Eighth Circuit Hands Welcome Win to UIM Insurers, Reversing Western District’s Decision on “Per Occurrence” Limits of Insurance Provisions

Earlier this summer, the Eighth Circuit Court of Appeals issued a decision upholding the “Per Occurrence” limits of liability for underinsured motorist coverage under Missouri law. In Brazil v. Auto-Owners Ins. Co., the Eighth Circuit reversed the decision entered by the Western District of Missouri in favor of the insureds, and held the unambiguous terms of the insurance policy’s underinsured motorist coverage provisions limited the total recovery by three injured insureds to a total of $1,000,000.

The policy provided UIM limits of insurance as “$1,000,000 each person / $1,000,000 each occurrence.” The Limits of Insurance section of the policy contained a paragraph stating that the “Each Person” Limit was the most the insurer would pay for bodily injury to one person in any one occurrence. The next paragraph stated that the “Each Occurrence” Limit was the most the insurer would pay for bodily injury to two or more persons in any one occurrence. Both paragraphs included language that the provisions of the paragraph were “subject to” the other paragraph.

The insureds argued that the “subject to” language in both paragraphs was circular and conflicting, creating an ambiguity and rendering the “Each Occurrence” paragraph superfluous. They argued that the ambiguity required the court to interpret the contract in their favor, entitling each of the three insureds to a separate limit of insurance under the “Each Person” Limit for a total of $3,000,000.

The Court of Appeals disagreed, rejecting the insureds’ interpretation as unreasonable because it required the “Each Occurrence” limits to be read out of the policy entirely, resulting in more surplusage and materially changing the parties’ bargain. The Court concluded that the “Each Person” paragraph unambiguously limits any one individual to $1,000,000 in coverage and, under these circumstances, works together with the “Each Occurrence” paragraph to unambiguously limit the total amount recoverable by the multiple insureds involved in one occurrence. In other words, each paragraph provides a limit, and both limits apply to the claim without conflicting with each other.

The Eighth Circuit’s reversal of the District Court’s decision with respect to these common limits of insurance provisions is a welcome reprieve for insurers who frequently find their automobile policies subject to intense scrutiny from the courts in Missouri, often resulting in decisions distorting the policy’s terms and unreasonably expanding coverage.

For the full Eighth Circuit Opinion, please see Brazil v. Auto-Owners Ins. Co., 3 F.4th 1040 (8th Cir. 2021).