STOWERS, Chief Justice.
While sitting on his motorcycle at a stop light, Chad Hahn was thrown backwards when Franklin Townsend's car failed to stop in time and struck the motorcycle. During settlement negotiations in the tort suit that followed, Hahn sought payment under Townsend's underinsured motorist (UIM) insurance policy. Hahn argued that he was an insured occupant of Townsend's car because he landed on the car after the impact and
In April 2015 Franklin Townsend rear-ended Chad Hahn with his car while Hahn was stopped on his motorcycle at a red light. The impact threw Hahn from his motorcycle. According to Hahn, he landed momentarily on the hood, windshield, and roof of Townsend's vehicle before coming to rest on the street. Hahn and Townsend had no relationship prior to the accident. Hahn's medical bills totaled around $160,000 and Hahn claimed, through his attorney, that Townsend faced personal liability "in the neighborhood of $500,000 to $1,000,000."
Townsend was insured under an Alaska Family Automobile Insurance Policy issued by GEICO. Townsend's policy provides up to $50,000 of property damage liability per person and $50,000 for bodily injury liability per person. In addition, it includes UIM benefits, extending up to $50,000 of coverage for "damages for bodily injury [and property damage], caused by an accident, which the insured is legally entitled to recover from the owner or operator of an uninsured motor vehicle, an underinsured motor vehicle, or a hit and run motor vehicle arising out of the ownership, maintenance or use of that vehicle."
The GEICO policy then defines "occupying" to mean "in, upon, getting into or getting out of." The UIM coverage is not available "until the limits of liability of all bodily injury and property damage liability bonds and policies that apply have been used up by payments, judgments or settlements."
Hahn sued Townsend for negligence and intentional torts arising out of the accident. GEICO, as Townsend's insurer, offered to pay Hahn "full per person limits of liability bodily injury coverage and the full amount of the liability property damage coverage" in exchange for a full release of all claims against Townsend. Hahn's attorney communicated to Townsend's attorney that if the UIM limits were offered in addition to the property damage and bodily injury limits, he would advise Hahn to release all claims against Townsend. Townsend's attorney communicated this request to GEICO, and under increasing pressure from Hahn's attorney, repeatedly requested that GEICO pay UIM limits as Hahn suggested in light of the excess exposure Townsend faced as well as increasing litigation costs. GEICO repeatedly reiterated that it was willing to pay Hahn full bodily injury and property damage limits under Townsend's policy in exchange for a full release of all claims against Townsend. But GEICO refused to pay UIM benefits to
GEICO filed suit against Hahn seeking a declaratory judgment that "there is no coverage available to Chad Hahn under the UIM coverage of Townsend's GEICO policy with respect to the April 18, 2015 accident, and that [GEICO] has no obligation to pay any damages Hahn seeks to recover under that coverage as a result of that accident." GEICO argued that Hahn was not "occupying" Townsend's vehicle under the policy and therefore was not an insured. Hahn asserted a counterclaim for a declaratory judgment that "there is underinsured motorist coverage available to Chad Hahn under the GEICO... policy issued to Franklin Townsend" because Hahn was occupying Townsend's vehicle when he landed on it. Hahn also sought to join Townsend and Hahn's medical insurance provider Blue Cross Blue Shield (Blue Cross) as "third-party defendants", arguing that they were real parties in interest and necessary parties under Alaska Civil Rules 17 and 19, respectively. Hahn also asserted as third-party claims against Townsend the same negligence and intentional tort claims as those included in Hahn's separate personal injury action.
GEICO filed a summary judgment motion seeking a ruling that Hahn was not covered under the UIM coverage of Townsend's policy because he was not "occupying" Townsend's vehicle at the time of the collision as defined by the GEICO policy. GEICO also filed a motion to dismiss Hahn's third-party claims, arguing that the only interested parties with respect to the insurance coverage question were GEICO and Hahn. Townsend filed a motion seeking to dismiss the third-party claims against him, arguing that he was not a necessary party and that the duplicative claims were meant to pressure Townsend and GEICO to settle in the personal injury action.
