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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. State Farm Mutual Automobile Insurance Co. v. Houle (8/26/2011) sp-6597

State Farm Mutual Automobile Insurance Co. v. Houle (8/26/2011) sp-6597, 258 P3d 833

        Notice: This opinion is subject to correction before publication in the PACIFIC  REPORTER. 
        Readers are requested to bring errors to the attention of the Clerk of the Appellate Courts, 
        303 K Street, Anchorage, Alaska 99501, phone (907) 264-0608, fax (907) 264-0878, email 
        corrections@appellate.courts.state.ak.us. 

                THE SUPREME COURT OF THE STATE OF ALASKA 

STATE FARM MUTUAL                             ) 
AUTOMOBILE INSURANCE                          )       Supreme Court Nos. S-13645/S-13855 
COMPANY,                                      ) 
                                              )       Superior Court No. 3AN-06-07851CI 
                       Petitioner/            ) 
                       Cross-Respondent, )           O P I N I O N 
                                              ) 
        v.                                    )      No. 6597 - August 26, 2011 
                                              ) 
LARRY HOULE, SUNNIE                           ) 
HOULE, GRAHAM HOULE, and                      ) 
MARSHALL HOULE; and BRIAN                     ) 
NOEL, LYNN NOEL, LAURA                        ) 
NOEL, and SARAH NOEL,                         ) 
                                              ) 
                       Respondents/           ) 
                       Cross-Petitioners.     ) 
                                              ) 

               Petition for Review from the Superior Court of the State of 
               Alaska,     Third   Judicial  District,  Anchorage,     William    F. 
               Morse, Judge. 

               Appearances:   David       S.   Carter,   Hughes,   Gorski,   Seedorf, 
               Odsen, & Tervooren, LLC, Anchorage, for Petitioner/Cross- 
               Respondent.        Richard    E.  Vollertsen   and   Christopher    J. 
               Slottee,    Atkinson,    Conway,    &   Gagnon,     Anchorage,     for 
               Respondents/Cross-Petitioners. 

               Before:     Carpeneti,     Chief   Justice,  Fabe,    Christen,   and 
               Stowers, Justices. [Winfree, Justice, not participating.] 

               CARPENETI, Chief Justice. 

----------------------- Page 2-----------------------

I.      INTRODUCTION 

                At issue in this case are the coverage limits associated with underinsured 

motorist   (UIM)   insurance   and   whether   coverage   provided   under   disputed   insurance 

policies complies with the requirements of Alaska insurance statutes.                 The respondent 

families hold UIM policies.         They allege that they have suffered emotional distress and 

loss of consortium as a result of a collision that killed one family's child and severely 

injured the other family's child.        The insurer accepts that the policyholders incurred 

damages.     However, it contends that the families have already exhausted the coverage 

limits available to them under the UIM policies because the family members seeking 

damages were not "in" the fatal collision. 

                The superior court concluded that the families had not exhausted their UIM 

coverage under Alaska insurance statutes and reformed the insurance policies to allow the 

emotional distress claims to proceed to arbitration.            The superior court dismissed the 

families' loss of consortium claims as outside the coverage of the policies.  Because we 

conclude   that   the   families   have   exhausted   the   coverage   limits   available   under   their 

policies and that these policies are consistent with statutory requirements,  we reverse the 

superior court's decision to reform the policies.  Because coverage limits are exhausted, 

we decline to consider whether loss of consortium is covered under the policies. 

II.     FACTS AND PROCEEDINGS 

                This   is   a   dispute   over   insurance   coverage   arising   from   an   automobile 

accident   in   which   Nolan   Houle   was   killed   and   Caroline   Noel   sustained   significant 

injuries. The accident took place in August 2001 near the intersection of O'Malley Road 

and New Seward Highway in Anchorage.  Nolan and Caroline were passengers in a car 

driven by Ryan Schubert.         Schubert, who is not a party in this case, turned left in front 

of a bus that slammed into his car.  The parties do not dispute that the injuries in this case 

                                                  -2-                                             6597
 

----------------------- Page 3-----------------------

resulted from Schubert's driving and that the families' claims triggered coverage under 

Schubert's liability insurance policy. 

                Schubert      was   insured    by   State   Farm    Mutual    Automobile      Insurance 

Company.         Schubert's   liability   policy   covered    claims   up   to  a   per-person   limit   of 

$100,000 and a per-accident limit of $300,000.1  Pursuant to Schubert's liability policy, 

State Farm paid $100,000 to Caroline Noel and $100,000 to the estate of Nolan Houle, 

exhausting two separate per-person limits and two-thirds of the sum available for a single 

accident.    Pursuant   to   the   same   liability   policy,   State   Farm   also   made   payments   to 

Caroline's parents and Nolan's parents based on claims that, according to the families, 

included negligent infliction of emotional distress (NIED).               Together these payments 

exhausted the $300,000 per-accident limit of Schubert's liability policy. 

                The Houle family had three automobile insurance policies with State Farm. 

