Eidemiller v. State Farm Mut. Auto. Ins. Co.

• Decision Date: 07 March 1997
• Docket Number: No. 73861,73861
• Citation: 933 P.2d 748,261 Kan. 711
• Parties: James M. EIDEMILLER, Appellant, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Appellee.
• Court: Kansas Supreme Court

Page 748

933 P.2d 748

261 Kan. 711

James M. EIDEMILLER, Appellant, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Appellee.

No. 73861.

Supreme Court of Kansas.

March 7, 1997.

Syllabus by the Court

K.S.A. 40-284(d) prohibits the stacking of underinsured motorist coverage from separate vehicle liability insurance policies rather than granting to the insurer the right to limit stacking, and, as such, it will be read into and become a part of the policies.

David T. Greis, of William H. Pickett, P.C., Kansas City, MO, argued the cause, and William H. Pickett, Gregory J. Abella, and Michael R. Taylor, of the same firm, were with him on the briefs, for appellant.

Douglas M. Greenwald, of McAnany, Van Cleave & Phillips, P.A., Kansas City, argued the cause, and Clifford T. Mueller, of the same firm, was with him on the brief, for appellee.

Arthur S. Chalmers and Mary E. Giovanni, of Kahrs, Nelson, Fanning, Hite & Kellogg, L.L.P., Wichita, were on the brief, for amicus curiae, Kansas Association of Defense Counsel.

ALLEGRUCCI, Justice:

This litigation involves a claim for underinsured motorist coverage by the insured, James Eidemiller, under three separate policies with State Farm Mutual Automobile Insurance Company (State Farm). The district court entered summary judgment for State Farm on the ground that K.S.A. 40-284(d) prohibits stacking insurance policies. The Court of Appeals reversed on the ground that the statute prohibits stacking only if the insurance agreement contains an express antistacking provision. Eidemiller v. State Farm Mut. Auto. Ins. Co., 22 Kan.App.2d 278, 915 P.2d 161 (1996). This court granted State Farm's petition for review on the stacking question.

The sole issue in this appeal is whether K.S.A. 40-284(d) prohibits stacking underinsured motorist coverage from separate vehicle liability insurance policies or gives insurance companies the right to eliminate stacking by including express antistacking provisions in their policies. The facts are not in dispute. Eidemiller was injured in an automobile accident. He was a passenger in a car driven by Edward Musick that struck a car driven by John Guzan II. Eidemiller settled his liability claim against Musick for Musick's policy limits of $25,000. He settled his liability claim against Guzan for $5,500. The liability limit of Guzan's policy was $25,000.

State Farm insured Eidemiller under three separate automobile insurance policies. The underinsured motorist limit of each policy was $25,000. State Farm did not include an anti-stacking provision in any of the three policies.

Claiming that the liability settlements did not adequately compensate him for his injuries, Eidemiller notified State Farm that he was making an underinsured motorist claim based on the three combined State Farm policies. State Farm denied the claim, and Eidemiller sued for breach of contract.

K.S.A. 40-284(d) is known as the anti-stacking provision of the uninsured and underinsured motorist coverage statute, K.S.A. 40-284. This court has defined "stacking" as "the right to recover on two or more policies in an amount not to exceed the total of the limits of liability of all policies up to the full amount of the damages sustained." Van Hoozer v. Farmers Insurance Exchange, 219 Kan. 595, 608, 549 P.2d 1354 (1976).

Before the anti-stacking provision was added to K.S.A. 40-284 in 1981, L.1981, ch. 191, 1(d), it was presumed in Kansas case law that underinsured motorist coverage would be stacked. See, e.g., Welch v. Hartford Casualty Ins. Co., 221 Kan. 344, 349, 559 P.2d 362 (1977). The question in this case is whether the legislature intended theaddition of subsection (d) in 1981 to eliminate policy stacking or to give insurance companies the right to eliminate stacking by including anti-stacking provisions for the uninsured/underinsured motorist coverage in their policies.

The Court of Appeals concluded that the statute gives insurance companies the right to eliminate stacking by including anti-stacking provisions in their policies. Because State Farm had not included anti-stacking provisions in any of the applicable policies, the Court of Appeals reversed the trial court's entry of summary judgment in favor of the insurer.

