Bartee v. R.T.C. Transp., Inc.

• Decision Date: 27 October 1989
• Docket Number: No. 63061,63061
• Citation: 245 Kan. 499,781 P.2d 1084
• Parties: Mary BARTEE, as Mother and Natural Guardian of Jennifer Bartee, a Minor; Mark Mohan, as Father and Natural Guardian of Janine M. Mohan, a Minor; and Richard L. Moranz, Plaintiffs-Appellees, v. R.T.C. TRANSPORTATION, INC., Keith Pachiano, and Carrier Insurance Company, Defendants-Appellees, v. KANSAS FIRE & CASUALTY COMPANY, Intervenor-Appellant.
• Court: Kansas Supreme Court

Page 1084

781 P.2d 1084

245 Kan. 499

Mary BARTEE, as Mother and Natural Guardian of Jennifer

Bartee, a Minor; Mark Mohan, as Father and Natural Guardian of Janine M. Mohan, a Minor; and Richard L. Moranz, Plaintiffs-Appellees, v. R.T.C. TRANSPORTATION, INC., Keith Pachiano, and Carrier Insurance Company, Defendants-Appellees, v. KANSAS FIRE & CASUALTY COMPANY, Intervenor-Appellant.

No. 63061.

Supreme Court of Kansas.

Oct. 27, 1989.

Syllabus by the Court

In an appeal by intervenor from the decision of the district court granting judgment to three plaintiffs claiming uninsured motorist benefits, the record is examined and it is held: The district court did not commit error in finding that (1) defendants Pachiano and R.T.C. Transportation, Inc., are uninsured motorists; (2) plaintiffs are required to exhaust their uninsured motorist coverage before they are entitled to benefits from the Georgia Insurers Solvency Pool; (3) intervenor does not have a right of subrogation against defendants for uninsured motorist benefits paid to the plaintiffs; and (4) the personal umbrella policy issued by intervenor included uninsured motorist coverage.

Steve R. Fabert, of Fisher, Patterson, Sayler & Smith, Topeka, argued the cause, and Larry G. Pepperdine, was with him on the briefs, for intervenor-appellant.

Jerry R. Palmer, of Palmer, Marquardt & Snyder, Topeka, argued the cause and was on the brief, for plaintiffs-appellees.

Stephen W. Cavanaugh, of Fisher, Heck & Cavanaugh, P.A., Topeka, argued the cause and was on the brief, for defendants-appellees.

Pamela Scott, Sp. Asst. Atty. Gen., and Timothy G. Elliott, of Kansas Ins. Dept., Topeka, were on the brief amicus curiae, for Fletcher Bell, Com'r of Ins.

ALLEGRUCCI, Justice:

Kansas Fire & Casualty Company (Kansas Fire & Casualty), as intervenor, appeals the decision of the district court awarding damages in three consolidated cases to plaintiffs claiming uninsured motorist benefits. Kansas Fire & Casualty denied coverage, but the district court found coverage as a matter of law. The court tried fault and damage issues and entered judgment in favor of plaintiffs against Kansas Fire & Casualty. The case was transferred to this court from the Court of Appeals pursuant to K.S.A. 20-3018(c).

Most of the facts involved in this case are undisputed. The claims arose from a vehicular accident occurring on the Kansas Turnpike east of Topeka on July 16, 1984. Jennifer Bartee, Janine Mohan, and Richard Moranz occupied a vehicle insured by intervenor Kansas Fire & Casualty. The vehicle policy had a limit of $300,000. The vehicle was owned by the parents of Janine Mohan, who was driving at the time of the accident. Defendant Keith Pachiano was driving a semitrailer rig when it crossed the turnpike median at a construction site, causing the accident. While the tractor was owned by Pachiano, the semitrailer rig was owned by defendant R.T.C. Transportation, Inc., (R.T.C.) a Georgia corporation. The tractor and semitrailer were insured by defendant Carrier Insurance Company (Carrier). Other named defendants were Kansas Turnpike Authority and Reece Construction Company, Inc., (Reece Construction) based upon allegations of improper maintenance and design of a temporary roadway constructed as part of the project.

After the actions were initiated, Carrier, R.T.C.'s insurer, became insolvent. The Georgia Insurers Insolvency Pool assumed defense of the case as statutory successor-in-interest to Carrier. All three plaintiffs then made demand on Kansas Fire & Casualty for uninsured motorist benefits. Plaintiffs Bartee and Moranz also sought uninsured motorist benefits from State Farm Mutual Automobile Insurance Company (State Farm) and Farmers Casualty Company Mutual, (Farmers Casualty) respectively, the companies that provided coverage for their families. Kansas Fire & Casualty filed a motion to intervene, which was granted, seeking declaratory relief in construing the existence, amounts, and priority of coverages under the statutory provisions governing the Georgia Insurers Insolvency Pool and the policies of insurance under which recovery was sought.