Each policy provided underinsured motorist (UIM) coverage to the members of the Houle 

household up to a per-person limit of $250,000 and a per-accident limit of $500,000.  The 

Noel family also had three State Farm automobile insurance policies subject to the same 

policy language.  Each policy provided UIM coverage to members of the Noel family up 

to a per-person limit of $100,000 and a per-accident limit of $300,000.  It is undisputed 

that   the   Houle   and   Noel   families'   UIM    policies   were   "stackable,"   as   that   term   is 

commonly understood.2          By stacking, the Houle family effectively had UIM coverage 

        1       We consider the arguments before us in order to interpret the disputed 

provisions   of   the   families'   UIM   policies;   this   case   does   not   conclusively   interpret 
obligations or limitations under Schubert's liability policy. 

        2       See BLACK 'S LAW DICTIONARY             1440 (8th ed. 2004) (defining "stacking" 

as "[t]he process of obtaining benefits from a second policy on the same claim when 
recovery from the first policy alone would be inadequate"); see also IRVIN E. SCHERMER 
                                                                                         (continued...) 

                                                   -3-                                             6597
 

----------------------- Page 4-----------------------

up to a per-person limit of $750,000 and a per-accident limit of $1.5 million, while the 

Noel family's limits were effectively $300,000 per person and $900,000 per accident. 

Further,   there   is   no   dispute   that   coverage   under   these   UIM   policies   was   triggered 

because, as a result of the August 2001 accident, members of the Houle and Noel families 

suffered   damages   that   exceeded   the   coverage   available   under   the   Schubert   liability 

policy.3 

                Pursuant to the Houle and Noel UIM policies, Caroline Noel, the estate of 

Nolan Houle, and the respondent family members presented State Farm with claims for 

various medical and economic costs resulting from the August 2001 accident, as well as 

punitive   damages.      State   Farm   paid   $750,000   on   account   of   Nolan   Houle's   UIM 

coverage and $300,000 on account of Caroline Noel's UIM coverage.  These payments 

exhausted the stacked per-person limits of the families' UIM policies.  But State Farm's 

        2       (...continued) 

& WILLIAM J. SCHERMER, AUTOMOBILE LIABILITY INSURANCE   29:1, at 29-3 (4th ed. 
2004). 

        3       The full extent of the damages suffered by the Houles and Noels is not 

known.     The record suggests that Caroline was in a coma for a week; spent 12 days in 
intensive care; had approximately 30 days of post-traumatic amnesia; and suffered a 
severe traumatic brain injury that caused, at least for some time, cognitive and memory 
deficits, hemiparesis, migraine headaches, knee-buckling, and full-body spasms.  We 
have no doubt that the loss and injury of loved ones may have devastating physiological 
effects on close family members. In this case, the families assert that they were prepared 
to present evidence of asthma, depression, trouble sleeping, anxiety attacks, and chronic 
stress that Caroline's and Nolan's family members suffered as a result of the tragic car 
accident.    State Farm has not contested before this court the amount of the families' 
damages as a factual matter.   Under the policies, the extent of monetary damages would 
be resolved in arbitration if coverage limits were not exhausted. 

                                                  -4-                                             6597
 

----------------------- Page 5-----------------------

payments did not exhaust the aggregate per-accident limits of the Houle and Noel UIM 

policies.4 

                 That is the origin of this dispute. The respondent family members believed 

that they were entitled to additional coverage based on the claims they had filed with 

State   Farm.    In   other   words,   they   believed   that   the   injuries   Caroline's   and   Nolan's 

parents and siblings had suffered as a result of the August 2001 accident triggered UIM 

coverage subject to separate per-person limits for each injured family member. But State 

Farm refused to make additional payments under the UIM policies, believing that any 

injuries suffered by the respondent family members were subject to the single per-person 

limits triggered by Caroline's and Nolan's injuries.  Thus, State Farm filed an action for 

declaratory   judgment,   asking   the   superior   court   to   declare   that   the   Noel   and   Houle 

families'   coverage   limits   had   been   exhausted.       The   families     sought   a   stay  of   the 

declaratory judgment action and appointment of an arbitrator to hear their claims and 

resolve any factual disputes. 

                 The superior court carefully addressed three rounds of summary judgment 

and several other motions concerning procedure and discovery.                    It responded to new 

developments in the governing law, including the release of our opinion in State Farm 

Mutual   Automobile   Insurance   Co.   v.   Dowdy   (Dowdy   II).5        Among   other   issues,   the 

superior court considered which of the parents' and siblings' claims constituted "bodily 

        4        State Farm has asserted that its payments "totaled in excess of $688,000 to 

the   Noel family and $1.288 million to the Houle family," which (according to State 
Farm) exhausted the stacked policy limits of both families' UIM coverage.  State Farm 
claims that these sums include "interest . . . and add[-]ons."  Nevertheless, the sums that 
State Farm reports paying to the Noel and Houle families fall short of the $900,000 and 
$1.5 million stacked per-accident limits in the families' respective UIM policies. 

