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Larson v. Geico General Insurance Co.

United States District Court, D. Arizona

October 21, 2014

Gregory Melvin Larson, Plaintiff,
v.
GEICO General Insurance Company, et al., Defendants.

ORDER

DAVID G. CAMPBEL, District Judge.

Plaintiff Gregory Larson has filed a motion for partial summary judgment regarding the offset Defendant GEICO General Insurance Company (GEICO) may receive in connection with an underinsured motorist (UIM) claim. Doc. 15. The motion is fully briefed and the Court heard oral argument on October 10, 2014. For the reasons that follow, the Court will grant Plaintiff's motion.[1]

I. Background.

Plaintiff suffered serious and permanent injuries in a motor vehicle accident caused by Barrett Lavon Dempster, an underinsured motorist. Doc. 1-1 at 3. Before the accident, Dempster consumed alcohol at a nearby golf course. Id. While driving intoxicated, Dempster forced Plaintiff's vehicle off the roadway and into a light pole. Id.

Dempster had motor vehicle liability insurance with limits of $25, 000 applicable to Plaintiff's claim. Id. Plaintiff had automobile insurance issued by GEICO, which provided UIM coverage of $250, 000 per person. Id. The golf course was insured through a general liability insurance policy with a limit of $1, 000, 000. Id. at 4.

Plaintiff pursued negligence claims against Dempster and the golf course in state court. Id. at 3-4. Plaintiff eventually settled with Dempster for his policy limits of $25, 000 ( id. at 4) and with the golf course for $60, 000 (Doc 18 at 7). After settling the negligence claims, Plaintiff presented his UIM claim to GEICO. Doc. 1-1 at 6. Plaintiff alleges GEICO refused to compensate him for his injuries. Doc. 1-1 at 4.

Plaintiff originally brought this action for declaratory relief in Maricopa County Superior Court. Plaintiff alleged breach of contract and bad faith against GEICO for refusing to pay Plaintiff his entire UIM policy limit of $250, 000. Doc. 1. GEICO removed the case to this Court, and Plaintiff now moves for partial summary judgment, arguing that A.R.S. § 20-259.01 and GEICO's UIM policy prevent GEICO from offsetting the golf course settlement against the UIM coverage. Doc. 15.

II. Analysis.

In diversity cases, state substantive law supplies the rule of decision. See 28 U.S.C. § 1652; Erie R. Co. v. Tompkins, 304 U.S. 64, 78 (1938). A federal court interpreting state law is bound by decisions of the state's highest court. Vernon v. City of Los Angeles, 27 F.3d 1385, 1391 (9th Cir. 1994). Where the state supreme court has not yet ruled on the issues, federal courts must determine how the state supreme court would decide based on lower court opinions, statutes, and treatises. Id.

A. Relevant Statutes.

Arizona has adopted the Uninsured/Underinsured Motorist Act (UMA), A.R.S. § 20-259.01. Under the UMA, every insurer writing motor vehicle liability policies in Arizona must offer UIM coverage and must include such coverage in a policy at the request of the insured. A.R.S. § 20-259.01(B). The parties disagree on the meaning of § 20-259.01(G). Plaintiff asserts that the only reasonable interpretation of this provision prevents UIM insurers from deducting a non-motorist tortfeasor's insurance policy liability limits or settlement amounts from UIM coverage. Doc. 15 at 3. GEICO argues that it may offset all liability payments Plaintiff has received for injuries and damages related to the accident, including the $60, 000 settlement from the golf course. Doc. 17 at 1.

The statutory provision at issue provides this definition:

"Underinsured motorist coverage" includes coverage for a person if the sum of the limits of liability under all bodily injury or death liability bonds and liability insurance policies applicable at the time of the accident is less than the total damages for bodily injury or death resulting from the accident. To the extent that the total damages exceed the total applicable liability limits, the ...

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