The superior court heard arguments on GEICO's motion for summary judgment, motion to dismiss, and other pending motions. At the hearing and in a "Suggestion of Lack of Subject Matter Jurisdiction" filed after the hearing Hahn argued that GEICO's declaratory judgment action was not ripe because he had not made a formal claim for UIM benefits, and because the bodily injury and property damage liability limits had not been "used up," a pre-condition for UIM benefits under the policy. GEICO filed a response to Hahn's Suggestion, arguing that because Hahn had demanded UIM benefits in settlement negotiations there was an actual controversy turning on a purely legal issue that the court had jurisdiction to decide under the provision for declaratory judgments in AS 22.10.020(g).
The superior court issued a written order concluding (1) it had jurisdiction over the coverage dispute and the dispute was ripe for decision; (2) Blue Cross and Townsend could not be joined as "third-party defendants", the procedure for which is governed by Alaska Civil Rule 14 because neither party could be liable to Hahn for GEICO's claims against him; (3) Blue Cross was properly joined as a real party in interest, but Townsend was neither a real party in interest nor a necessary party, and Hahn's duplicative claims against Townsend should therefore be dismissed; and (4) Hahn was not entitled to UIM coverage under Townsend's GEICO policy and GEICO was therefore entitled to summary judgment.
With respect to jurisdiction, the superior court determined that "Townsend's liability to Hahn will most likely exceed the personal injury policy limits" based on various representations and arguments by the parties. The court also noted that despite not making a formal claim, Hahn repeatedly rejected GEICO's offer of bodily injury and property damage limits but indicated he would drop his
With respect to joinder under Rules 17 and 19, the superior court reasoned that "[u]nlike GEICO or Hahn, Townsend's interest [was] in disputing and minimizing his personal liability for Hahn's injuries" and that the declaratory judgment action would have no effect on this underlying liability. The court emphasized that the contractual relationship at issue in the declaratory judgment action was between Hahn, as a potential insured, and GEICO. The court also noted that allowing the third-party claims to go forward might lead to multiple and inconsistent legal obligations for Townsend because they duplicated the claims in the personal injury action. It therefore dismissed the third-party claims against Townsend because he was neither a real party in interest nor a necessary party. Because it concluded that Blue Cross was partially subrogated to any UIM benefits accruing to Hahn, the court did not dismiss Blue Cross.
Lastly, with regard to the availability of coverage, the court construed the policy's use of the word "upon" together with the word "occupying." The court determined that "occupying," along with "getting in" and "getting out of," implied a prior relationship with the insured vehicle, thereby limiting the meaning of "upon" and excluding Hahn from coverage. Moreover, it concluded that a "reasonable insured would read all terms of the policy in context" and "not assign undue weight to a single term." The court supported its interpretation with out-of-state case law interpreting similar policy provisions to require "some degree of connection between the claimant, the injury, and the insured vehicle" beyond incidental contact. And it noted that interpreting "upon" in the manner Hahn advocated would yield absurd results, favoring those who happened to land on a car rather than the ground.
The court entered judgment in favor of GEICO and against Hahn and Blue Cross. Hahn appeals. Blue Cross does not.
Alaska's declaratory judgment statute provides in relevant part that "[i]n case of an actual controversy ... the superior court, upon the filing of an appropriate pleading, may declare the rights and legal relations of an interested party seeking the declaration."
"The question of whether to permit or require joinder of a real party in interest `rests in the sound discretion of the superior
"We review rulings on motions for summary judgment de novo, `reading the record in the light most favorable to the non-moving party and making all reasonable inferences in its favor.'"