        5        192 P.3d 994 (Alaska 2008). 

                                                   -5-                                              6597
 

----------------------- Page 6-----------------------

injury" under the UIM policy's broad definition of this term; it concluded that the policy 

covered   negligent   infliction   of   emotional   distress   but   not   loss   of   consortium.  The 

superior court later concluded that the families had not exhausted their UIM coverage 

under Alaska insurance statutes and reformed State Farm's insurance policy to allow the 

negligent infliction of emotional distress claims to proceed to arbitration. 

                State Farm then filed a petition for review, arguing that its UIM policy is 

consistent with the requirements of Alaska statutes and should not have been reformed. 

We granted the petition and authorized a cross-petition.           The families cross-petitioned, 

urging us to address their loss of consortium claims and to reconsider our ruling in 

Dowdy II.      We have considered the issues raised by both petitions. 

III.    STANDARD OF REVIEW 

                This case "involves a ruling on summary judgment and presents a question 

of law.   We therefore apply a de novo standard of review, 'adopting the rule of law that 

is most persuasive in light of precedent, reason, and policy.' "6        "We also review de novo 

as a question of law the interpretation of insurance policy language."7 

IV.     DISCUSSION 

                 Taken together, State Farm's petition and the families' cross-petition ask 

us whether Nolan Houle's and Caroline Noel's family members are entitled to separate 

per-person coverage under the terms of State Farm's UIM policies, whether the terms of 

the policies are consistent with the requirements of Alaska insurance statutes, whether 

the families' loss of consortium claims and emotional distress claims should be treated 

        6       Id. at 998 (quoting State Farm Mut. Auto. Ins. Co. v. Lestenkof, 155 P.3d 

313, 316 (Alaska 2007)). 

        7       Id. (citing Simmons v. Ins. Co. of N. Am., 17 P.3d 56, 59 (Alaska 2001)). 

                                                 -6-                                              6597 

----------------------- Page 7-----------------------

differently under the governing rules, and whether our decision in Dowdy II governs the 

outcome of the case. 

                The parties do not dispute that the Houle and Noel family members incurred 

damages as a result of the August 2001 car accident.             They disagree about whether the 

injuries to these family members triggered per-person limits separate from Nolan Houle's 

and Caroline Noel's per-person limits. 

                State Farm argues that the applicable coverage limits have been exhausted 

and that the UIM policies are consistent with statutory requirements.  According to State 

Farm, any covered injuries incurred by Nolan's and Caroline's family members are 

covered only under the per-person limits paid in respect of Nolan Houle and Caroline 

Noel. 

                The family members assert that separate per-person limits should apply to 

their claims.  They also argue that while the superior court properly reformed the policy 

to   cover   the   parents'   emotional     distress  claims,   there   is  no  principled    reason    to 

distinguish the emotional distress claims from the loss of consortium claims.  According 

to the families, all of these claims should proceed to arbitration. 

                Dowdy II  governs the interpretation of the UIM policy language in this 

case.   We decline to reconsider the ruling of that case and conclude that coverage has 

been   exhausted   under   the   terms   of   the   Houles'   and   Noels'   UIM   policies.   Because 

coverage has been exhausted, we need not consider whether loss of consortium claims 

could satisfy the policies' definition of "bodily injury."           Reformation of the policies is 

unnecessary because the terms of the policies are consistent with statutory requirements.8 

        8       See   State   Farm   Mut.   Auto.   Ins.   Co.   v.   Lawrence,   26   P.3d   1074,   1080 

(Alaska 2001) ("If State Farm has failed to provide [required] coverage, its UM/UIM 
                                                                                         (continued...) 

                                                   -7-                                               6597 

----------------------- Page 8-----------------------

        A.	     The UIM Policies Do Not Provide Separate Per-Person Coverage For 
                The Family Members' Emotional Distress Claims. 

                In addressing the proper interpretation of an insurance policy, we look to 

"(1) the language of the disputed provisions in the policy, (2) other provisions in the 

policy,    (3)  extrinsic   evidence,    and  (4)   case  law   interpreting    similar  provisions."9 

Because   "an   insurance   policy   is   a   contract   of   adhesion,"10 we   "construe   grants   of 

coverage broadly and interpret exclusions narrowly."11              We recently explained: 

                Insurance policies are construed in such a way as to honor a 
                lay   insured's   reasonable   expectations.     Policy   language   is 
                construed in accordance with ordinary and customary usage. 
                Ambiguities   in   .   . .   insurance   policies   are   to   be   construed 
                most favorably to an insured, but ambiguities only exist when 
                there are two or more reasonable interpretations of particular 
                policy language.[12] 

These rules of construction provide a general guide for interpreting disputed policy 

language. 

                Notably, we have already applied these rules of construction to the policy 

language at issue in this case.      State Farm's UIM policy provides in relevant part: 

                The amount of coverage for bodily injury is shown on the 
                declarations page under "Limits of Liability - UI - Bodily 
                Injury, Each Person, Each Accident".  Under "Each Person" 

        8       (...continued) 

provisions will be reformed to conform with the statutory requirements." (citing State 
Farm Mut. Auto. Ins. Co. v. Harrington, 918 P.2d 1022, 1025 (Alaska 1996))). 

