Edwards v. Farmers Ins. Co. of Washington

• Decision Date: 17 November 1988
• Docket Number: No. 54666-5,54666-5
• Citation: 763 P.2d 1226,111 Wn.2d 710
• Court: Washington Supreme Court
• Parties: Louise M. EDWARDS, Personal Representative of the Estate of Kenneth J. Edwards, Deceased, Petitioner, v. FARMERS INSURANCE COMPANY OF WASHINGTON, Respondent.

Page 710

111 Wn.2d 710

763 P.2d 1226

Louise M. EDWARDS, Personal Representative of the Estate of Kenneth J. Edwards, Deceased, Petitioner, v. FARMERS INSURANCE COMPANY OF WASHINGTON, Respondent.

No. 54666-5.

Supreme Court of Washington,

En Banc.

Nov. 17, 1988.

Nielsen, Nielsen & Leach, P.S., J. Robert Leach, Everett, for petitioner.

Robert E. Brooke, Seattle, for respondent.

DURHAM, Justice.

A claimant seeks to recover under two underinsured motorist policies issued by Farmers Insurance Company (Farmers). Farmers argues that two provisions--one entitled "Limits of Liability", and the other entitled "Other Insurance"--prohibit stacking these recoveries. We hold that stacking is not precluded by the limits of liability provision. However, we are unable to conclusively determine if the other insurance provision prohibits double recovery and we remand the case for further fact-finding on this issue.

I. FACTS

Kenneth J. Edwards was killed by an uninsured motorist on November 30, 1982. Kenneth and his wife, Louise, each had separate automobile insurance policies with Farmers Insurance Company. At the time of the accident, Kenneth was driving a GMC truck for whom the named insured was Louise. Kenneth was the named insured on a Pinto automobile.

Each policy had underinsured motorist protection in the amount of $50,000 per person per loss. Kenneth was covered as an insured person under both policies. ¹ Accordingly, Kenneth's estate sought to recover damages under both policies. Farmers paid $50,000 pursuant to Louise's policy. However, Farmers refused to pay an additional $50,000 pursuant to Kenneth's policy, arguing that the policy's other insurance and limits of liability provisions prohibit such a double recovery.

Kenneth's estate brought an action seeking a declaratory judgment that it was entitled to recover under both policies. The parties each moved for summary judgment. Farmers relied on the other insurance and limits of liability provisions to argue that it is not obligated beyond the single $50,000 payment it has already made. Kenneth's estate contended that the other insurance section was void under RCW 48.30.300 because it discriminates based on marital status, and that the limits of liability section is inapplicable to this case.

The trial court held that the other insurance provision discriminates on the basis of marital status and entered a summary judgment in favor of Kenneth's estate. The trial court's order did not address the limits of liability issue.

The Court of Appeals concluded that the other insurance section was not discriminatory and remanded for the trial court to enter summary judgment in favor of Farmers. Edwards v. Farmers Ins. Co., 48 Wash.App. 399, 739 P.2d 107 (1987). Because of this holding, the court did not analyze the limits of liability issue. Edwards, at 404, 739 P.2d 107. We granted review.

II. LIMITS OF LIABILITY PROVISION

The limits of liability provision at issue in this case reads in full as follows:

Limits of Liability

The limits of liability shown in the Declarations apply subject to the following:

1. The limit for "each person" [$50,000] is the maximum for bodily injury sustained by any person in any one accident....

2. Subject to the limit for "each person," the limit for "each accident " [$100,000] is the maximum for bodily injury sustained by two or more persons in any one accident.

3. Subject to the law of the state of the accident, we will pay no more than these maximums regardless of the number of vehicles insured, insured persons, claims, claimants, policies, or vehicles involved in the accident.

(Some italics ours.) Farmers argues that the inclusion of the term "policies" in paragraph 3 evidences an intent to limit Farmers' aggregate liability under all policies to $50,000. We disagree.

The limits of liability provision describes only Farmer's liability under that particular policy, not its aggregate liability under all applicable policies. The issue of Farmer's aggregate liability under multiple policies is dealt with elsewhere in the policy, in an other insurance provision:

Other Insurance

1. The amount of bodily injury coverage provided under this part shall be reduced by the amount of any other bodily injury coverage available to any party held to be liable for the occurrence.