Motions for summary judgment were filed by Kansas Fire & Casualty, State Farm, and Farmers Casualty. The trial court was asked to find defendant R.T.C. was an insured motorist within the meaning of the policies and the Kansas uninsured motorist statutes due to the availability of the Georgia Insurers Insolvency Pool. Alternatively, Kansas Fire & Casualty asked the trial court to determine the priority of coverages available under the policies issued by itself, Farmers Casualty, and State Farm. Kansas Fire & Casualty also asked the court to find that no coverage of any kind was available to plaintiffs under a personal liability umbrella policy issued by Kansas Fire & Casualty to the Mohan family.

On February 10, 1987, the district court decided all issues adversely to the arguments of Kansas Fire & Casualty. The court held that any liability of the Georgia Insurers Insolvency Pool was contingent upon exhaustion of all benefits available under any uninsured motorist coverage. Based upon the provisions of the individual policies of insurance, the court found defendants State Farm and Farmers Casualty responsible only for excess liability, but then went on to conclude that the statutory prohibition against stacking of uninsured motorist coverages in K.S.A.1988 Supp. 40-284(d) completely exonerated State Farm and Farmers Casualty. Those companies were dismissed as parties. The court construed the Kansas Fire & Casualty personal liability umbrella policy to include mandatory uninsured motorist coverage of $1 million as excess coverage beyond the $300,000 coverage available under the Mohan auto policy. While the court concluded 40-284(d) prohibited stacking of uninsured motorist coverages, it held that the Mohan personal liability umbrella policy could be treated as an excess policy which combined with the Mohan auto policy for a total limit of $1,300,000.

Thereafter, the parties conducted discovery on the issues of fault and damages. All three plaintiffs entered into settlement agreements with defendants Kansas Turnpike Authority and Reece Construction. Kansas Fire & Casualty did not consent to the settlements. Kansas Fire & Casualty filed motions for summary judgment, arguing that its policies prohibited unauthorized settlements and, therefore, coverage here was void. The motions were denied.

The three cases were consolidated for trial and the issues of fault and damages were tried to the court on October 6, 1988. The fault of Kansas Turnpike Authority and Reece Construction was also compared. The damages found on behalf of the plaintiffs were reduced by the fault attributable to Kansas Turnpike Authority and Reece Construction in the amount of 5% and 10%, respectively. Judgments were entered on October 7, 1988, against the defendants in the amount of $317,333 for plaintiff Bartee, $90,000 for plaintiff Mohan, and $85,000 for plaintiff Moranz. The trial court denied Kansas Fire & Casualty's cross-claims against Pachiano and R.T.C. as moot. The court stated, however:

"The subrogation rights of Kansas Fire and Casualty Company are merged, as a matter of law, into the judgments entered in favor of the various plaintiffs. To the extent that Kansas Fire and Casualty Company pays uninsured motorist benefits to any plaintiff, it shall be entitled to reimbursement from any judgment proceeds collected from defendants and Pachiano and R.T.C. Transportation, Inc."

Intervenor raises three issues in this appeal:

1. Whether defendants Pachiano and R.T.C. are uninsured motorists. If so, (a) are plaintiffs required to exhaust their own personal uninsured motorist coverage before they are entitled to benefits from the Georgia Insurers Insolvency Pool, and (b) does intervenor have a subrogation right against defendants for the amount paid in uninsured motorist coverage?

2. Does the personal liability umbrella policy that the Mohan family had with intervenor contain uninsured motorist coverage pursuant to K.S.A.1988 Supp. 40-284?

3. Did the plaintiffs lose their uninsured motorist coverage by settling their claims with Kansas Turnpike Authority and Reece Construction?

We first consider whether defendants Pachiano and R.T.C. are uninsured motorists.

The trial court held that defendants Pachiano and R.T.C. were uninsured motorists under the Insurance Code of the State of Kansas, citing K.S.A. 40-285. The court concluded that the existence of a state insolvency fund for protection of its insureds did not prevent a motorist from being uninsured.

The trial court began its analysis by examining the following definition of an uninsured motor vehicle, which is contained in the Insurance Code of the State of Kansas:

"For the purpose of this act, the term 'uninsured motor vehicle' shall, subject to the terms and conditions of such coverage, be deemed to include an insured motor vehicle where the liability insurer thereof is unable to make payment with respect to the legal liability of its insured within the limits specified herein because of insolvency." K.S.A. 40-285.

The Kansas Fire & Casualty policy contains similar language. Because defendants' insurance carrier was insolvent, the vehicle driven by Pachiano was an uninsured motor vehicle under Kansas law. Although the trial court found no Kansas appellate decisions on point, it concluded that existence of the state insolvency fund did not prevent a motorist from being uninsured.

However, since the decision by the trial court, this court has held that, even though an insolvency fund exists, an insured motor vehicle for which the insurer is insolvent is still an uninsured motor vehicle under K.S.A. 40-285. In Hetzel v. Clarkin, 244 Kan. 698, 772 P.2d 800 (1989), this court addressed Kansas law regarding the issue now being argued by intervenor. In Hetzel, plaintiff sued Clarkin for damages she...