        9       Allstate Ins. Co. v. Teel, 100 P.3d 2, 4 (Alaska 2004). 

        10      C.P. ex rel. M.L. v. Allstate Ins. Co., 996 P.2d 1216, 1222 (Alaska 2000). 

        11      Teel, 100 P.3d at 4. 

        12      Dowdy II, 192 P.3d at 998 (footnotes omitted). 

                                                   -8-	                                           6597
 

----------------------- Page 9-----------------------

                is   the   amount   of   coverage   for   all   damages   due   to  bodily 
                injury to oneperson . "Bodily injury to oneperson " includes 
                all injury and damages to others resulting from this bodily 
                injury.  Under "Bodily Injury - Each Accident" is the total 
                amount   of   coverage,   subject   to   the   amount   shown   under 
                "Each Person", for all damages due to bodily injury to two or 
                more persons  in the same accident. 

When we refer to "per-person" and "per-accident" limits in State Farm's UIM policy, we 

refer to the parameters established for "Each Person" and "Each Accident" in the passage 

above. 

                In both Lawrence and Dowdy II, we construed basically the same policy 
language that is before us today.13       In both of these cases, family members who suffered 

emotional distress as a result of an accident sought separate per-person coverage under 
the terms of State Farm's UIM policy.14          In other words, not only have we had occasion 

to   construe   the   same   language   that   is   in   dispute   here;   we   have   construed   the   same 

language in light of similar facts. 

                In Lawrence, we identified two requirements that must be met in order for 

separate coverage limits to apply under the terms of the policy: (1) the claimant must 

have suffered "bodily injury"; and (2) that injury must have been suffered "in the same 

        13      See Lawrence, 26 P.3d at 1077; Dowdy II, 192 P.3d at 996 n.9. 

        14      See Lawrence, 26 P.3d at 1075-76 (considering the claims of Tobitha and 

Stacey     Lawrence     Sr.,  who    suffered    emotional     distress  as  a  result   of  their  son's 
hospitalization following a collision with a suicidal, underinsured driver and who sought 
separate per-person coverage after payments to their son had exhausted the per-person 
limit for an accident involving one person); Dowdy II, 198 P.3d at 995 (considering the 
claims of Asa and Barbara Dowdy, who suffered severe emotional distress as a result of 
the death of their 17-year-old daughter in a collision with an underinsured intoxicated 
driver and who sought separate per-person coverage after payments to their daughter's 
estate had exhausted the per-person limit for an accident involving one person). 

                                                   -9-                                             6597
 

----------------------- Page 10-----------------------

accident."15    But we did not reach the merits of the coverage dispute in Lawrence.16 

When we took up the issue in Dowdy II, we explained that "the 'accident' referred to by 
the policy . . . is, of course, the collision between the vehicles."17            We concluded that 

" 'injury in the same accident' cannot reasonably be construed to refer to injuries that 
result from viewing a dead or injured person away from an accident scene."18                    In light 

of   our   interpretation   of   the   phrase   "in   the   same   accident,"   we   concluded   that   the 
Dowdys' emotional distress did not trigger separate per-person coverage limits.19 

                Dowdy II left open the possibility that some bystander emotional distress 
claims could meet the "in the same accident" requirement.20                Asa and Barbara Dowdy 

saw their daughter's body at the hospital at least three hours after the collision that killed 

her; the parents were "miles away" from the scene of the accident when the collision 
took place.21   Because the Dowdys were "far removed" from the accident involving their 

daughter,     we    concluded     that  they   could    not  satisfy   the  "in  the   same    accident" 
requirement.22 

        15      See Lawrence, 26 P.3d at 1077 (quoting Crabtree v. State Farm Ins. Co., 

632 So.2d 736, 741 (La. 1994)). 

        16      Id.  at   1077-78    (concluding      that  State  Farm    had   waived    the  relevant 

arguments about interpretation of the policy). 

        17      Dowdy II, 192 P.3d at 999. 

        18      Id. at 995. 

        19      Id. at 1001-02. 

        20      Id. at 999-1002. 

        21      Id. at 999. 

        22      Id. at 1001. 

                                                  -10-                                             6597
 

----------------------- Page 11-----------------------

                In this case, none of Nolan Houle's or Caroline Noel's family members 

were vehicle occupants or pedestrians in the collision that took place at the intersection 

of O'Malley Road and New Seward Highway.                  Nor did any of the family members see 

the August 2001 accident take place.   The family members saw Nolan and Caroline for 

the first time at the hospital.  Following Dowdy II 's interpretation of the term "accident," 

the undeniable emotional distress suffered by Nolan's and Caroline's family members 
was not incurred "in the same accident" that injured Caroline and Nolan.23                 According 

to the families' allegations, some of Nolan's and Caroline's family members were dining 

"just minutes away" from the hospital, and Brian Noel drove past the accident scene on 

his way to the hospital.  These allegations, while poignant, do not distinguish the claims 

of Nolan's and Caroline's family members from the emotional distress claims that failed 

to trigger separate per-person coverage in Dowdy II.  The emotional distress suffered by 

the family members does not trigger separate per-person coverage because they were not 

in or near the August 2001 collision. 

