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Utah Supreme Court Finds that UM/UIM Limits in an Amount Equal to Liability Limits Apply Even to Employee-Owned Vehicles in Commercial Auto Policies


In Dircks v. Travelers Indemnity Co. of Amer., 2017 UT 73 (Oct. 17, 2017) a bitterly divided Utah Supreme Court held that all vehicles covered under the liability provisions of an automobile insurance policy must also be covered under the underinsured motorist provisions of that policy, and with equal coverage limits, unless a named insured waives the coverage by signing an acknowledgment form meeting the statutory requirements of UM/UIM waivers.  This coverage even applies to employee-owned vehicles not specifically named or identified in a commercial auto policy.

Derek Dircks and Michael Riley suffered injuries in a car accident caused by another driver. Both Dircks and Riley were employees of Mid-State Consultants, Inc. They were in Riley’s personal vehicle on an assignment for Mid-State at the time of the accident. To cover his resulting medical bills, Dircks and his wife sought and received liability benefits under the third-party driver’s automobile insurance policy, as well as underinsured motorist benefits under Riley’s policy. But the amounts received were insufficient to cover the bills. So Dircks sought additional underinsured motorist benefits under Mid-State’s commercial insurance policy with Travelers Indemnity Company of America. The policy included $1 million of liability coverage for persons driving in either a Mid-State fleet vehicle listed in the insurance policy or a vehicle owned by a Mid-State employee when used for Mid-State business. The policy also included $1 million of underinsured motorist coverage. And it purported to limit this coverage to persons driving in Mid-State fleet vehicles.

Travelers denied Dircks’ claim on the ground that Mid-State’s policy did not provide underinsured motorist coverage for Riley’s personal vehicle.  He then sued.  The Utah Supreme Court concluded that any vehicle—whether owned by the policyholder or not—that is covered by a policy’s liability insurance is also subject to underinsured motorist coverage under Utah Code Ann.§31A-22-305.3. Thus, Section 305.3 requires that any person occupying or using such a vehicle must also be covered by underinsured motorist insurance (and to the same policy limits) unless the coverage is waived by a formal acknowledgment satisfying statutory waiver requirements. 

A strident dissent claimed that the majority’s statutory analysis “ma[de] no sense.” The dissent would have held that the Utah automobile insurance laws at issue govern only the terms of insurance policies purchased to satisfy the owner’s or operator’s security requirement. Because Mid-State did not purchase liability insurance on employee-owned cars in order to satisfy the owner’s or operator’s security requirement, the dissent would have found that section 305.3 did not apply to that insurance.

Written by Richard A. Vazquez

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