Farm Bureau Mut. Ins. Co., Inc. v. Winters

• Decision Date: 24 August 1990
• Docket Number: No. 64370,64370
• Citation: 797 P.2d 885,14 Kan.App.2d 623
• Parties: FARM BUREAU MUTUAL INSURANCE COMPANY, INC., Appellee, v. Ricki Gene WINTERS and Paulette G. Winters, Appellants, and Curtis Sutterby and George Sutterby, Defendants.
• Court: Kansas Court of Appeals

Page 885

797 P.2d 885

14 Kan.App.2d 623

FARM BUREAU MUTUAL INSURANCE COMPANY, INC., Appellee, v. Ricki Gene WINTERS and Paulette G. Winters, Appellants and Curtis Sutterby and George Sutterby, Defendants.

No. 64370.

Court of Appeals of Kansas.

Aug. 24, 1990.

Review Granted Dec. 13, 1990.

Syllabus by the Court

1. In determining the intention of the parties to a contract of insurance, the test is not what the insurer intends the printed language to mean, but rather what a reasonable person placed in the position of the insured would have understood the words to mean.

2. Where the provisions of an insurance policy are ambiguous or conflicting, the policy is to be construed strictly against the insurer and in favor of the insured.

3. In a case where an automobile liability policy provides that its bodily injury limits are $100,000 for each person and $300,000 for each occurrence in which two or more persons sustain bodily injury and the policy language does not make the "per occurrence" limit subject to the "per person" limit, it is held the policy is ambiguous because an insured could reasonably conclude coverage exceeding $100,000 is afforded to one person where two or more persons are injured in a single occurrence and the total amount of the injured persons' recoverable damages does not exceed $300,000.

William E. Metcalf, of Metcalf & Justus, Topeka, for appellants.

Paul Hasty, Jr., and Bradley S. Russell, of Wallace, Saunders, Austin, Brown & Enochs, Overland Park, for appellee.

Before ELLIOTT, P.J., REES, J., and DANIEL L. BREWSTER, District Judge, assigned.

DANIEL L. BREWSTER, District Judge Assigned:

Paulette and Ricki Winters appeal from a declaratory judgment which construed a Farm Bureau Mutual Insurance Company (Farm Bureau) automobile liability insurance policy's limits of liability.

In January 1988, a two-vehicle automobile collision occurred in Linn County. One vehicle was owned by George Sutterby and driven by Curtis Sutterby. The other vehicle was owned and occupied by Paulette and Ricki Winters. The Sutterby vehicle was insured by Farm Bureau.

As a result of the collision, both Paulette and Ricki suffered bodily injuries. Paulette claims to have incurred expenses in excess of $100,000 for bodily injuries. Ricki claims to have incurred expenses of approximately $12,000. The Farm Bureau policy's stated liability limits are $100,000 for "each person" and $300,000 for "each occurrence." The controversy presented concerns whether Farm Bureau's liability for Paulette's claim is limited to $100,000 or whether Paulette and Ricki combined could realize up to $300,000.

Farm Bureau filed a petition for declaratory judgment in Johnson County District Court and moved for summary judgment. The court found that the insurance contract was not ambiguous and limited Farm Bureau's liability for Paulette and Ricki individually to a maximum recovery of $100,000. Ricki and Paulette timely appeal. The Sutterbys filed no answer to the petition for declaratory judgment and are not parties to this appeal.

The question before us is whether the district court erred in finding the insurance contract unambiguous and limiting Farm Bureau's liability coverage to $100,000 for Paulette and Ricki individually.

Our scope of review of a written contract is broad. "Regardless of the construction of the written contract made by the trial court, on appeal a contract may be construed and its legal effect determined by the appellate court." Patrons Mut. Ins. Ass'n v. Harmon, 240 Kan. 707, 713, 732 P.2d 741 (1987); Kansas Gas & Electric Co. v. Kansas Power & Light Co., 12 Kan.App.2d 546, 551, 751 P.2d 146, rev. denied 243 Kan. 779 (1988). "This court can review the negotiated agreement and decide its legal effect. Regardless of the construction the district court gave the agreement, this court may independently construe the contract and determine its legal significance." NEA-Goodland v. U.S.D. No. 352, 13 Kan.App.2d 558, 562, 775 P.2d 675, rev. denied 245 Kan. 785 (1989).

The fact that summary judgment was entered by the district court is of no consequence. On a motion for summary judgment, both the district court and the appellate courts are required to resolve all facts and draw all inferences in favor of the party against whom the ruling is sought. Bacon v. Mercy Hosp. of Ft. Scott, 243 Kan. 303, 306, 756 P.2d 416 (1988). In this case, there are no conflicting facts or inferences. The issue raised is purely a question of law over which this court's review is unlimited. Hutchinson Nat'l Bank & Tr. Co. v. Brown, 12 Kan.App.2d 673, 674, 753 P.2d 1299, rev. denied 243 Kan. 778 (1988).