                The families draw attention to cases in which we allowed family members' 

emotional distress claims to trigger separate per-person coverage.   In Lawrence, we 

allowed the parents' claims of emotional distress to trigger separate per-person coverage 

limits; but we noted that the insurer had waived the arguments that the emotional distress 

claimed by the parents did not constitute "bodily injury" and did not meet the policies' 

        23      Testing the logic of Dowdy II 's definition of "accident," the respondent 

family members ask:         If they were not injured in the same accident as Caroline and 
Nolan,   in   what   accident   were   they   injured?   But  Dowdy   II  made   clear   that   not   all 
compensable   injuries   are   incurred   "in"   a   covered   accident   under   the   terms   of   State 
Farm's UIM policy.  Id. ("[I]t is not possible to say that all plaintiffs with NIED claims 
that are valid under Alaska law are necessarily injured in the same accident as their 
injured relatives.").     The family members were injured "as a result" of the accident but 
not "in" the accident. 

                                                  -11-                                            6597
 

----------------------- Page 12-----------------------

requirement of having been "in the same accident" as their son.24                 In  Teel, we again 

allowed a parent's emotional distress claim to trigger separate per-person coverage, but 
we were interpreting different policy language in that case.25          These cases do not change 

the conclusion that the emotional distress suffered by Caroline's and Nolan's family 

members does not trigger separate per-person coverage limits under the UIM policies in 

this case.  As explained above, this result is compelled by Dowdy II. 

                Nor is a different result compelled by the new evidence presented in this 

case.  Through discovery, the families obtained evidence that State Farm has, at times, 

paid emotional distress claimants under separate per-person limits.              The families argue 

that   this   is   strong   evidence   that   the   proper   interpretation   of   the   policy   would   allow 

Nolan's and Caroline's family members' claims to fall under separate per-person limits. 

But, according to State Farm, these payments were made at a time when the law was 

unsettled, and served as compromises to avoid litigation.             The families have identified 

some isolated cases where State Farm made payments under separate per-person limits 

to family members who were not in the collision.              But this evidence is insufficient to 

support the conclusion that State Farm consistently made such payments or is obligated 

to make such payments. Moreover, this evidence does not compel revisiting the decision 
in Dowdy II.26 

        24      Lawrence, 26 P.3d at 1077. 

        25      Allstate Ins. Co. v. Teel, 100 P.3d 2, 3-4 (Alaska 2004) (concluding that a 

mother's emotional distress was "because of" the bodily injury suffered by her son, and 
thus, satisfied the requirements for separate per-person coverage under a policy that 
defined an "insured person" as someone who is legally entitled to recover damages 
"because of bodily injury to [the insured], a resident relative, or an occupant of [the 
insured's] auto with [the insured's] permission" (italics omitted)). 

        26      See Pratt & Whitney Can., Inc. v. Sheehan, 852 P.2d 1173, 1176 (Alaska 

                                                                                       (continued...) 

                                                 -12-                                            6597
 

----------------------- Page 13-----------------------

               The families also argue that State Farm's limits of liability clause does not 

include limiting language found elsewhere in the State Farm policy.         They cite to C.P. 
ex rel. M.L. v. Allstate Insurance Co.,27 a case in which an insurer "knew how to phrase 

an exclusion unambiguously" but failed to repeat the relevant exclusion in a separate 

provision of the policy; we concluded in M.L.  that the policy provided the disputed 
coverage because the insurer had not expressly excluded it.28         In the present case, the 

families draw attention to the fact that a separate provision of State Farm's policy limits 

coverage to injuries sustained by an insured "while they operate or occupy a vehicle 

covered under the liability section."     According to the families, this demonstrates State 

Farm's ability to be more precise in defining and clarifying the terms of the policy.  The 

families argue that State Farm's failure to employ limiting terms shows State Farm's 

clear intent to provide broader coverage.      However, we find that the absence of these 

terms creates, at best, an ambiguity, rather than a clear expression of intent.         To the 

degree that an ambiguity exists, we already applied the relevant rules of construction 
when we interpreted the policy language in Dowdy II .29           And   there we rejected the 

interpretation of the UIM policy urged by the families in this case. 

       26      (...continued) 

1993) ("[W]e will overrule a prior decision only when 'clearly convinced [that] the rule 
was originally erroneous or is no longer sound because of changed conditions, and that 
more good than harm would result from a departure from precedent' . . . ." (quoting State 
v. Dunlop, 721 P.2d 604, 610 (Alaska 1986))). 

       27      996 P.2d 1216 (Alaska 2000). 

