Allstate Ins. Co. v. Hammonds

• Decision Date: 25 January 1994
• Docket Number: No. 16042-1-II,16042-1-II
• Citation: 865 P.2d 560,72 Wn.App. 664
• Parties: ALLSTATE INSURANCE COMPANY, Respondent, v. Mark HAMMONDS, Appellant.
• Court: Washington Court of Appeals

Page 664

72 Wn.App. 664

865 P.2d 560

ALLSTATE INSURANCE COMPANY, Respondent, v. Mark HAMMONDS, Appellant.

No. 16042-1-II.

Court of Appeals of Washington Division 2.

Jan. 25, 1994.

David V. Johnson, Johnson & Rutz, Port Angeles, for appellant.

David H. Armstrong, Armstrong & Cable, Bremerton, for respondent.

SEINFELD, Judge.

Mark Hammonds claims coverage under the underinsured motorist provisions of an Allstate Insurance Company policy for the loss of consortium of his 10-year-old uninsured son. The claim arises out of injuries the boy sustained in an automobile accident. The trial court granted summary judgment of non-coverage to Allstate. Hammonds appeals. We affirm.

FACTS

In January of 1988, Jacob Hammonds, Mark Hammonds's son, was a passenger in a car owned by his aunt. Jacob was seriously injured when his aunt's car collided with a vehicle driven by Thomas Ryan. Ryan, the driver at fault, was insolvent and had no liability insurance. At the time of the accident, Jacob's mother and Mark Hammonds were divorced. Pursuant to the divorce decree, Jacob resided with his mother and visited his father regularly.

Allstate had issued a policy to Hammonds's current wife, Elizabeth Hammonds, which included $50,000 of underinsured motorist (UIM) coverage. The policy provided that Allstate "will pay damages for bodily injury or property damage which an insured person is legally entitled to recover from the owner or operator of an underinsured motor vehicle." The policy included as insured persons the named insured and the named insured's resident spouse and resident relatives. The parties do not dispute that this language provides coverage for Mark Hammonds but excludes Jacob from coverage.

Hammonds filed a claim with Allstate to recover underinsured motorist benefits for his loss of consortium with Jacob, pursuant to RCW 4.24.010. ¹ Allstate, asserting lack of coverage

                under the policy, brought a declaratory judgment action in superior court.   Both parties moved for summary judgment;  the trial court granted Allstate's motion.   The trial court concluded that no reasonable insurance purchaser would read the policy as providing the coverage Hammonds seeks, and that the insurance policy does not violate public policy
                

ANALYSIS

POLICY COVERAGE

Hammonds contends that the policy language covers his loss of consortium claim. ² He argues that because he is an insured person under the policy, and because his claim is for damages that he is legally entitled to recover under RCW 4.24.010, he is entitled to underinsured motorist policy benefits. In its memorandum opinion the trial court stated that the policy only covers an insured's bodily injury damages, and that Hammonds's loss of consortium claim was not for an insured's bodily injuries. The trial court found the policy language unambiguous, stating that no reasonable person would believe that injury to an uninsured person would trigger UIM coverage.

When a court examines a contract, it must read it "as the average person would read it; it should be given a 'practical and reasonable rather than a literal interpretation', and not a 'strained or forced construction' leading to absurd results." Eurick v. Pemco Ins. Co., 108 Wash.2d 338, 341, 738 P.2d 251 (1987) (quoting E-Z Loader Boat Trailers, Inc. v. Travelers Indem. Co., 106 Wash.2d 901, 907, 726 P.2d 439 (1986)). A contract should not be given a construction

which would lead to an extension or restriction of the policy beyond what is fairly within its terms, or which would lead to Morgan v. Prudential Ins. Co. of Am., 86 Wash.2d 432, 434-35, 545 P.2d 1193 (1976).

an absurd conclusion, or render the policy nonsensical or ineffective.

The trial court relied primarily on two cases in determining the coverage issue: Eddy v. Fidelity and Guar. Ins. Underwriters, Inc., 113 Wash.2d 168, 776 P.2d 966 (1989) (insured sustained injuries while operating vehicle not insured under liability portion of policy); and Eurick, supra (insured killed while riding as a passenger on a motorcycle; policy excluded recovery for injuries arising out of use of motorcycle). In both cases the insureds presented loss of consortium claims arising out of direct injuries to other insureds. In both cases the policies excluded coverage for the direct injuries to the other insureds. The Supreme Court held, in each case, that the policy exclusions barred the loss of consortium claims, concluding that a reasonable person would read the exclusions as a limitation on coverage for all claims arising out of the excluded conduct. Eddy, 113 Wash.2d at 176, 776 P.2d 966; Eurick, 108 Wash.2d at 342, 738 P.2d 251.

