Allen v. Prudential Property and Cas. Ins. Co., 890408

Decision Date22 June 1992
Docket NumberNo. 890408,890408
Citation839 P.2d 798
PartiesBlaketta ALLEN, Plaintiff and Appellant, v. PRUDENTIAL PROPERTY AND CASUALTY INSURANCE COMPANY, a corporation, Defendant and Appellee.
CourtUtah Supreme Court

T.J. Tsakalos, Salt Lake City, for Prudential.

H. Ralph Klemm, Salt Lake City, for Allen.


Blaketta Allen brought a district court action for declaratory judgment to invalidate a household exclusion in her homeowner's insurance policy issued by Prudential Property and Casualty Insurance Company. The district court granted summary judgment for Prudential, and Allen appeals. Allen initially claims that the district court erred in failing to enter a brief statement of the grounds for its decision, as required by Utah Rule of Civil Procedure 52(a). Addressing the merits, Allen challenges the district court's refusal to invalidate the household exclusion, claiming that the exclusion violates her "reasonable expectations" of insurance coverage. We reject Allen's contentions and affirm the grant of summary judgment.

In considering an appeal from a summary judgment, we view the facts in a light most favorable to the nonmoving party. Blue Cross & Blue Shield v. State, 779 P.2d 634, 636 (Utah 1989). We state the facts in this case accordingly.

In 1981, Allen's husband met with a Prudential agent to discuss homeowner's insurance. During the meeting, Mr. Allen completed an application for a homeowner's policy under which Prudential would insure the Allens' home and provide liability coverage against accidents occurring on the property. At the meeting, the agent did not mention the household exclusion, but advised Mr. Allen that he should review the policy when he received it. The Allens received the policy in the mail approximately two months after the meeting. Attached to the policy was an endorsement excluding members of the Allens' household from liability coverage. Neither Allen nor her husband read the endorsement.

Approximately three years after the agreement went into effect, the Allens' two-year-old son was injured when Allen spilled a pot of boiling water on him. After the accident, Mr. Allen contacted the Prudential agent, seeking recovery against the policy for his wife's accidental injury of his son. The agent, for the first time, orally informed Mr. Allen of the household exclusion. Based on the exclusion, Prudential denied coverage.

Allen filed a declaratory judgment action seeking to invalidate the exclusion on the grounds that the insurance agreement was an adhesion contract and that the existence of the exclusion violated her reasonable expectations. Prudential moved for summary judgment, arguing, inter alia, that the exclusion was unambiguous and that it did not violate public policy. The district court granted Prudential's motion, stating simply that it was doing so for reasons "set forth in the arguments of defendant." Allen appeals.

We address two of Allen's three challenges to the trial court's grant of summary judgment. 1 First, she contends that the trial court committed reversible error in failing to issue a brief written statement of the grounds for its decision, as required by Utah Rule of Civil Procedure 52(a). Second, addressing the merits, Allen contends that the household exclusion should be held unenforceable. She claims that the insurance agreement was an adhesion contract and that a provision in an adhesion contract which violates the insured's reasonable expectations of coverage is invalid. We will address these contentions in order.

As a threshold matter, we note the applicable standard of review. By definition, a summary judgment is based solely on conclusions of law. Therefore, we review a summary judgment for correctness, without deferring to the trial court's legal determinations. See, e.g., Bonham v. Morgan, 788 P.2d 497, 499 (Utah 1989); Transamerica Cash Reserve, Inc. v. Dixie Power & Water, Inc., 789 P.2d 24, 25 (Utah 1990).

We begin with Allen's contention that the trial court's failure to issue a brief written statement of the grounds for its decision violates Utah Rule of Civil Procedure 52(a). The last sentence of rule 52(a) states, "The court shall issue a brief written statement of the ground for its decision on all motions [for summary judgment] granted ... when the motion is based on more than one ground." Utah R.Civ.P. 52(a); see Lowe v. Sorenson Research Co., 779 P.2d 668, 669 n. 1 (Utah 1989). Although Prudential advanced a number of arguments in support of its motion for summary judgment, the trial judge's short statement of his ruling said merely that "under the facts of this case ... the motion for summary judgment of the defendant is proper as set forth in the arguments of [Prudential]."