Hahn argues on appeal that the superior court (1) erred in concluding it had subject matter jurisdiction to resolve this dispute under the declaratory judgment provision because Hahn had not made a formal claim to UIM coverage and the preconditions under the policy for UIM coverage were not yet met; (2) erred in dismissing the third-party claims against Townsend because Townsend was a real party in interest who stood to have his personal liability reduced if the court ruled that UIM coverage was available to Hahn; (3) erred in concluding Hahn was not "occupying" Townsend's vehicle within the meaning of the policy because the court's contractual interpretation conflicted with what a reasonable insured would expect, was contrary to out-of-state case law, and violated public policy; and (4) erred in concluding that no genuine issue of material fact existed and that GEICO was entitled to judgment as a matter of law. Hahn does not appeal the court's determination that Townsend could not properly be joined under Civil Rules 14 or 19.
Hahn argues that the superior court had no subject matter jurisdiction over this case because (1) Hahn never formally made a claim for UIM benefits, so any declaratory judgment that GEICO is not obligated to pay UIM benefits to him under Townsend's policy is an impermissible advisory opinion; (2) Hahn never intended to make a UIM claim under Townsend's policy and was instead more likely to have obtained an excess judgment against Townsend and let Townsend seek recovery from GEICO for any excess judgment Hahn might have obtained against him; (3) Hahn had not exhausted the bodily injury and property damage liability limits in Townsend's policy as is required to trigger UIM coverage; and (4) any real dispute is between Townsend and GEICO because — Hahn claims — GEICO likely filed the declaratory judgment action to avoid a bad faith claim brought by Townsend for its failure to tender UIM benefits to Hahn during settlement negotiations.
Alaska Statute 22.10.020(g) grants the superior court the power to issue declaratory judgments in cases of "actual controversy." This statute provides that "[i]n case of an actual controversy ... the superior court ...
"A ripe suit for declaratory judgment will present `a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality.'"
The superior court likened Townsend's UIM coverage to "excess coverage" — to be paid out after primary coverage has been exhausted — and determined that while we have not yet decided the issue when an action for excess coverage becomes ripe for adjudication, most jurisdictions deem a declaratory judgment appropriate when "it is reasonably likely that a potential claim for excess coverage will mature." The court then determined, based on the parties' representations and arguments, that "Townsend's liability to Hahn will most likely exceed the personal injury policy," making available any applicable excess coverage.
The court also noted that despite not making a formal claim, Hahn repeatedly rejected GEICO's offer of bodily injury and property damage limits but indicated he would drop his tort claims if GEICO also offered UIM coverage. The court observed that Townsend repeatedly asked GEICO to offer Hahn UIM coverage to secure a release of all claims to protect him from a "very large verdict." Accordingly, the court reasoned that UIM coverage had become crucial to ongoing settlement negotiations in the personal injury action and that withholding judgment on the availability of such coverage would inhibit ongoing settlement negotiations and cause the parties substantial hardship. Because of the importance of UIM benefits to the stalled negotiations and because Townsend's liability to Hahn would likely exceed the limits of Townsend's liability policy, the court determined that the case was ripe for decision.
We find no error in the superior court's conclusion. We have not previously directly answered the question of when a declaratory judgment action in the insurance coverage context becomes ripe,
First, while Hahn may be correct that he had not made a formal claim for UIM benefits, that assertion only goes so far. Hahn made clear through his negotiations with Townsend that if GEICO offered UIM limits he would drop his tort suit. While Hahn characterizes this behavior as an "invitation to offer," we are not here dealing with a question of contract formation. The practical effect of making a settlement contingent on GEICO proffering UIM benefits was to make a demand for UIM benefits. After GEICO filed for declaratory judgment against Hahn, Hahn continued to insist on UIM benefits in exchange for a release of claims against Townsend; and, significantly, Hahn counterclaimed against GEICO for an order declaring that UIM coverage was available.
