Farmland Ins. Companies of Des Moines, Iowa v. Heitmann, 17854

• Decision Date: 07 April 1993
• Docket Number: No. 17854,17854
• Citation: 498 N.W.2d 620
• Parties: FARMLAND INSURANCE COMPANIES OF DES MOINES, IOWA, Plaintiff and Appellee, v. Nicholas HEITMANN, Defendant and Appellant, and Laura Heitmann, Deceased; Horace Mann Insurance Co.; and Viking Insurance Co., Defendants.
• Court: South Dakota Supreme Court

Page 620

498 N.W.2d 620

FARMLAND INSURANCE COMPANIES OF DES MOINES, IOWA, Plaintiff and Appellee, v. Nicholas HEITMANN, Defendant and Appellant, and Laura Heitmann, Deceased; Horace Mann Insurance Co.; and Viking Insurance Co., Defendants.

No. 17854.

Supreme Court of South Dakota.

Argued Oct. 5, 1992.

Decided April 7, 1993.

Lon Kouri of May, Johnson, Doyle & Becker, Sioux Falls, for plaintiff and appellee.

J. Michael Dady and Ann K. Grossman of Lindquist & Vennum, Minneapolis, MN, for defendant and appellant.

WUEST, Justice.

This is an appeal from summary judgment granted to Farmland Insurance Co. concerning its obligation to pay underinsured motorist benefits for the death of Laura Heitmann. We affirm.

FACTS

The facts in this case are not in dispute. On August 24, 1990, decedent Laura Heitmann was riding her bicycle when she was struck and killed by a pick-up truck driven by Terrance Hornseth (Hornseth) and owned by Gary Greseth (Greseth). Hornseth was drunk at the time; he later pled guilty to vehicular homicide in the accident.

At the time of the accident, Hornseth carried liability insurance with a per person limit of $25,000 with Viking Insurance Company and Greseth carried liability insurance with a per person limit of $100,000 with Horace Mann Insurance Company. Laura Heitmann and her husband, Nicholas, carried automobile liability insurance which included a $100,000 per person limit of underinsured motorist coverage (UIM), with Farmland Insurance Companies of Des Moines, Iowa (Farmland). Nicholas Heitmann (Heitmann) has neither demanded nor received payment under the liability policies of Hornseth or Greseth. ¹

Farmland failed to issue its standard UIM limiting endorsement with the Heitmann's policy. The missing endorsement would have limited the available UIM coverage to the difference between the UIM policy limits and all other applicable insurance. Claiming damages sustained as a result of Laura's death exceeded the amounts available under the applicable liability policies, Heitmann demanded payment of the $100,000 UIM from Farmland.

Farmland denied payment and brought a declaratory judgment action to determine its obligations to its insured. The trial court determined the terms of the insurance policy issued to the Heitmanns provided UIM coverage for uncompensated damages up to the $100,000 limit. The court then found SDCL 58-11-9.5 (1990) limited Heitmann's recovery to the difference between the policy limits and the amount recovered from any tort-feasors and it granted summary judgment to Farmland.

Heitmann appeals; we address the following issue:

WHETHER SDCL 58-11-9.5 OPERATES TO LIMIT UNDERINSURED MOTORIST COVERAGE TO THE DIFFERENCE BETWEEN THE POLICY LIMITS AND THE AMOUNT RECOVERED FROM THE TORT-FEASOR.

Summary judgment will be affirmed only if there are no genuine issues of material fact and the trial court has correctly decided the legal issues before it. Stroh v. Town of Java, 463 N.W.2d 923 (S.D.1990); Bego v. Gordon, 407 N.W.2d 801 (S.D.1987); Trapp v. Madera Pacific, Inc., 390 N.W.2d 558 (S.D.1986). There is no dispute as to the facts in this case. Consequently, we review to determine the correctness of the trial court's application of the law. Construction of a statute is a question of law. Vellinga v. Vellinga, 442 N.W.2d 472 (S.D.1989); Nash Finch Co. v. South Dakota Dep't of Revenue, 312 N.W.2d 470 (S.D.1981). Review of the trial court's order granting summary judgment will be affirmed if any basis exists which supports the ruling. Trapp, 390 N.W.2d at 562; Uken v. Sloat, 296 N.W.2d 540 (S.D.1980).

I.

Farmland argues the missing endorsement imposed the obligation to pay UIM benefits and, without the endorsement, the duty to pay benefits must be imposed by statute. Heitmann argues the terms of the policy issued impose an obligation to pay UIM benefits without the endorsement so there is no need to impose a duty to pay through use of the statute.

The trial court was correct in finding the policy issued by Farmland provided coverage up to "the full amount the insured is legally entitled to recover as damages," capped only by the $100,000 policy limit. The policy issued to the Heitmanns states on the cover page "[t]hese policy provisions with the declarations page and endorsements, if any, issued to form a part thereof, complete this policy." (Emphasis added.) Part B of the declarations page states clearly "insurance is provided where a premium is shown for the coverage." Directly underneath is printed a charge for underinsured coverage of $100,000 per person, $300,000 per accident. Another provision in the contract defines an "underinsured motor vehicle."