       28      Id. at 1227-28. 

       29      See, e.g., Dowdy II, 192 P.3d 994, 998 (Alaska 2008) ("Ambiguities in . . . 

insurance policies are to be construed most favorably to an insured, but ambiguities only 
exist   when   there  are  two  or  more   reasonable   interpretations   of  particular  policy 
language."). 

                                             -13-                                         6597
 

----------------------- Page 14-----------------------

        B.	      Alaska     Insurance      Statutes     Do   Not    Require     Separate     Per-Person 
                 Coverage For Family Members' Emotional Distress Claims. 

                 The next question to consider is whether State Farm's policy is consistent 

with   the   requirements   of   Alaska's   insurance   statutes.      If   a   policy   does   not   provide 

statutorily     required     coverage,     it  will   be   reformed     to   conform      with   statutory 
requirements.30     Former AS 21.89.020(c), now renumbered as AS 21.96.020(c), requires 

automobile   liability   insurers   to   provide   UIM   coverage   that   meets   certain   criteria.31 

Under this statute, insurers must offer policies with certain per-person and per-accident 

coverage limits.   The statute also prohibits insurers from providing UIM coverage with 

limits "less than the limit in AS 28.20.440 or AS 28.22.101," statutory provisions that 
identify requirements governing liability policies.32            The parties dispute the meaning of 

the   statutory   language   that   suggests   that   coverage   is   triggered   where   damages   arise 
"because of bodily injury to or death of two or more persons in one accident."33 

        30       State Farm Mut. Auto. Ins. Co. v. Harrington, 918 P.2d 1022, 1025 (Alaska 

1996) (citingHughes v. Harrelson, 844 P.2d 1106, 1107 (Alaska 1993); Burton v. State 
Farm Fire & Cas. Co., 796 P.2d 1361, 1363 (Alaska 1990);Hillman v. Nationwide Mut. 
Fire Ins. Co., 758 P.2d 1248, 1250-53 (Alaska 1988)). 

        31       AS 21.96.020(c) (requiring "coverage. . . for the protection of the persons 

insured under the policy who are legally entitled to recover damages for bodily injury 
or death from owners or operators of an uninsured or underinsured motor vehicle"). 

        32      Id.; see also AS 28.20.440 (identifying liability coverage that automobile 

insurers     are   required    to   provide);    AS    28.22.101     (identifying     general    coverage 
requirements with which automobile insurers must comply). 

        33       This    language      appears     in  two    sections    of   the   insurance     statute: 

AS 21.96.020(c)(2)(A)-(E) (requiring coverage where damages arise "because of bodily 
injury   to   or   death   of   two   or   more   persons   in   one   accident");   and   AS   28.22.101(d) 
(requiring coverage where damages arise "because of bodily injury to or death of two or 
more persons in any one accident"). AS 28.20.440(b)(2) describes per-accident liability 
                                                                                           (continued...) 

                                                   -14-	                                             6597
 

----------------------- Page 15-----------------------

                According to the families, these statutes, particularly AS 28.20.440, require 

insurers to provide UIM coverage for each family   member   injured as a result of an 

accident     and   do   not  permit    any   restrictions    on   that  coverage     unless   specifically 

authorized by statute.        The families argue that a separate per-person coverage limit is 

triggered   for   each   family   member   who   was   injured   as   a   result   of   the   August   2001 

accident.     Because several members of each family suffered injuries in this case, the 

families insist that the aggregate per-accident limit has not been exhausted.  To the extent 

that the terms of State Farm's policy fall short of this coverage, the families argue that 

reformation of the policy is required. 

                 State   Farm   contends   that   in   order   to   secure   UIM   coverage   under   the 

statutory scheme, an injured family member must be injured in an accident, not simply 

as a result of the accident.   In turn, the insurer argues that because only Nolan Houle and 

Caroline Noel were in the August 2001 accident, only one per-person coverage limit was 

activated for each family, and as a result, any covered damages suffered by other family 

members are subject to the single per-person caps.                Based on its interpretation of the 

statutes, State Farm argues that reformation is not required because its payments have 

exhausted the single per-person limits for all six of the Houle and Noel policies, the full 

extent of statutory required coverage. 

                Dowdy II is instructive in addressing this dispute. That case did not address 

the interpretation of the insurance statutes laid out above, and it does not directly control 

        33       (...continued) 

coverage in roughly the same language: "coverage . . . because of bodily injury to or 
death    of   two  or  more    persons    in  any   one   accident."    Neither    party  has   addressed 
specifically whether the word "any" in AS 28.20.440(b)(2) necessitates interpreting that 
statute differently from AS 28.22.101(d) and AS 21.89.020(c).                    We see no reason to 
distinguish these phrases in this case. The parties have not suggested that there is any 
significant difference between these statutory phrases. 

