Of Forklifts, UM Coverage and Unasked Questions

By | March 24, 2014

In perusing judicial decisions, it is not unusual to discover answers to questions one never thought to ask. One such question is whether a forklift is a “motor vehicle” under uninsured/underinsured motorists (UM) statutes, and, if so, would the UM statute apply to an out of state accident involving an uninsured forklift?

For Louisiana insurers and attorneys who never thought to ask these questions, answers have nonetheless been provided in a recent case, Boyett v. Redland Insurance Company.

In Boyett, the federal Fifth Circuit Court of Appeals was confronted with an accident involving a Louisiana company whose Louisiana employee was driving its Louisiana registered flatbed truck covered by a Louisiana issued liability insurance policy to deliver a load of lumber to a customer in North Carolina. The flatbed truck also carried a forklift owned by the company, which was specifically excluded from coverage under the Louisiana issued liability policy.

Upon arrival in North Carolina, an employee of the North Carolina customer unloaded the lumber using the Louisiana forklift. While being unloaded, some of the lumber fell on the foot of the Louisiana employee, severely injuring him. The injured Louisiana employee claimed that he was entitled to UM benefits under the Louisiana UM statute because the forklift was not covered by his employer’s Louisiana liability insurance policy and there was no required waiver of statutory UM coverage as required by the UM statute.

UM coverage is read into all Louisiana automobile liability insurance policies unless validly rejected, in writing, by the insured.

To resolve this claim, the court had to answer two questions: (1) does the Louisiana UM statute apply to out of state accidents and (2) is a forklift a “motor vehicle” under the UM statute?

Neither question had been answered by the Louisiana Supreme Court. Thus, the federal court first noted that it was required to “employ Louisiana’s civilian methodology” in determining how it believed the questions would be decided by the Louisiana Supreme Court.

Unlike every other state, Louisiana law is based on a Civil Code rather than common law. One result of this difference is that while the federal court might be “guided” by appellate court decisions, it was not “strictly bound by them.”

The Out of State Question

The purpose of the Louisiana UM statute is to provide coverage to a victim for damages caused by a person who has no or inadequate liability insurance coverage. To achieve this goal, UM coverage is read into all Louisiana automobile liability insurance policies unless validly rejected, in writing, by the insured.

Because there was no written rejection of UM coverage by Boyett’s employer, the Louisiana insured, the only question was whether the statutorily imposed UM coverage applied to out of state accidents.

In arguing against imposing UM coverage on out of state accidents, Boyett’s employer’s insurer pointed to Section 1295(1)(a)(iii) of the UM statute, which provides that the “requirements for uninsured motorist coverage shall apply to any liability insurance covering any accident which occurs in this state and involves a resident of this state,” and argued that this section created a geographic limitation, i.e., an accident occurring in Louisiana, on the imposition of UM coverage.

The federal court disagreed. Rather than creating a geographic limitation, the court noted that Section 1295(1)(a)(iii) was added by the legislature to overrule a decision by the Louisiana Supreme Court, Snider v. Murray, which held that the Louisiana UM statute applied only to policies delivered or issued for delivery in Louisiana and did not apply to policies issued in other states. Thus, the purpose of Section 1295(1)(a)(iii) was to “expand the reach of Louisiana statutory UM coverage to out of state policies when the accident occurs in Louisiana and involves a Louisiana resident.”

The court also pointed out that Section 1295(1)(a)(iii) does not address Louisiana issued policies, such as the one in the case before it; rather, Louisiana issued policies were subject to Section 1295(1)(a)(i), which does not address whether UM coverage applied to accidents occurring outside of Louisiana.

The court, however, found nothing in Section 1295(1)(a)(i) limiting its geographic reach and observed that the Louisiana Supreme Court had recognized in several decisions that a foreign state’s UM law could apply to an accident occurring within Louisiana. The court reasoned that if a foreign state’s UM law could apply to a Louisiana accident then Louisiana’s UM statute should be applicable to out of state accidents. It also noted that the UM statute, as a whole, embodied a “strong public policy” which was to be “liberally construed.”

For these reasons, the federal court determined that Louisiana’s interest in an automobile accident was not vitiated merely because it occurred outside of Louisiana and, accordingly, the UM statute did apply to an out of state accident involving a Louisiana insured and Louisiana issued policy.

A ‘Motor Vehicle,’ or Not?

On the second issue, two of the three judges decided that the forklift involved in the accident was a “motor vehicle” covered by the UM statute, but the third judge dissented.

forkliftThe majority based its decision on a rather fine distinction within Section 1295(1)(a)(i) of the UM Statute. Specifically, the majority noted that Section 1295(1)(a)(i) does not define the term “motor vehicle”, but appeared to draw a distinction between an insured motor vehicle and an uninsured motor vehicle. The majority found this distinction in the fact that in its first few lines, the statute included the phrase “designed for use on public highways and required to be registered in this state” immediately following the reference to an insured motor vehicle, but did not included this same phrase several lines later when referring to an uninsured motor vehicle.

Although not specifically discussed, the court appeared to accept as a given that forklifts were not designed for use on public highways and required to be registered in Louisiana.

The majority believed that the statute purposely drew this distinction between motor vehicles which were insured and motor vehicles which were uninsured.

Applying the statutory maxim that all words of a statute should be given effect and none rendered superfluous, the majority concluded that when referring to uninsured motor vehicles, which were the reason for requiring UM coverage under the UM statute, the term the “motor vehicle” included all vehicles with a motor, even those not designed for use on public highways and required to be registered. Thus, the majority concluded that the forklift at issue, which was a motorized vehicle and was uninsured, fell within the requirement of the UM statute.

In the dissenting judge’s view, the statute did not intend to draw a distinction between an insured motor vehicle and an uninsured vehicle as found by the majority, but, rather, simply found it unnecessary to repeat the phrase “designed for use on public highways and required to be registered in this state” each and every time the term “motor vehicle” was used within Section 1295(1)(a)(i) since the term “motor vehicle” included this limitation at the beginning of Section 1295(1)(a)(i) and, thus, should be understood to include this limitation whenever used within the statute.

The dissenting judge noted that his reading of the statute was consistent with the purpose of UM coverage, which was to fill a coverage gap in the event that the driver of an insured vehicle failed to obtain adequate liability insurance coverage. Of course, this reading of the statute did not prevail.

In a last attempt to avoid coverage, the insurer argued that if the court did interpret the UM statute to cover the forklift, it would effectively reform the insurance policy with the Louisiana insured, and, accordingly, the policy should be reformed to the minimum extent necessary. The insurer argued that since the insurance policy specifically excluded the forklift from liability coverage, any UM coverage read into the policy should likewise exclude coverage of the forklift based on the policy’s exclusion.

The majority brushed aside this argument, finding “no logical reason” why its interpretation of the UM statute to require coverage should be restricted by an exclusion in the liability portion of the underlying policy, particularly since the UM statute expressly imposes UM coverage without regard to any policy language, the intentions of the parties or even whether a premium has been paid for UM coverage.

And the Answer Is …

So, the answer to the unasked question is that the Louisiana UM statute applies to accidents occurring out of state, at least when a Louisiana issued policy is involved, and includes coverage of forklifts and any other motorized vehicle even though it is not intended for use on public highways and required to be registered in Louisiana.

Next unasked question?

From This Issue

Insurance Journal West March 24, 2014
March 24, 2014
Insurance Journal West Magazine

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