's car, a 1989 Honda, at the time of the accident.
Contreras' insurer paid his liability policy limits to the Arringtons. While Barbara was fully redressed, Larry and Cynthia were not completely compensated for their injuries.
At the time of the accident, Cynthia was the named insured under a policy on the Honda issued by State Farm. The policy provided UIM coverage with liability limits of $25,000 per person and $50,000 per accident.
Larry and Barbara had separate State Farm policies on four vehicles they owned: two Chevrolets, a Jeep and a Buick. Because Cynthia resided with her parents, she was also an insured within the UIM coverage on each of those four policies. Each of the policies had UIM coverage limits of $25,000 per person and $50,000 per accident, and each contained the following clause:
"Limits of Liability - Coverage W [UIM Coverage]"
"5. The most we pay will be the lesser of:"
"a. the difference between the amount of the insured's damages for bodily injury , and the amount paid to the insured by or for any person or organization who is or may be held legally liable for the bodily injury; or"
"b. the limits of liability of this coverage." (Emphasis original.)
State Farm offered $12,000 to settle Larry's UIM claim and $15,000 to settle Cynthia's UIM claim. The Arringtons accepted on the condition that Larry's claim be paid under the policy on the Honda and that Cynthia's claim be paid under the policy on the Buick. State Farm paid Larry under the Honda policy, but it issued Cynthia a draft for $13,000 on the Honda policy and a draft for $2000 on the Buick policy. Larry and Barbara signed a release of Larry's UIM claim under the Honda policy, but Cynthia returned the drafts payable to her.
Larry and Cynthia took the position that Larry was entitled to $12,000 and Cynthia to $15,000 in UIM benefits from each of the five State Farm policies. State Farm disagreed, and it filed an action for declaratory relief, seeking an order that it had no obligation to pay Larry and Cynthia more than the difference between the amount of their damages for bodily injury and the amount paid to them by Contreras' insurer. Larry and Cynthia counterclaimed for bad faith and for a declaratory judgment that they were entitled to UIM payments under each of the five policies.
Both sides moved for summary judgment. State Farm argued that its policies' UIM provisions stated that the insureds can recover UIM damages only to the extent that they remain uncompensated for their actual damages. It also asserted that, pursuant to Ariz. Rev. Stat. Ann. ("A.R.S.") section 20-259.01, UIM coverage is applicable only for the difference between an insured's total damages and the total applicable liability limits.
Larry and Cynthia argued that nothing in the express langauge of the policies excluded them from obtaining UIM recovery from each policy for which a premium was paid. Reasoning that they were entitled to recover under each policy unless the p
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