                                                   -15-                                              6597
 

----------------------- Page 16-----------------------

the question of statutory construction before us now.34            But in Dowdy II, we construed 

similar language and identified the generally accepted usage of the phrase "in the same 
accident."35   We explained that the generally accepted usage of the phrase "in the same 

accident" was inconsistent with the conclusion that non-witness bystanders incurred 
injuries "in the same accident" that hospitalized their daughter.36 

                State Farm urges us to interpret the statute's "in one accident" language and 

"in any one accident" language in the same way that we interpreted the phrase "in the 

same accident" in Dowdy II.  State Farm suggests that the meaning of the words "in one 

accident" and "in any one accident" is effectively indistinguishable from the phrase "in 

the   same   accident"   interpreted   in  Dowdy   II.     State   Farm   argues   that   ordinary   and 

customary usage should control the interpretation of the statute.             We agree. 

                The   families   rightly   note   that   ordinary   usage   does   not   always   govern 

statutory interpretation.     We construe "words and phrases according to their 'common 

and approved usage' unless such words and phrases have acquired peculiar meaning by 

        34       State Farm argued before the superior court, and seems to suggest here, 

that our decision not to reform the insurance policies in Dowdy II  should be read as a 
statement that the policies are consistent with statutory requirements. But this argument 
overlooks our policy of addressing only those issues that have been properly presented 
and briefed.  See, e.g., State Farm Mut. Auto. Ins. Co. v. Lawrence, 26 P.3d 1074, 1077 
(Alaska 2001) (declining to reach the merits of coverage dispute because insurer waived 
argument).  The superior court was right not to "read so much into the silence of Dowdy 
II" on the statutory issues. 

        35      Dowdy II, 192 P.3d at 199 ("To conclude that either Barbara or Asa Dowdy 

were injured 'in the same accident' with [their daughter] would stretch the meaning of 
that phrase beyond any generally accepted usage."). 

        36      See id. 

                                                  -16-                                            6597
 

----------------------- Page 17-----------------------

virtue of statutory definition or judicial construction."37          But the families did not show 

how the statutes give the words "in one accident" or "in any one accident" a peculiar and 

appropriate   meaning   different   from   the   phrase   interpreted   in  Dowdy   II.       Thus,   we 

conclude that Nolan's and Caroline's family members were not "in" the August 2001 

accident.    The statutes require State Farm only to provide   the   family members with 

coverage under the per-person limits triggered by Caroline and Nolan. 

                Alaska Statute 21.96.020, which requires insurers to offer UIM coverage, 
is intended to protect insured persons from suffering uncompensated damages.38                     With 

this purpose in mind, the families urge us to avoid reading limits into the statute.  Their 
approach   has   some   support.39     We   reject   State   Farm's   contention   that   the   families' 

approach is a "generic" effort to avoid the specific terms of the statute.  But the families' 

argument      does   not   justify  rejecting   the  common      and   approved     usage    of  "in  one 

accident."      The rules governing insurance policy interpretation, which we applied in 

        37      Lynch v. McCann, 478 P.2d 835, 837 (Alaska 1970) (citing AS 01.10.040). 

        38      Hillman v. Nationwide Mut. Fire Ins. Co., 758 P.2d 1248, 1252 (Alaska 

1988) ("The purpose of the statute is to protect completely, those willing to accept its 
protection, from all harm . . . produced by uninsured motorists." (internal citation and 
quotation   marks omitted)); see Coughlin v. Gov't Emps. Ins. Co., 69 P.3d 986, 991 
(Alaska   2003)   ("[T]he   purpose   of   the   statute   [is]   to   ensure   that   UIM  coverage   is 
secondary rather than primary coverage while at the same time making the benefit of 
UIM coverage broadly available."). 

        39      In a variety of contexts, we have noted that statutes should be construed 

liberally to give effect to their purpose.       See, e.g., Imperial Mfg. Ice Cold Coolers, Inc. 
v. Shannon, 101 P.3d 627, 630 (Alaska 2004) (calling for remedial statute "to be liberally 
construed to effectuate its purpose"); Allstate Ins. Co. v. Teel, 100 P.3d 2, 4 (Alaska 
2004) ("We construe grants of coverage broadly and interpret exclusions narrowly."); 
Spenard Action Comm. v. Lot 3, Block 1, Evergreen Subdivision, 902 P.2d 766, 773 
(Alaska   1995)   ("[W]e   construe   these   statutes   in   a   manner   to   avoid   frustrating   their 
remedial purpose."). 

                                                  -17-                                             6597
 

----------------------- Page 18-----------------------

Dowdy II, require construing any ambiguities in favor of the insured.40                But even under 

those rules of construction we concluded that the family members' emotional distress 
claims   were   not   incurred   "in   the   same   accident"   from   which   the   distress   resulted.41 

Applying the rules of statutory construction here does not mandate a different result. 

