Estate of Swartz v. Metropolitan Property & Cas. Co.

• Decision Date: 01 August 1997
• Docket Number: No. 96-CA-0664-MR,96-CA-0664-MR
• Parties: ESTATE OF Judith H. SWARTZ, Appellant, v. METROPOLITAN PROPERTY & CASUALTY COMPANY, Appellee.
• Court: Kentucky Court of Appeals

Page 72

949 S.W.2d 72

ESTATE OF Judith H. SWARTZ, Appellant, v. METROPOLITAN PROPERTY & CASUALTY COMPANY, Appellee.

No. 96-CA-0664-MR.

Court of Appeals of Kentucky.

Aug. 1, 1997.

Robert L. Heleringer, Louisville, for Appellant.

Christopher S. Burnside, Robert L. Steinmetz, Louisville, for Appellee.

Before WILHOIT, C.J., and ABRAMSON and DYCHE, JJ.

OPINION

ABRAMSON, Judge:

The sole issue presented in this case of first impression is whether an insured may aggregate or "stack" underinsured motorist coverage under a policy which, while ostensibly charging a single premium for that protection, in fact bases the premium on whether the policy covers a single vehicle or multiple vehicles. The Estate of Judith H. Swartz (the "Estate") challenges a judgment of the Jefferson Circuit Court concluding that her insurer, Metropolitan Property & Casualty Company ("Metropolitan"), is not required to stack underinsured motorist (UIM) benefits for the three vehicles covered by her automobile insurance policy because she had been notified that the premium for such coverage was on a "per policy" not a "per vehicle" basis. Having examined the insurance policy in question in light of Kentucky cases on related stacking questions and case law from other jurisdictions that have confronted the single premium issue, we are convinced that, despite Metropolitan's characterization of its UIM premium as a single charge for a single coverage, the reality is that Swartz purchased more than a single item of UIM coverage. Under a two-tier rate schedule which almost doubled the UIM premium where two or more vehicles were insured, Mrs. Swartz and her husband in fact purchased two items of UIM coverage. Kentucky law regarding stacking of UIM coverage requires the conclusion that an insured is entitled to the number of coverages actually purchased regardless of how the premium is presented to the insured. Accordingly, we hold that the Estate is entitled to two items of UIM benefits or $50,000 in total coverage from Metropolitan.

The facts essential to our review of this case were stipulated to the trial judge. On or about July 20, 1993, Judith Swartz signed a Kentucky Automobile Insurance Application and submitted it to agent Virgle W. Tidrow, Jr., for submission to Metropolitan. At the time of application, Mrs. Swartz and her husband Donald owned two vehicles that were to be covered under the policy. In his deposition, Donald testified that Judith Swartz took care of the parties' financial affairs, including insurance matters. Although he was present at the meeting with Tidrow to complete the application, Donald stated that he neither participated in the discussion nor remembers signing the application.

Metropolitan issued a policy which took effect August 5, 1993, providing for regular six-month renewals. In December 1994, the Swartzes acquired a 1993 Chevrolet S-10 pickup truck which was added to the policy about December 27, 1994. At that time Metropolitan charged the Swartzes three separate premiums for UIM coverage, $6.00 on each covered vehicle for a total of $18.00. The separate premiums were reflected on the Declarations Page sent to the Swartzes. Prior to the February 5, 1995 six-month policy renewal, Metropolitan sent the Swartzes a renewal package that included an "Important Notice" titled CHANGES IN YOUR AUTO INSURANCE COVERAGE which set out the following paragraphs pertinent to this appeal:

You will find an important change on the Declarations Page of your automobile insurance policy. It concerns your Uninsured Motorists Bodily Injury (UMBI) and Underinsured Motorists Bodily Injury (UIMBI) insurance protections only. Until this change, you were charged per vehicle for these coverages. Now you will be charged a per policy amount.

Your Declarations Page now shows one amount for UMBI coverage and one amount for UIMBI coverage. These amounts represent the total limit of your policy's coverage, regardless of the number of vehicles listed on the policy. Your cost will be based on how much coverage you select and on whether or not you choose to insure more than one automobile. Therefore, take a look at your current UMBI and UIMBI limits to be sure the amount of coverage is right for you.

As an example of how your UMBI and UIMBI coverages work, if a covered auto is hit and Uninsured Motorists or Underinsured Motorists coverage is applicable, the amount of available UMBI and UIMBI coverage will not exceed the figure displayed on your Declarations Page.

The new Declarations Page reflected a premium of $10.00 for the Swartzes' UIM coverage of $25,000 per person/$50,000 per accident.

