BEFORE WALKER, HAWKINS AND PRATHER
PRATHER, JUSTICE, FOR THE COURT:
The issue of this appeal is whether underinsured motorist coverage of an insurance company may require offset for payments of the tortfeasor's liability carrier. The answer turns upon an interpretation of the Mississippi Uninsured Motorist Act and the construction of the parties' contract. After analysis of the Act and the contract, this Court holds that an insurance company may offset the tortfeasor's payments against underinsurance benefits. Susan T. Kuehling sued the driver and the owner of an automobile, together with her own uninsured motorist carrier for damages sustained by her in an automobile accident. On a summary judgment motion, the trial court held the insured entitled to receive total coverage limits afforded by her uninsured motorist coverage plus amounts received from the tortfeasor's liability carrier, without offset. State Farm Mutual Automobile Insurance Company appeals asserting that the trial court erred as a matter of law in granting to Kuehling, and denying to State Farm, a motion for summary judgment.
The assignment of error is based upon the contention that:
A. The Mississippi Uninsured Motorist Act, Miss. Code Ann. 83-11-101 et seq. (Supp. 1982), makes a clear distinction between uninsured and underinsured motorist coverage and, by definition alone, creates a wholly separate category of insurance coverage entitling insureds to collect as benefits under uninsured coverage only that amount by which the underinsurance limits of liability exceed the liability coverage of the adverse driver.
B. In creating underinsured motorist coverage by amendment of Miss. Code Ann. 83-11-103 (c) (iii) in 1979, the Mississippi Legislature did not intend to abrogate the rights of underinsured motorist carriers to subrogation as provided by Miss. Code Ann. 83-11-107 (1972) and, therefore, the two statutory provisions must be construed in conjunction with each other, resulting in the allowance of a credit to the underinsured motorist carrier in the amount of the liability payment of the adverse driver in lieu of subrogation.
On November 26, 1981, Susan T. Kuehling suffered substantial injuries when involved in a headon collision with a vehicle driven by Timothy Sparling and owned by William Herring. The driver, Timothy Sparling, whose
negligence was the cause of the accident, was covered through a personal liability policy with maximum coverage of $10,000. William Herring was uninsured. The appellee, Susan T. Kuehling, was insured through two separate liability policies issued by State Farm in the amount of $10,000, allowing aggregate coverage of $20,000.
On August 4, 1982, without written consent, but with knowledge of State Farm, appellee executed a" full and final release of all claims "for $10,000 with Timothy Sparling; and on August 10, 1982, she dismissed with pre judice her action against Sparling and Herring reserving her right to pursue her uninsured motorist claim against State Farm.
State Farm voluntarily paid to the appellee $5,000 representing the maximum medical payments benefit under the policy and $10,000 of uninsured motorist coverage - an amount determined by State Farm to be the full extent to which she was entitled, based upon the difference between the aggregated $20,000 maximum and the $10,000 coverage afforded by the settlement with Sparling. Appellee claimed that she was entitled to the full $20,000 payment from State Farm notwithstanding the fact that the tortfeasor's payment had compensated her to the extent of $10,000.
In January, 1983, both parties filed motions for summary judgment. Stipulations entered by the parties provided that:
(1) The appellee incurred hospital, medical expenses, and lost wages totaling $11,382.90;
(2) The appellee was not at fault for the accident; and
(3) In the event the lower court ordered the appellant to pay the additional $10,000 in controversy and if that ruling was then affirmed by this Court, then the appellant would agree to make the $10,000 payment sought by the appellee without further proof being submitted to the lower court, thus preventing this case from being in the nature of an ...