Second, as GEICO argues, Hahn's assertions that he never intended to make a future claim for UIM benefits are likewise unconvincing. Hahn raised the issue of UIM coverage in negotiations, filed a counterclaim seeking a determination that UIM coverage would be available to him, contested summary judgment motions on the issue, and filed this appeal. And while Hahn argues that he was just as likely to obtain an excess judgment from Townsend and let Townsend seek recovery from GEICO, this, too, is unconvincing. At oral argument to the superior court Hahn's attorney conceded that to "chas[e] the person with no ability to pay" was a bad idea and that it was better to seek UIM benefits during settlement negotiations.
Third, the fact that Hahn had not exhausted the bodily injury and property damage liability limits did not make a declaratory judgment inappropriate. As the superior court noted, there was little doubt that Townsend was exposed to potential liability in excess of the policy limits, making the question whether UIM coverage was available critical to the underlying dispute. Moreover, the only reason that the policy limits had not been used up was because Hahn had rejected them in settlement negotiations, by insisting that his release of tort claims against Townsend be dependent on UIM benefits. Given that Hahn had made UIM benefits central to the settlement negotiations and had represented that Townsend's personal liability was well over GEICO's policy limits, we conclude that a UIM claim was reasonably likely to mature. Therefore, the fact that Hahn had not yet technically exhausted Townsend's bodily injury and property damage limits was not an impediment to hearing the case as a declaratory judgment action.
This conclusion comports with our prior treatment of the "actual controversy" question in the declaratory judgment context, and with our jurisprudence on ripeness generally. For example, in Alaska Commercial Fishermen's Memorial in Juneau v. City & Borough of Juneau, a nonprofit organization sought a declaratory judgment on whether the City of Juneau could construct a dock on submerged lands before it had a final decision from the State transferring those submerged lands to the City.
In Metcalfe v. State we held that, although the plaintiff challenging the enforcement of 2005 legislation affecting the Public Employees' Retirement System (PERS) no longer had a job with PERS benefits, his "declaratory judgment claim was ripe for decision" because "[he] and others in his position need[ed] to know their PERS status to make decisions about pursuing employment opportunities with the State" and substantial case law guided the court's adjudication of the plaintiff's constitutional challenge to the legislation.
When determining whether a case is ripe for decision, we also "`examine the fitness of the issues for judicial decision and the hardship to the parties of withholding court consideration' in an effort to `balance[ ] the need for decision against the risks of decision.'"
And as the superior court noted, the hardship visited on the parties by refraining from deciding this issue militates in favor of issuing a declaratory judgment. Hahn made the availability of UIM coverage central to settlement negotiations arising out of the car accident, Townsend asked GEICO to tender UIM benefits, and GEICO denied there was a factual or legal basis for making this type of benefit available in this context. Refusing to answer the UIM benefits question would thus cause the parties hardship.
Finally, Hahn suggests that the real reason GEICO asked for declaratory judgment was to avoid a potential bad faith claim by Townsend for failing to tender UIM benefits in settlement negotiations pursuant to our decision in Bohna v. Hughes, Thorsness, Gantz, Powell & Brundin.
Because a UIM claim was reasonably likely to mature, the superior court was faced with an actual controversy that was ripe for adjudication, and the court had subject matter jurisdiction to decide the declaratory
Under Alaska Civil Rule 56, the court may grant summary judgment to a party where "there is no genuine issue as to any material fact" and "the moving party is entitled to judgment as a matter of law."
Hahn contends that the court erred in its interpretation of the policy. He argues that because the GEICO policy covers any person "occupying" the vehicle; because the policy's definition of the word "occupying" includes being "upon" the vehicle; and because "during the course of the collision" Hahn was "upon" Townsend's car as the term would be "understood in [its] ordinary and popular sense and as a man of average intelligence and experience would understand [it]";
"Contract interpretation is a question of law subject to de novo review."
It is true that the term "upon" read in isolation could describe Hahn's position during the crash; his body was at least momentarily "upon" the hood, windshield, and perhaps roof of Townsend's car.
The superior court properly sought to construe the word "upon" in context, relying on the doctrine of noscitur a sociis, which provides that "the meaning of a word ... can be gleaned from the words associated with it."