                The families emphasize that the legislature mandated "coverage . . . for the 

protection   of   persons   insured   under   the   policy   who   are   legally   entitled   to   recover 

damages from owners or operators of uninsured or underinsured motor vehicles because 
of bodily injury or death."42        The families correctly explain that the phrase "legally 

entitled to recover damages" incorporates background tort principles into the statutory 

scheme.     They argue that where a person is "legally entitled to recover damages," that 

person has met the threshold requirements for coverage and is entitled to proceed to 

arbitration.      According      to   the   families,   State   Farm's     interpretation    creates   an 

impermissible gap between the injuries that are compensable under tort law and the 
injuries compensable under the policy.43           They suggest that the doctrine of proximate 

cause and the requirements for establishing a cause of action provide the workable limits 

on coverage that the legislature intended.             But the limits of tort law are not the only 

coverage limits found in the statutes.         The statutes also require us to give effect to the 

words   "in   one   accident"   and   "in   any   one   accident."   Giving   effect   to   the   ordinary 

        40      Dowdy II,     192 P.3d at 998 ("Ambiguities in . . . insurance policies are to 

be construed most favorably to an insured, but ambiguities only exist when there are two 
or more reasonable interpretations of particular policy language."). 

        41      Id. at 1002 ("[I]t seems plain that the 'in the same accident' language of the 

policy cannot reasonably be construed to cover the Dowdys' NIED claim."). 

        42      AS 28.20.440(b)(3); see also AS 21.96.020(c). 

        43      The families also characterize this as an impermissible "exclusion" from 

coverage. 

                                                  -18-                                             6597
 

----------------------- Page 19-----------------------

meaning of this phrase, we conclude that Nolan Houle's and Caroline Noel's family 

members       are   not   entitled  to  separate  per-person   coverage    under   the   underinsured 

motorist statute.    These family members were not "in" the accident. 

                The families also argue that the so-called "mirror-image rule" requires State 

Farm to provide the same scope of coverage under its UIM policy that it provides under 

the liability policy. We have explained that "automobile insurance companies must offer 
insureds UM/UIM coverage that mirrors the insureds' liability."44                  The two policies 

should provide "the same benefit level."45          The families urge that the same reasoning 

requires separate per-person coverage for their emotional distress and loss of consortium 

claims because such coverage would be available under the liability policy.                    But the 

families   have   not   shown   how   State   Farm's   interpretation   of   the   UIM   policy   would 
provide different benefits than those available under the liability policy.46          As State Farm 

points out, the liability and UIM policies include the same language to describe injuries 

        44      State Farm Mut. Auto. Ins. Co. v. Lawrence, 26 P.3d 1074, 1079-80 (Alaska 

2001) (emphasis added) (concluding that because the injured party's liability policy 
covered   punitive   damages,   that   party's   UIM   policy   should   compensate   for   punitive 
damages). The legislature later superseded this specific holding with Ch. 172 SLA 2004, 
which amended AS 21.89.020(c) (now AS 21.96.020(c)) to provide that "coverage for 
punitive damages that might otherwise be recoverable from an uninsured or underinsured 
person is not required under this paragraph."             But the following general requirement 
remains intact: An automobile insurer must make available UIM coverage with the same 
limits as the liability policies it offers.     AS 21.89.020(c)(1); see also State Farm Mut. 
Auto. Ins. Co. v. Harrington , 918 P.2d 1022, 1025 (Alaska 1996) (concluding that a 
policyholder was entitled to coverage for pre-judgment interest and attorney's fees where 
that party's liability policy covered pre-judgment interest and attorney's fees). 

        45      Lawrence, 26 P.3d at 1079. 

        46      Harrington,   918   P.2d   at   1026   ("[T]he   evident   purpose   of   section   [AS 

21.96.]020(c)(1) is to provide for the insured, as an injured claimant, the same benefit 
level as that provided by the insured to those asserting claims against the insured."). 

                                                 -19-                                            6597
 

----------------------- Page 20-----------------------

to one person.  But the two policies differ in whom they cover.  Liability insurance is not 

designed to compensate the persons insured under the policy for their injuries; coverage 

is available to compensate an indeterminate class of third parties who may suffer injuries 

at the hands of the insured.   By contrast, a UIM policy provides first-person coverage to 

the   persons    insured    under   that  policy.    There    is  no  clear   analogy    between     the 

circumstances of this case and the payments that would be provided to third parties under 

the Houles' and Noels' liability policies.   In other words, the mirror image rule does not 

change the conclusion that the respondent family members are not entitled to separate 

per-person coverage under the underinsured motorist statute. 

                We see no reason to stray from generally accepted usage in interpreting the 

insurance   statutes   in   this   case. Looking   to   accepted   usage,   we     conclude   that   the 

respondent   family   members   were   not   injured   "in   the   same   accident"   as   Nolan   and 

Caroline.  Because Alaska's underinsured motorist statute does not require separate per- 

person coverage for these family members, reformation is unnecessary. 

V.      CONCLUSION 

                Because neither AS 21.96.020, AS 28.20.440, nor AS 28.22.101 requires 

coverage that is unavailable under the disputed insurance policies, we REVERSE the 

decision to reform the policies and REMAND for the superior court to enter judgment 

for State Farm. 

                                                 -20-                                            6597
 
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