Hammonds insists that Eddy and Eurick do not apply to his case because his policy contains no specific exclusion which would extend to his claim for loss of consortium. We are not persuaded. Hammonds's loss of consortium claim is necessarily dependent upon the injury to Jacob. Jacob, as a non-resident of Elizabeth Hammonds's household, failed to meet the conditions for coverage and thus was excluded from the list of "insured persons". The Allstate policy language that defines who is an "insured" operates in a similar fashion to the Eddy and Eurick exclusion clauses that explain when a person generally insured will not be insured.

Here, as in Eddy and Eurick, a reasonable person reading the policy clause would understand it to promise UIM benefits only when an insured sustains direct injuries. In its discussion of a reasonable person's interpretation of the relationship of the motorcycle exclusion clause to the parents' RCW 4.24.010 claims, the Eurick court observed:

We believe that the clear intent of the contract was to exclude from the set of risks that Pemco would insure against, and that respondents would pay premiums for, all claims arising from injuries sustained by a motorcycle driver or rider. Recognition of the parents' claims would render the exclusion virtually meaningless. The only damages a parent cannot recover under RCW 4.24.010 appear to be the child's personal pain and suffering. If the parents' claims were allowed, the insurer would pay the bulk of the damages it would have paid had the child brought its own action. To allow the exclusion to be circumvented merely by the substitution of one insured for another on the claim form would be to succumb to a "forced" or "strained" interpretation totally at odds with the interpretation the average person would give the policy.

Eurick, 108 Wash.2d at 342, 738 P.2d 251.

Furthermore, as the Eddy court remarked, it would:

afford the insurer only an illusory protection from risk if the exclusion did not reach all claims arising from injuries sustained by one "operating or occupying a motor vehicle owned by or available for the regular use by" the named insured when that vehicle was not insured under the liability coverage of the same policy.

Eddy, 113 Wash.2d at 176, 776 P.2d 966 (citing Eurick, supra). This reasoning is applicable here also. If Allstate were required to compensate Hammonds for Jacob's uninsured injuries, the policy exclusion would provide Allstate with only an illusory protection from risk. Allowing Hammonds to circumvent the exclusion by substituting himself for his son would substantially eviscerate the exclusion. The trial court did not err in concluding that the Allstate policy does not provide the coverage Hammonds seeks.

AMBIGUITY

Hammonds contends that even if the Allstate policy does not clearly provide coverage, the language at issue is ambiguous, and thus we must give it the reasonable interpretation most favorable to him. He asserts that it is unclear whether an insured must suffer bodily injury in order to receive UIM benefits or whether all that is required is that an insured be legally entitled to recover from an uninsured driver for bodily injuries suffered by a third party.

An ambiguity exists in a provision when, reading the contract as a whole, two reasonable and fair interpretations are possible. State Farm Gen. Ins. Co. v. Emerson, 102 Wash.2d 477, 484, 687 P.2d 1139 (1984); Morgan, 86 Wash.2d at 435, 545 P.2d 1193. "A clause in a policy is ambiguous when, on its face, it is fairly susceptible to two different interpretations, both of which are reasonable." Vadheim v. Continental Ins. Co., 107 Wash.2d 836, 841, 734 P.2d 17 (1987). Where an ambiguity remains unresolved, we adopt the reasonable interpretation most favorable to the insured. Vadheim, 107 Wash.2d at 841; Morgan, 86 Wash.2d at 435, 545 P.2d 1193. This rule applies even where the insurer may have intended another meaning. Vadheim, 107 Wash.2d at 841, 734 P.2d 17; Morgan, 86 Wash.2d at 435, 545 P.2d 1193.

Hammonds urges us to adopt his favored interpretation. It would allow an insured person to recover UIM benefits under the Allstate policy whenever the person can point to a statute granting him a legal entitlement to damages stemming from injury to a relative, including loss of consortium of children and wrongful death of siblings and parents. We would have to engage in a strained and forced interpretation of the Allstate policy to conclude that it provides compensation to an insured household member for injuries to non-resident, uninsured relatives. As we discussed above, this is not a reasonable and fair interpretation, and it would "render the policy ... ineffective." Morgan, 86 Wash.2d 432, 545 P.2d 1193. Thus, we decline to so construct the policy language.

PUBLIC POLICY

Hammonds contends that any interpretation of the Allstate policy which excludes his claim violates the public policy underlying the underinsured motorist statute, RCW 48.22.030. ³ The courts have recognized that a "strong public policy of assuring protection to the innocent victims of automobile accidents" underlies the UIM statute. Mutual of Enumclaw Ins. Co. v. Wiscomb, 97 Wash.2d 203, 207, 643 P.2d 441 (1982). To this end, we liberally construe the statute to allow persons injured by financially...