Nor was it error for the court to consider case law interpreting similar provisions. Indeed, that is what we have instructed the superior court to do when interpreting insurance policies.
Hahn argues that the superior court should have followed the approach taken by the Sixth Circuit in Bennett v. State Farm Mutual Automobile Insurance Co., which found coverage in circumstances similar to those in this case.
Hahn separately argues that the term "upon" is ambiguous and must be resolved against the insurer or construed broadly as a provision of coverage.
Hahn is correct that we interpret ambiguous insurance policies in favor of the purported insured.
Finally, Hahn suggests that the superior court erred by reading into the policy an additional requirement that an injured person must have "some prior relationship" with the insured vehicle to be eligible for UIM coverage. He argues that will encourage insurers to deny coverage based on implied requirements, forcing laypersons to grapple with "subtle legal distinctions when interpreting the terms of an insurance contract," contrary to our holding in Allstate Insurance Co. v. Teel.
For the reasons outlined here, we find no error in the superior court's conclusion that Hahn was not "occupying" Townsend's car and therefore was not insured under the GEICO policy. Because this determination did not depend on any disputed factual issues but rather followed from the superior court applying its interpretation of the insurance policy to undisputed facts, the court did not err in concluding that GEICO was entitled to judgment as a matter of law and granting summary judgment in GEICO's favor.
Hahn sought to join Townsend as a third-party defendant under Alaska Civil Rules 17 and 19 and brought the same negligence
The superior court found that joining Townsend as a "third-party defendant" was improper. The court explained that a third-party claim is governed by Civil Rule 14, which "permits a defendant to implead any third party `who is or may be liable to [the defendant] for all or part of the plaintiff's claim' against him." The court reasoned that because GEICO sought only a declaratory judgment regarding its contractual obligations to Hahn, no other party could be liable to Hahn for GEICO's claims. The court proceeded to address whether joinder could be supported under Rules 17 or 19, which permit joinder of real parties in interest and indispensable or "necessary" parties, respectively. The court reasoned that "[u]nlike GEICO or Hahn, Townsend's interest [was] in disputing and minimizing his personal liability for Hahn's injuries," but concluded that the declaratory action would have no effect on this underlying liability. The court emphasized that the contractual relationship at issue in the declaratory judgment was between Hahn as the potential insured and GEICO, and that Townsend's presence in the case would not affect that contractual relationship. Because the court found that Townsend had only a collateral interest in the outcome, it concluded that he was neither a real party in interest nor a necessary party. The superior court also reasoned that allowing the third-party claims to go forward might lead to multiple and inconsistent legal obligations for Townsend because they duplicated the claims in Hahn's tort suit. The court therefore dismissed the third-party claims against Townsend.
On appeal, Hahn challenges only the court's determination that Townsend was not a real party in interest under Rule 17.
Having considered Hahn's argument, we find no error in the superior court's conclusion. In this case, both GEICO and Hahn sought declaratory judgments as to the scope of Hahn's contractual rights against GEICO and GEICO's contractual obligations to Hahn. While Townsend is the policy holder and named insured under the GEICO policy, UIM coverage is not liability coverage for those injured by the policyholder; it is coverage for personal damages suffered by insured parties.
We AFFIRM the superior court's decision in all respects.
We note that we recently stated in Metcalfe v. State that "[w]e review a superior court's decision regarding a controversy's ripeness for abuse of discretion." 382 P.3d 1168, 1177 n.47 (Alaska 2016). This statement incorrectly followed prior opinions that were abrogated by State v. ACLU of Alaska; like the parties in ACLU of Alaska, the Metcalfe opinion "conflate[d] the two requirements for declaratory judgment — standing and the prudential basis for granting declaratory relief — and the different standards of review that attach to each requirement." See ACLU of Alaska, 204 P.3d at 367-68. We reiterate that ACLU of Alaska is the correct statement of law.