"Underinsured motor vehicle" means a land motor vehicle or trailer of any type to which a bodily injury liability bond or policy applies at the time of the accident but the amount paid for "bodily injury" under that bond or policy to an "insured" is not enough to pay the full amount the insured is legally entitled to recover as damages.

This completes the policy's reference to underinsured coverage. The trial court correctly refused to consider the missing endorsement as part of the policy. The policy as issued provided $100,000 UIM without any limitations.

Farmland next claims since South Dakota statutes are automatically incorporated into insurance contracts, SDCL 58-11-9.5 operates to limit UIM to the difference between the UIM policy limits less the amount available from the tort-feasors. Heitmann argues if the statute applies, the first sentence of the statute allows the terms of the insurance contract to extend broader coverage than required by law. Thus, Heitmann's UIM coverage would be subject to the terms of the insurance policy, not the lesser coverage imposed by statute.

SDCL 58-11-9.5 provides:

Subject to the terms and conditions of such underinsured motorist coverage, the insurance company agrees to pay its own insured for uncompensated damages as its insured may recover on account of bodily injury or death arising out of an automobile accident because the judgment recovered against the owner of the other vehicle exceeds the policy limits thereon. Coverage shall be limited to the underinsured motorist coverage limits on the vehicle of the party recovering less the amount paid by the liability insurer of the party recovered against.

A.

First, we decide whether the statute is applicable to this policy. Farmland relies on the "general rule" that statutes in effect at the issuance of the policy become part of the policy itself. Farmland, citing Alexander and Epiphany, asserts South Dakota law follows the "general rule" and requires existing statutes to be read into an insurance policy as if they were express provisions. Alexander v. Home Ins. Co., 53 S.D. 305, 308, 220 N.W. 525, 526 (1928); Epiphany Roman Catholic Church v. German Ins. Co., 16 S.D. 17, 20, 91 N.W. 332, 333 (1902).

Heitmann asserts there is an exception to this general rule when the policy is more favorable to the insured. "An exception is made to the rule that the statute prevails over the terms of the contract where the provision of the policy which conflicts with the statute is more favorable to the insured. In such case the policy provision prevails and is enforced." Couch on Insurance 2d (Rev. ed.) Sec. 13:8. Further, Heitmann distinguishes the South Dakota cases of Alexander and Epiphany as both cases enlarged, not reduced, the scope of protection for the insured. Alexander, 53 S.D. at 310, 220 N.W. at 526; Epiphany, 16 S.D. at 23, 91 N.W. at 332.

The trial court determined "contracts cannot change statutory law" and found the weight of authority followed the "general rule." Couch on Insurance 2d (Rev. ed.) Sec. 13:7; 43 Am.Jur.2d, Insurance, Sec. 256. The trial court, citing Alexander and Epiphany, held, "[i]n South Dakota insurance statutes in force at the time an insurance contract is entered into become a part of the contract as if the statute had been incorporated into the policy itself."

We agree with the trial court and the greater weight of authority. "As a general rule, stipulations in a contract of insurance in conflict with, or repugnant to, statutory provisions which are applicable to, and consequently form a part of, the contract, must yield to the statute, and are invalid, since contracts cannot change existing statutory laws." Couch on Insurance 2d (Rev ed) Sec. 13:7. "Where such statutes exist, their provisions become mandatory unless expressly rejected as provided by law.... One must consider the legislative intent and statutory purpose, and its definitions will prevail over those of a policy." 8C Appleman, Insurance Law and Practice Sec. 5067.35 (1981).

The determinative factor in South Dakota is the apparent intent of our state legislature. Union Ins. Co. v. Stanage, 454 N.W.2d 736, 739 (S.D.1990). By passing SDCL 58-11-9, which requires UIM insurance, the legislature clearly sought to protect insured motorists from underinsured motorists. Id. However, modifications of this statute show a legislative determination that UIM coverage may be limited. See SDCL Secs. 58-11-9.6 thru 58-11-9.9. Only policy provisions not inconsistent with chapter 58 may be included in insurance policies. ² Chapter 58 governs policies omitting required conditions or containing provisions inconsistent with the chapter. ³ Further, where the legislature intended to allow contractual deviations from chapter 58, it has used discretionary language or expressly stated exceptions. ⁴ We hold SDCL 58-11-9.5 applies to UIM policies sold in South Dakota.

B.

We now address Heitmann's contention that if SDCL 58-11-9.5 applies, the first sentence allows parties to contract for broader coverage than the statute requires. In reviewing statutes, this court will construe them according to their plain and ordinary meaning. Cimarron Ins. Co. v. Croyle, 479 N.W.2d 881, 886 (S.D.1992); Appeal of AT & T Information Systems, 405 N.W.2d 24, 27 (S.D.1987)...