Clearly, the trial judge did not comply with the requirements of rule 52(a). We recently added the final sentence to rule 52(a) to aid our review of summary judgments in which the parties have advanced a number of alternate grounds; otherwise, we could not identify the basis for a trial judge's ruling. When reviewing trial court decisions, we presume them to be correct and search for grounds upon which they may be upheld. E.g., College Irr. Co. v. Logan River & Blacksmith Fork Irr. Co., 780 P.2d 1241, 1244 (Utah 1989). As a practical matter, however, that presumption has little operative effect when members of this court cannot divine the trial court's reasoning because of the cryptic nature of its ruling. Consequently, both the interest of the trial court in having a correct ruling sustained and the interest of the parties in having a properly framed appellate proceeding are better served when the trial judge complies with rule 52(a). Be that as it may, some trial judges cling to the view that the less explanation given for their rulings the better. They would prefer to remain silent and rely on the presumption that their rulings are correct. As we have noted, the wisdom of that view is questionable, but a trial judge's failure to comply with the last sentence of rule 52(a) alone is not reversible error absent unusual circumstances. See Neerings v. Utah State Bar, 817 P.2d 320, 323 (Utah 1991). We find no need to discuss in the abstract what may constitute unusual circumstances, but note that they are not present here.

Having disposed of her procedural objection, we turn to Allen's argument on the merits. Allen claims that the district court erred in failing to invalidate the household exclusion because the court did not recognize the "reasonable expectations doctrine." 2 In general, the reasonable expectations doctrine authorizes a court confronted with an adhesion contract to enforce the reasonable expectations of the parties under certain circumstances. See Roger C. Henderson, The Doctrine of Reasonable Expectations in Insurance Law After Two Decades, 51 Ohio St.L.J. 823 (1990) [hereinafter Henderson].

Allen offers three alternative formulations of the reasonable expectations doctrine and seeks their application to her case. Underlying all her arguments is the premise that she has raised a factual issue as to whether she, in fact, expected the household exclusion to be contained in the Prudential policy and whether that expectation was reasonable. For purposes of this decision, we assume that she has raised such factual questions.

Allen's three formulations of the reasonable expectations doctrine can be summarized as follows. First, she contends that the insurance contract with Prudential is an adhesion contract and reasons that she therefore is entitled to have the court enforce her reasonable expectations. Second, she argues that the trial court should have applied a variant of the reasonable expectations doctrine discussed in a recent Utah Court of Appeals decision, Wagner v. Farmers Insurance Exchange, 786 P.2d 763 (Utah Ct.App.1990). Under this theory, she claims, courts must enforce the reasonable expectations of the insured where the insurer has a reason to believe that the insured would not have assented to a particular term had he or she known of its presence. Third, Allen appears to argue for a version of the doctrine that focuses on whether the exclusion at issue was ambiguous. We assume that she is urging us to adopt a rule that would allow a court to interpret ambiguous provisions so that the insured's reasonable expectations are fulfilled.

These three variations are more easily understood when placed in a historical context. The intellectual foundation of the reasonable expectations doctrine was initially formulated by Professor, now Judge, Robert Keeton as an overarching set of principles to assist in explaining the results of disparate insurance law decisions that appeared to be based on a number of different rationales. Henderson at 823, 825 (citing Robert E. Keeton, Insurance Law Rights at Variance with Policy Provisions, 83 Harv.L.Rev. 961 (part 1) & 83 Harv.L.Rev. 1281 (part 2) (1970)). Courts in various states have since attempted to massage these principles into a legal rule through case-by-case development. Consequently, different versions of the doctrine exist.

One commentator, after surveying the jurisdictions purporting to apply the reasonable expectations doctrine, classifies the legal rules resulting from these various approaches as follows: (i) construction of an ambiguous term in the insurance contract to satisfy the insured's reasonable expectations; (ii) refusal to enforce the "fine print" of an insurance contract because it limits more prominent provisions giving rise to the insured's expectations; and (iii) refusal to enforce an insurance contract provision when it would frustrate the reasonable expectations of coverage created by the insurer outside of the contract. Stephen J. Ware, Comment, A Critique of the Reasonable Expectations Doctrine, 56 U.Chi.L.Rev. 1461, 1467 (1989) [hereinafter Ware]; see also Mark C. Rahdert, Reasonable Expectations Reconsidered, 18 Conn.L.Rev. 323, 335-36, 345 (1...

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