The following language from the Farm Bureau insurance contract is the source of the debate:

"LIMITS OF LIABILITY

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

"1. The bodily injury liability limit for 'each person' is the maximum for bodily injury sustained by one person in any one occurrence;

"2. The bodily injury liability limit for 'each occurrence' is the maximum limit of liability for bodily injury sustained by two or more persons in any one occurrence."

The policy declarations recite a limit of $100,000 for each person and $300,000 for each occurrence.

It is the Winters' contention that the policy is patently ambiguous, allowing $100,000 for injuries to one person in one occurrence, but also allowing $300,000 for injuries to two people in one occurrence. They argue that the two clauses are separate, and nothing in the policy ties them together. In support of their position, the Winters cite two Kansas cases which discuss the construction and interpretation of insurance contracts.

" 'In determining the intention of the parties to a contract of insurance, the test is not what the insurer intends the printed language to mean, but rather what a reasonable person placed in the position of the insured would have understood the words to mean.'

....

" 'Where provisions of an insurance policy are ambiguous or conflicting, the policy is to be construed strictly against the insurer and in favor of the insured.'

" 'Where an insurer intends to limit or restrict the coverage under its policy, it should use language which clearly reveals its stated purpose.' [Citation omitted.]" Alliance Life Ins. Co. v. Ulysses Volunteer Fireman's Relief Assn., 215 Kan. 937, 947-48, 529 P.2d 171 (1974).

"It is a general rule that exceptions, limitations and exclusions to insuring agreements require a narrow construction on the theory that the insurer, having affirmatively expressed coverage through broad promises, assumes a duty to define any limitations on that coverage in clear and explicit terms." Baugher v. Hartford Fire Ins. Co., 214 Kan. 891, 900, 522 P.2d 401 (1974).

Farm Bureau contends the insurance contract is clear and unambiguous, with the $100,000 per person limit overriding any claim by one person for more than that under the $300,000 per occurrence clause. It cites Kansas common-law rules concerning the interpretation of insurance contracts. A court "will not torture words in order to import ambiguity where the ordinary meaning leaves no room for ambiguity." Eddy v. Travelers Ins. Co., Hartford, Conn., 212 F.2d 518, 520 (10th Cir.1954). "[U]nless the provisions in question are ambiguous, the rule is they are not susceptible of judicial interpretation but must be construed in their ordinary sense." Brown v. Metropolitan Life Ins. Co., 166 Kan. 616, 621, 203 P.2d 150 (1949).

In summary, Farm Bureau has cited language stating that, if a contract is unambiguous, the court should take it as it finds it. The Winters have cited language stating that, if a contract is ambiguous, the insurer, not the insured, should suffer from the ambiguity. Both are correct, so the first task at hand is to determine whether the contract is ambiguous.

As noted in Haney v. State Farm Insurance, 52 Wash.App. 395, 397-98, 760 P.2d 950 (1988), rev. denied 111 Wash.2d 1033 (1989), a case nearly identical to the present case:

"It is true that members of the legal profession, the insurance industry, and others familiar with the structure and operation of insurance contracts are generally aware that the per accident limits of the typical insurance contract are intended to operate subject to the per person limits. The question before this court, however, is not what people subjectively know about such clauses; the question is what the average reasonable insured would know from reading the clauses at issue in this policy. [Citation omitted.]"

In Haney, an insured couple sought a declaratory judgment stating they were entitled to the $300,000 per accident limit of their uninsured motorist policy rather than the $100,000 per person limit. The trial court entered summary judgment for the insurer. The Washington Court of Appeals, finding the contract ambiguous, reversed.

The policy in Haney stated:

"Limits of Liability

"1. The amount of coverage is shown on the declarations page under 'Limits of Liability--U--Each Person, Each Accident'. Under 'Each Person' is the amount of coverage for all damages due to bodily injury to one person. Under 'Each Accident' is the total amount of coverage for all damages due to bodily injury to two or more persons in the same accident." 52 Wash.App. at 397, 760 P.2d 950.

This provision is indistinguishable from the present Farm Bureau policy. The Haney court held:

"The liability limits provision contains an inherent contradiction: the per person limit is $100,000, but the per accident limit is $300,000 for damages to 'two or more persons'. There is no language making the per accident limit subject to the per person limit. The existing language in the two clauses cannot be reconciled. The per accident limit directly implies that two people injured in one accident may recover up to $300,000 while the per person limit says each person is limited to $100,000." 52 Wash.App. at 397, 760 P.2d 950.

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