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

• Decision Date: 01 March 1991
• Docket Number: No. 64370,64370
• Citation: 248 Kan. 295,806 P.2d 993
• 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 Supreme Court

Page 993

806 P.2d 993

248 Kan. 295

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.

Supreme Court of Kansas.

March 1, 1991.

Syllabus by the Court

1. The test to determine whether an insurance contract is ambiguous is not what the insurer intends the language to mean, but what a reasonably prudent insured would understand the language to mean.

2. Where contract provisions and terms are uncertain, conflicting, or susceptible of more than one construction, the construction most favorable to the insured must prevail. This principle is based upon the fact that an insurer prepares its own contract and thereby assumes the duty to make its meaning clear and define limitations in coverage in explicit terms.

3. An automobile liability insurance policy that fails to state that a "per occurrence" limit on liability is expressly subject to the "per person" limit on liability is subject to conflicting interpretations and is considered ambiguous.

4. Under the facts of this case, the defendant, injured along with another person in a single accident is entitled to recover in excess of the "per person" limit on liability of the insured's insurance policy but is limited to the "per occurrence" limit on liability.

William E. Metcalf, of Metcalf and Justus, Topeka, argued the cause, and Henri Watson, Kansas City, Mo., was with him on the briefs, for appellants.

Paul Hasty, Jr., of Wallace, Saunders, Austin, Brown & Enochs, Chartered, Overland Park, argued the cause, and Bradley S. Russell, was with him on the brief, for appellee.

HERD, Justice:

Ricki and Paulette Winters appeal a declaratory judgment by the district court which construed the liability limit provision of the automobile liability insurance policy of Farm Bureau Mutual Insurance Company (Farm Bureau).

On January 2, 1988, a vehicle driven by Curtis Sutterby and owned by George Sutterby was involved in an accident with an automobile operated by Ricki Winters. As a result of the accident, Paulette Winters claimed bodily injury damages in excess of $100,000 and Ricki alleged bodily injury damages of approximately $12,000.

At the time of the accident, the Sutterby vehicle was insured by Farm Bureau under an automobile liability insurance policy. Farm Bureau's policy limited its liability to $100,000 for bodily injury for "each person" and $300,000 for "each occurrence."

Farm Bureau filed a petition for declaratory judgment in Johnson County District Court and moved for summary judgment. Ricki and Paulette Winters alleged Farm Bureau's liability to Paulette was not limited to $100,000 because two persons were injured in the accident, thereby raising the total liability limit to $300,000. The district court granted Farm Bureau's motion and ruled the insurance liability policy was not ambiguous, but limited liability to $100,000 for each person's bodily injuries even though more than one person was injured in the same accident. This appeal followed.

On appeal, the Court of Appeals found the liability limit provision of Farm Bureau's policy was ambiguous and, therefore, construed it against the insurer. Farm Bureau Mut. Ins. Co. v. Winters, 14 Kan.App.2d 623, 630-31, 797 P.2d 885 (1990). We granted Farm Bureau's petition for review.

In this case we are required to interpret the liability limit provision of Farm Bureau's insurance policy. The provision at issue provides:

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

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

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

"3. The property damage liability limit for 'each occurrence' is the maximum for all damages to all property in any one occurrence.

"We will pay no more than these maximums regardless of the number of vehicles described in the declarations, insured persons, claims, claimants or policies, or vehicles involved in the occurrence."

The policy declaration indicates the maximum liability for bodily injury for "each person" is $100,000 and the "each occurrence" limitation is $300,000.

Farm Bureau contends the policy clearly and unambiguously makes the $300,000 limit for each occurrence subject to the $100,000 liability limit for each person. The Winters argue the $100,000 bodily injury limit does not apply where two or more persons are injured in the same accident. The Winters allege the "each occurrence" provision of Farm Bureau's policy provides for recovery on each of their claims, so long as the total for both claims does not exceed $300,000.

For support, Farm Bureau relies upon two cases, Standard Acc. Ins. Co. of Detroit, Mich. v. Winget, 197 F.2d 97 (9th Cir.1952), and Lowery v. Zorn, 184 La. 1054, 168 So. 297 (1936). In Lowery, the plaintiff and his son were injured in an automobile accident with the defendant. The district court allowed Lowery $5,858.25 for his injuries and $150 for the use and benefit of his son. On appeal, the Court of Appeal increased Lowery's judgment to $8,358.25 and affirmed the judgment of $150 for the use and benefit of Lowery's son. 184 La. at 1057, 168 So. 297.

Following a garnishment action against the defendant's insurer, the Louisiana Supreme Court ruled the insurer was not liable for more than $5,000 for damages to Lowery. The insurer's limit of liability in its policy was $5,000 for bodily injury to one person and " 'subject to the same limit for each person' $10,000 for any one accident causing bodily injury to more than one person." 184 La. at 1057-58, 168 So. 297. Thus, the court determined where two or more persons were injured in one accident and one person's bodily injuries exceeded the limit of liability for one person, that person could not recover more than the bodily injury limit, even when the total amount of damages due to all injured persons was less than the per occurrence liability limit. 184 La. at 1058, 168 So. 297.

In Standard, 197 F.2d 97, Towry was involved in an accident with Winget and Mack. Winget received a judgment for $32,000 and Mack received a judgment for $15,000. Subsequently, Winget brought an action against Standard, Towry's insurer, for payment of the judgment. Standard's liability limits for bodily injury were $10,000 for each person and $20,000 for each accident. 197 F.2d at 104. In addition, Standard's liability limit provision provided " 'the limit of such liability stated in the declarations as applicable to "each accident" is subject to the above provision respecting each person, the total limit of the company's liability for all damages ... sustained by two or more persons in any one accident.' " 197 F.2d at 104 n. 2. Thus, the court determined each person's recovery was clearly limited to $10,000. 197 F.2d at 104.

We also consider Mannheimer Bros. v. The Kansas C. & S. Co., 149 Minn. 482, 184 N.W. 189 (1921), wherein two of plaintiff's employees were injured in an automobile accident and received judgment for damages against the plaintiff of $12,633.32 and $2,630.73. The employer brought suit against defendant, its insurer, to recover the money paid in the adverse judgments. 149 Minn. at 483-84, 184 N.W. 189. Defendant admitted liability, but claimed it was not liable for the full amount of the judgments. Defendant's insurance policy provided:

" 'The company's liability under paragraph one of the insuring agreements, on account of bodily injuries to or death of one person is limited to five thousand dollars ($5,000) and subject to the same limit for each person, the company's total liability on account of bodily injuries or a death of more...