Chaffin v. Kentucky Farm Bureau Ins. Companies, 89-SC-424-TG

• Decision Date: 26 April 1990
• Docket Number: No. 89-SC-424-TG,89-SC-424-TG
• Citation: 789 S.W.2d 754
• Parties: Betty CHAFFIN, Appellant, v. KENTUCKY FARM BUREAU INSURANCE COMPANIES, Appellee.
• Court: United States State Supreme Court — District of Kentucky

Page 754

789 S.W.2d 754

Betty CHAFFIN, Appellant, v. KENTUCKY FARM BUREAU INSURANCE COMPANIES, Appellee.

No. 89-SC-424-TG.

Supreme Court of Kentucky.

April 26, 1990.

Rehearing Denied June 28, 1990.

Eldred E. Adams, Jr., Louisa, for appellant.

Ralph T. McDermott, Ashland, for appellee.

LAMBERT, Justice.

This Court ordered transfer of the case at bar from the Court of Appeals and heard oral argument on the same day as in Hamilton v. Allstate, Ky., 789 S.W.2d 751 (rendered April 26, 1990). While these cases differ in some respects, the predominant issue in each is whether an insurance company may enforce an antistacking provision in the uninsured motorist coverage it writes. We have discovered divergent lines of authority on this issue and in this case we will further attempt to harmonize our decisions.

The relevant facts have been stipulated by the parties and are as follows: While driving a motor vehicle which she owned, appellant was injured by an uninsured motorist. Her motor vehicle was insured by appellee and she was also a named insured on two other automobile insurance policies issued by appellee. Each of the three insurance policies provided uninsured motorist coverage of $25,000 and separate premiums were collected and paid for each of the items of uninsured motorist coverage.

While neither party saw fit to file copies of the entire insurance policies with the record of this case, the stipulated facts disclose that appellant's policies contained a provision commonly known as the "other vehicle exclusion" which is as follows:

"A. We do not provide Uninsured Motorist Coverage for bodily injury sustained by any person:

1. While occupying, or when struck, by any motor vehicle owned by you or any family member which is not insured for this coverage under this policy. This includes a trailer of any type used with that vehicle."

Upon appellant's claim, appellee conceded liability and paid $25,000 pursuant to the uninsured motorist coverage contained in the policy which insured the vehicle appellant was driving. Appellee refused to make any payment pursuant to the uninsured motorist coverage contained in the policies insuring appellant's other vehicles relying upon the exclusion set forth hereinabove.

At the outset we note the existence of some factual differences between Hamilton v. Allstate, supra, and this case. These differences include the language of the policy provision under which antistacking is claimed to be enforceable, the relationship between the claimants and the vehicles in which they were injured, and the existence of a single policy insuring three vehicles in Hamilton as opposed to three separate policies, with identical exclusionary provisions, insuring three vehicles in this case. Another significant difference is the clarity with which the exclusionary provisions were written. Unlike Hamilton, the exclusionary clause in this case is nearly incapable of rational construction. A compelling argument could be made that such a provision should be stricken for the reason that if fails to reasonably convey the intended message, but we do not decide the case on that basis.

Having noted the differences between this case and Hamilton, we now review the similarities. In each case the insurance coverage at issue is uninsured motorist coverage, the availability of which is made mandatory by KRS 304.20-020; a separate premium was paid for the three items of uninsured motorist coverage; the claimant was a named insured and had a reasonable expectation of multiple coverage; and the policy provision at issue had the effect of eliminating all but one item of such coverage.

It is unnecessary to further dwell upon our holding in Hamilton except to say that we relied upon the reasoning contained in Meridian Mutual Ins. Co. v. Siddons, Ky., 451 S.W.2d 831 (1970), and Ohio Casualty Ins. Co. v. Stanfield, Ky., 581 S.W.2d 555 (1979), and concluded that uninsured motorist coverage is personal to the insured; that an insured who pays separate premiums for multiple items of the same coverage has a reasonable expectation that such coverage will be afforded; and that it is contrary to public policy to deprive an insured of purchased coverage, particularly when the offer of such is mandated by statute.

Appellee contends that the "other vehicle exclusion" is one of the few means available to an insurance carrier to prevent collusive suits. It says

"the exclusion is designed to prevent the stacking of the uninsured motorist provisions of two or more policies in a narrowly defined fact situation where collusive lawsuits are thought more likely to occur. The exclusion prevents the stacking of two or more uninsured motorist coverages where one is injured while occupying or struck by a motor vehicle owned by the insured or one of the insured's family members." (Brief for appellee at 1).

Long ago a similar argument was advanced in support of retaining interspousal tort immunity, but in Brown v. Gosser, Ky., 262 S.W.2d 480, 484 (1953), this Court abrogated this doctrine. We examined the fraud and collusion argument and concluded that it had little merit.

"The fear that relaxation of the common law rule will open the door to fraudulent and fictitious claims, especially against insurance companies, has less force than the argument of 'domestic peace and felicity.' We are not willing to admit that the courts are so ineffectual, nor our jury system so imperfect, that fraudulent claims cannot be detected and disposed of accordingly.

There is opportunity for fraud in many types of claims which reach the courts, but that does not justify denying the right to maintain those which have merit."

The foregoing rationale applies as forcefully in this case as it did in Brown and we see no reason to depart from this view. Moreover, the coverage at issue here is uninsured motorist coverage. In view of Kentucky's compulsory liability insurance statute, the need for such coverage is rare and this produces a greater likelihood of detection in the event of attempted collusion.

Appellee has cited and we have reexamined Bishop v. Allstate Ins. Co., Ky., 623 S.W.2d 865 (1981), and Staser v. Fulton, Ky.App., 684 S.W.2d 306 (1984), and find little support for appellee's collusion argument in those decisions. While Third National Bank of Ashland v. State Farm Mutual Auto. Ins. Co., Ky., 334 S.W.2d 261 (1960), does address "over friendly lawsuits," this decision is of dubious viability in view of Bishop v. Allstate which makes it clear that statutorily mandated coverage may not be invalidated by means of the "household exclusion," the stated purpose of which was to prevent collusion among family members.

Further, the other vehicle exclusion relied upon by appellee is so broadly drawn as to obfuscate its purpose in prevention of fraud, if indeed such is its primary purpose. To prevent collusive suits it might be appropriate to narrowly prohibit stacking in those instances when a legitimate probability of collusion exists. However, the exclusion as drafted by appellee prohibits claims in a...