Aaron v. State Farm Mut. Auto. Ins. Co.

• Decision Date: 20 November 2001
• Docket Number: No. 00-102.,00-102.
• Citation: 2001 WY 112,34 P.3d 929
• Parties: William G. AARON, Jr. and Kathy Aaron, husband and wife; and William G. Aaron, Jr., Personal Representative of the Estate of Danielle K. Aaron, deceased, Appellants (Plaintiffs), v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Appellee (Defendant).
• Court: Wyoming Supreme Court

34 P.3d 929

2001 WY 112

William G. AARON, Jr. and Kathy Aaron, husband and wife; and William G. Aaron, Jr., Personal Representative of the Estate of Danielle K. Aaron, deceased, Appellants (Plaintiffs), v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Appellee (Defendant).

No. 00-102.

Supreme Court of Wyoming.

November 20, 2001.

V. Anthony Vehar of Vehar Law Offices, P.C., Evanston, WY, Representing Appellants. Argument by Mr. Vehar.

Ford T. Bussart of Bussart, West, Piaia & Tyler, P.C., Rock Springs, WY, Representing Appellee. Argument by Mr. Bussart.

Before LEHMAN, C.J., and GOLDEN and KITE, JJ., and SPANGLER, D.J. Ret.

LEHMAN, Chief Justice.

[¶ 1] The issues in this case involve the interpretation and application of "underinsured" motorist (UIM) coverages in five separate policies of automobile liability insurance issued by State Farm to the appellants. We reverse and remand the district court's summary judgment determination as to the limits of the insurer's maximum potential liability.

ISSUES

[¶ 2] Appellant presents this statement of the issues:

Did the trial court err in its interpretation of the underinsured motorist contracts (policies) in holding that the amount paid by the tortfeasor's insurer should be offset against each of the underinsured motorist contracts which provided coverage for Appellants?

FACTS AND PROCEDURAL HISTORY

[¶ 3] The parties have stipulated to the following material facts. On June 27, 1996, appellants' daughter, Danielle Aaron, was fatally injured while a passenger in a motor vehicle negligently driven by Joshua Schofield. No other vehicle was involved in the accident. Allied Mutual Insurance Company insured Mr. Schofield's vehicle under a policy with a liability limit of $50,000. At the time of the accident, the Aarons were the holders of five separate policies of motor vehicle insurance issued by State Farm Mutual Automobile Insurance Company (State Farm). Four of the policies provided underinsured motorist (UIM) coverage with liability limits of $100,000 per person. The fifth policy provided UIM coverage with limits of $50,000 per person. The Aarons paid a separate premium for UIM coverage in each of the policies. All policy provisions at issue contain identical language.

[¶ 4] On June 25, 1998, the Aarons filed suit against State Farm seeking UIM coverage up to policy limits on all five issued policies. Subsequently, the Aarons, with the consent of State Farm, settled their claim against Mr. Schofield for his policy limit of $50,000 by check dated February 26, 1999. On the same date, State Farm tendered to the Estate of Danielle Aaron the sum of $50,000—the amount it claims was owed under the policies. Following discovery, both parties stipulated to the facts and moved for summary judgment based upon the provisions of the insurance contract.

[¶ 5] The Aarons contended that the policies could be "stacked" as they were entitled to personal insurance protection provided by each of the five policies.¹ They also argued that Mr. Schofield's payment should be credited only after the aggregation of all coverage. Accordingly, they contended the policies' UIM coverage limits should be added to equal $450,000, offset by Mr. Schofield's $50,000, allowing recovery of $400,000. State Farm, relying on the policies' limits of liability provisions, contended the contracts unambiguously precluded the stacking of coverage. Consequently, the Aarons were limited to coverage under a single $100,000 policy, to then be offset by Mr. Schofield's settlement of $50,000, allowing recovery of $50,000.

[¶ 6] On February 18, 2000, the district court issued its order granting partial summary judgment on the issue of liability. The court found the policy to be clear and unambiguous and concluded that its provisions did not preclude "stacking" of coverage; therefore, the insured could recover under each of the policies. However, based upon its reading of the parties' insurance contract, the district court did not aggregate coverage but rather credited the $50,000 payment by Mr. Schofield's insurer seriatim, i.e., five separate times-once against each of the Aarons' policies. Accordingly, the district court determined the Aarons could potentially recover $200,000.