2. Except as provided in paragraph 1 above, if any other Automobile Liability Insurance applies to a loss covered by this part, we will pay only our share. Our share is the proportion that our limits of liability bear to the total of all applicable limits.

3. Any insurance we provide for a vehicle you do not own shall be excess over any other collectible insurance.

4. If any applicable insurance other than this policy is issued to you by us or any other member company of the Farmers Insurance Group, the total amount payable among all such policies shall not exceed the limits provided by the single policy with the highest limits of liability.

This other insurance provision fully addresses the issue of Farmers' liability when more than one insurance policy is at issue. Comparing this provision with the limits of liability provision, it is clear that the latter is relevant only to the issue of Farmers' liability under that particular policy. Moreover, we reject the conclusion that both provisions can be applied in the context of multiple policies, in that the application of one provision would not always yield the same result as application of the other. ²

Further evidence that Farmers' limits of liability provision does not address aggregate liability under multiple policies is the provision's parallel to RCW 48.22.030(5), which reads as follows:

The limit of liability under the policy coverage may be defined as the maximum limits of liability for all damages resulting from any one accident regardless of the number of covered persons, claims made, or vehicles or premiums shown on the policy, or premiums paid, or vehicles involved in an accident.

This statute is directed toward the concept of "internal stacking", that is, multiple recoveries under a single policy. See Britton v. Safeco Ins. Co., 104 Wash.2d 518, 531-32, 707 P.2d 125 (1985); Comment, Washington's Underinsured Motorist Statute: Balancing the Interests of Insurers and Insureds, 55 Wash.L.Rev. 819, 823 n. 26 (1980) (the statute "allows the insurer to prevent stacking between vehicles insured on the same policy"). It does not also address external stacking. Compare RCW 48.22.030(6). Farmers' limits of liability provision, being derived from RCW 48.22.030(5), similarly should not be construed as addressing external stacking.

In light of the foregoing, we conclude that the limits of liability section does not bar the estate from recovering under both policies.

III. OTHER INSURANCE PROVISION

Whereas the limits of liability clause in Kenneth's policy prohibits internal stacking, the other insurance clause prohibits external stacking, that is, recovery under more than one policy. ³

Read in conjunction with the policy's definition of "you"--"Throughout this policy, 'you' and 'your' mean the 'named insured' shown in the Declarations and spouse if a resident of the same household"--the other insurance provision states:

If any applicable insurance other than this policy is issued to [the named insured, or the named insured's spouse if residing in the same household] by us ..., the total amount payable among all such policies shall not exceed the limits provided by the single policy with the highest limits of liability.

Because Kenneth and Louise were living in the same household as husband and wife, the other insurance section would apply to restrict the estate's recovery to $50,000, rather than the $100,000 it would receive by stacking recoveries from the two policies.

Kenneth's estate contends that the other insurance provision is void because it discriminates against married couples in violation of RCW 48.30.300, which provides in part as follows:

The amount of [insurance] benefits payable, or any term, rate, condition, or type of coverage shall not be restricted, modified, excluded, increased or reduced on the basis of the sex or marital status, or be restricted, modified, excluded or reduced on the basis of the presence of any sensory, mental, or physical handicap of the insured or prospective insured. These provisions shall not prohibit fair discrimination on the basis of sex, or marital status, or the presence of any sensory, mental, or physical handicap when bona fide statistical differences in risk or exposure have been substantiated.

(Italics ours.) RCW 48.30.300.

The estate points out that married couples who reside together and who individually own separate Farmers policies are disadvantaged when compared to similarly situated unmarried couples. If Kenneth and Louise had been unmarried cohabitants, then the estate could have recovered under both policies, the other insurance provision not being applicable. Thus, the estate complains that Farmers improperly discriminated on the basis of marital status.

Farmers counters that the other insurance provision does not violate RCW 48.30.300 because it does not always discriminate between married and single individuals. Coverage under the other insurance clause turns not solely on marriage, but also on the spouse's residence and the identity of the insurer on the other policy. Accordingly, married and single individuals are not always treated disparately, depending on the outcome of the other two factors. For example, neither married couples nor unmarried couples are prevented from stacking recoveries if they are living separately. Farmers contends that the presence of these other classifications means that the provision does not improperly discriminate on the basis of marriage.

The Court of Appeals agreed with Farmers' position. The court concluded that because the other insurance section did not restrict coverage solely on the basis of...