Judith Swartz was killed on April 26, 1995, while driving the Chevrolet S-10 pickup truck listed as a covered vehicle on the policy with Metropolitan. The accident was caused by the negligence of Micah Harris, the driver of the other vehicle, who was insured by Kentucky Farm Bureau Mutual Insurance Company. Farm Bureau paid the full amount of Harris's policy limit for liability ($25,000) to the Estate. The Estate subsequently made a demand upon Metropolitan for $75,000 in UIM benefits, claiming entitlement to stack the $25,000 policy limit for each of the three covered vehicles. In June 1995, Metropolitan agreed to pay the sum of $25,000 in UIM benefits which the Estate accepted in July 1995. Thereafter, on July 24, 1995, the Estate instituted a proceeding for a declaration that Metropolitan is required to stack UIM benefits for each of the three vehicles on the Swartzes' policy.

The trial judge denied the Estate's motion for a declaratory judgment concluding that because there was no way to determine the Swartzes' reasonable expectations under the policy, the policy language must be deemed controlling. He further held that Metropolitan had fully met its responsibilities under the policy by paying the stated UIM limit of $25,000. In this appeal, the Estate advances three arguments in support of its contention that stacking is required: 1) that the Swartzes had a reasonable expectation of the right to stacked coverage under their policy; 2) that the trial judge erred in concluding that the Swartzes had not paid separate premiums for UIM protection; and 3) that it is contrary to the public policy of this Commonwealth to deny an insured all the UIM protection he or she has actually purchased.

As noted by the Kentucky Supreme Court in State Farm Mutual Automobile Insurance Company v. Mattox, Ky., 862 S.W.2d 325 (1993), appellate decisions on issues pertaining to stacking are "not written on a clean slate." Thus, our analysis of the issue in the instant case is necessarily confined by the framework of statutory construction and policy considerations established in a line of Kentucky cases commencing with Meridian Mutual Insurance Company v. Siddons, Ky., 451 S.W.2d 831 (1970), and Ohio Casualty Insurance Company v. Stanfield, Ky., 581 S.W.2d 555 (1979). The import of these early decisions was addressed by the Supreme Court in Hamilton v. Allstate Insurance Company, Ky., 789 S.W.2d 751, 753-54 (1990), in concluding that anti-stacking provisions are contrary to public policy:

From the foregoing authorities [Siddons and Stanfield ], it is clear that this Court has recognized an inherent difference between liability insurance and uninsured motorist insurance coverage and regarded the latter as personal to the insured. Our interpretation has been based on the language of KRS 304.20-020 and its predecessor as well as the doctrine of reasonable expectations, the continued viability of which was recently underscored in Simon v. Continental Ins. Co., Ky., 724 S.W.2d 210 (1986). Under the doctrine of reasonable expectations, we have held that when one has bought and paid for an item of insurance coverage, he may reasonably expect it to be provided.

* * * * * *

Kentucky law requires an insurance carrier to offer uninsured motorist coverage with every policy insuring a motor vehicle. KRS 304.20-020. Decisional law declares such coverage to be applicable whether the insured who is injured by an uninsured motorist is driving an insured vehicle, riding as a passenger in another vehicle, or traveling as a pedestrian. Siddons, supra, 451 S.W.2d at 832 n. 1. In short, uninsured motorist coverage applies whenever an insured person would be entitled to recover damages but for the uninsured status of the negligent motorist.

(emphasis added). Notably, the insurance policy in Hamilton was "a so-called 'plain language' policy" which clearly provided that the insured, when injured in an auto other than her own, could "choose any single auto shown on the declarations page and the coverage limits applicable to that auto will apply." Id. at 752. The Court agreed that the policy language prohibiting stacking was unambiguous but concluded that it was unenforceable because it deprived the insured of coverage she had actually purchased.

More recently, the Court in Allstate Insurance Company v. Dicke, Ky., 862 S.W.2d 327 (1993), held that the public policy considerations underpinning the right to stack uninsured motorist coverage are equally applicable to underinsured motorist coverage. The Dicke Court summarized prior precedent as follows: "We have consistently held that when separate items of 'personal' insurance are bought and paid for, there is a reasonable expectation that the coverage will be provided. As such, we have held that it is contrary to public policy for it to be denied." Id. at 329. Mindful of the fact that we must examine the single-premium issue from the perspective of these previous stacking cases, we turn to the arguments pressed for reversal.

I. THE TRIAL JUDGE ERRED IN HOLDING THAT THE POLICY LANGUAGE CONTROLLED BECAUSE THE REASONABLE EXPECTATIONS OF THE SWARTZES COULD NOT BE ASCERTAINED.

In the order denying the Estate's request for a declaration of rights, the trial judge focused upon the impossibility of ascertaining the expectations of the insureds due...