[¶ 7] Procedurally, the district court's order specified that, pursuant to W.R.C.P. 54(b), its decision was subject to immediate appeal to this court. The district court expressly acknowledged that the actual amount of damages was yet undetermined, but issued its judgment on the limits of liability under the assumption held by the parties that the damages will exceed policy limits.² The Aarons' timely appeal of the district court's decision to offset followed. State Farm failed to cross-appeal the district court's decision. Consequently, we will not review the court's determination that the policies' provisions did not prohibit the stacking of coverage except to the extent necessary to decide the issue before us. "Our rule is well settled that a party who does not take an appeal may not attack a judgment in this court. Our requirement is that a cross-appeal be perfected in order to attack the judgment." Racicky v. Simon, 831 P.2d 241, 244 (Wyo.1992).

STANDARD OF REVIEW

[¶ 8] We will affirm a summary judgment provided there is no genuine issue of material fact and the law clearly entitles the moving party to prevail. Martin v. Farmers Ins. Exch., 894 P.2d 618, 620 (Wyo. 1995); Lincoln v. Wackenhut Corp., 867 P.2d 701, 702 (Wyo.1994). An insurance policy constitutes a contract between insurer and insureds. Martin, at 620; Worthington v. State, 598 P.2d 796, 806-07 (Wyo.1979). When the parties have stipulated to all material facts, summary judgment is proper if such an insurance contract is found to be unambiguous. Prudential Preferred Properties v. J & J Ventures, Inc., 859 P.2d 1267, 1271 (Wyo.1993).

DISCUSSION

[¶ 9] This case presents an issue of first impression for this court. Although one of the most highly litigated issues in insurance law of the past decade, we have yet to interpret insurance provisions in relation to the "stacking" of underinsured motorist coverage or the appropriate method for crediting the tortfeasor's payment against the insured's coverage once policies are stacked. However, we have had occasion to address both inter-policy stacking of uninsured motorist coverage in Ramsour v. Grange Ins. Ass'n, 541 P.2d 35 (Wyo.1975), and intra-policy stacking of uninsured motorist coverage in Commercial Union Ins. Co. v. Stamper, 732 P.2d 534 (Wyo.1987).³

[¶ 10] In both Ramsour and Commercial Union this court first determined the manner in which public policy as expressed in Wyo. Stat. Ann. § 31-10-101 affected the stacking of uninsured motorist coverage. We found this initial public policy determination necessary in light of our insurance jurisprudence holding that parties have the right to embody in their contract whatever lawful terms they wish, Commercial Union, 732 P.2d at 536; Alm v. Hartford Fire Ins. Co., 369 P.2d 216, 217 (Wyo.1962); Rosenblum v. Sun Life Assurance Co. of Canada, 51 Wyo. 195, 65 P.2d 399 (1937), on the condition that the insurance agreement does not conflict with pertinent statutes or public policy. Commercial Union, at 536; Allstatens. Co. v. Wyoming Ins. Dep't, 672 P.2d 810, 816 (Wyo. 1983). We stated that when delineating public policy we would give force and effect to those policies announced through applicable statutes or controlling precedent. Commercial Union, at 536.

[¶ 11] In the instant case, the district court found that there was no public policy that would prohibit the stacking of underinsured motorist coverage. We agree with this general proposition. In contrast to many states that have passed legislation on the subject, Wyoming statutes governing uninsured motorist coverage are silent as to the treatment of underinsured motorist coverage.⁴ Nor can we find controlling precedent identifying any public policy that would prohibit the aggregation of coverage by an insured who has purchased multiple insurance policies. We stated in Ramsour, 541 P.2d at 38:

The only inequity that there could be would be to permit a "stacking" of coverage in order to permit the insured to recover more than his damage and thus gain a windfall. We do not approve such "stacking." On the other hand, to not permit "stacking" to result in a sum equal to or less than insured's damage would result in a windfall to the insurer. "Stacking" to that extent is approved.

[¶ 12] Thus, this court has generally approved the "stacking" of multiple insurance coverages in order to provide complete indemnification for the injuries sustained by innocent motor vehicle accident victims. However, we also have acknowledged that no broad public policy exists to require the aggregation of coverage in all circumstances, especially in the face of clear and unambiguous policy language precluding such "stacking." Commercial Union, 732 P.2d at 538.⁵ Reading our cases together, we conclude that if insurers wish Wyoming courts to enforce policy provisions which will result in a "windfall to the insurer" by precluding the aggregation of uninsured or underinsured motorist coverage from separate policies for which separate premiums have been paid by the insured and accepted by the insurer(s), they must have done so clearly and unambiguously in terms that a lay-insured of ordinary intelligence could easily comprehend. The insurer through its policy must clearly explain to the insured what additional coverage is in fact being purchased by the payment of an additional premium and what additional risk the insurer is purporting to assume by the receipt of the additional premium so that the insurance consumer at the time of purchase can make an informed decision whether or not to pay the premium. Otherwise, "[b]ecause insurance policies represent contracts of adhesion where the insured has little or no bargaining power to vary the...