The Court of Appeals supported its conclusion with a rule of construction and citation to Howard v. Farmers Ins. Co., 5 Kan.App.2d 499, 619 P.2d 160 (1980), rev. denied 229 Kan. 670 (1981). The applicable rule of construction, as stated by the Court of Appeals, is that Kansas "precedent requires that insurance contracts be strictly construed against insurance companies which prepare insurance contracts and in favor of the insured. Brown v. Combined Ins. Co. of America, 226 Kan. 223, 232, 597 P.2d 1080 (1979)." 22 Kan.App.2d at 281, 915 P.2d 161. This principle also has been stated as follows: "Coverage clauses of automobile liability policies are to be broadly interpreted to afford the greatest possible protection to the insured, while exclusionary clauses are interpreted narrowly." Central Security Mut. Ins. Co. v. DePinto, 235 Kan. 331, 681 P.2d 15, Syl. 3, 235 Kan. 331, 681 P.2d 15 (1984). The Court of Appeals concluded "that because State Farm declined to incorporate the antistacking language of 40-284(d) into its policies, State Farm is equitably estopped from using that statute to bar Eidemiller from stacking the three State Farm insurance policies." 22 Kan.App.2d at 285, 915 P.2d 161.

The Court of Appeals also considered and rejected the argument that policy provisions other than express anti-stacking clauses effectively preclude stacking. First, it considered that the State Farm policies defined an underinsured motorist in language identical to the statutory definition, K.S.A. 40-284(b). Second, it considered offset provisions. The Court of Appeals concluded that the offset provisions only prohibited stacking the tortfeasor's liability coverage onto the victim's underinsured coverage. 22 Kan.App.2d at 285-86, 915 P.2d 161.

State Farm's argument in this court focuses primarily on the language of K.S.A. 40-284(d) and the legislative intent. The insurer also argues that neither the reasonable expectations doctrine nor the principle of equitable estoppel supports the Court of Appeals' decision.

Established principles of statutory construction include the following:

"Interpretation of a statute is a question of law, and it is the function of the court to interpret a statute to give it the effect intended by the legislature. It is a fundamental rule of statutory construction to which all other rules are subordinate that the intent of the legislature governs when that intent can be ascertained."

"When a statute is plain and unambiguous, the court must give effect to the intention of the legislature as expressed, rather than determine what the law should or should not be." Martindale v. Tenny, 250 Kan. 621, 829 P.2d 561, Syl. 1, 2, 250 Kan. 621, 829 P.2d 561 (1992).

"The fundamental rule of statutory construction is that the purpose and intent of the legislature governs when the intent can be ascertained from the statute. In construing statutes, the legislative intention is to be determined from a general consideration of the entire act. Effect must be given, if possible, to the entire act and every part thereof. To this end, it is the duty of the court, as far as practicable, to reconcile the different provisions so as to make them consistent, harmonious, and sensible." State v. Adee, 241 Kan. 825, 829, 740 P.2d 611 (1987).

K.S.A. 40-284(d), which governs this case, provides:

"Coverage under the policy shall be limited to the extent that the total limits available cannot exceed the highest limits of any single applicable policy,regardless of the number of policies involved, persons covered, claims made, vehicles or premiums shown on the policy or premiums paid or vehicles involved in an accident."

The current subsection (d) was among amendments made to the uninsured/underinsured motorist insurance coverage statute in 1981. L.1981, ch. 191, 1. Uninsured motorist coverage was elective in Kansas until 1968. L.1968, ch. 273. From 1968 until 1981, it was required unless waived in writing. L.1981, ch. 191, 1(a). In 1981, minimum dollar requirements were set for uninsured motorist coverage. L.1981, ch. 191, 1(c). The legislature made other substantive changes to the statute in 1981, including the addition of a requirement for underinsured motorist coverage, L.1981, ch. 191, 1(b), and the addition of subsections (d) and (e), which were concerned respectively with stacking policies and exclusions of coverage. Subsection (d) has not changed since it was introduced in 1981. The current subsection (e) is the same as the provision introduced in 1981 in all respects germane to this discussion. Subsection (d) is quoted in the preceding paragraph. The rest of 40-284 provides in pertinent part as follows:

"(a) No automobile liability insurance policy covering liability arising out of the ownership, maintenance, or use of any motor vehicle shall be delivered or issued for delivery in this state with respect to any motor vehicle registered or principally garaged in this state, unless the policy contains or has endorsed thereon, a provision with coverage limits equal to the limits of liability coverage for bodily injury or death in such automobile liability insurance policy sold to the named insured for payment of part or all sums which the insured or the insured's legal representative shall be legally entitled to recover as damages from the uninsured owner or operator of a motor vehicle because of bodily injury, sickness or disease, including death, resulting therefrom, sustained by the insured, caused by accident and arising out of ownership, maintenance or use of such motor vehicle, or providing for such payment irrespective of legal liability of the insured or any other person or organization....

"(b) Any uninsured motorist coverage...