Gearhart v. Mut. of Enumclaw Ins. Co.

• Citation: 160 Idaho 666,378 P.3d 454
• Decision Date: 27 July 2016
• Docket Number: Docket No. 42859
• Parties: Trent Gearhart, Plaintiff–Respondent, and Ronald M. Gearhart, Brandi L. Mc Mahon, Plaintiffs, v. Mutual of Enumclaw Insurance Company, Defendant–Appellant.
• Court: Idaho Supreme Court

160 Idaho 666
378 P.3d 454

Trent Gearhart, Plaintiff–Respondent
and
Ronald M. Gearhart, Brandi L. Mc Mahon, Plaintiffs
v.
Mutual of Enumclaw Insurance Company, Defendant–Appellant.

Docket No. 42859

Supreme Court of Idaho, Boise, January 2016 Term .

Filed: July 27, 2016
Rehearing Denied September 16, 2016

Ewing Anderson, P.S., Spokane, Washington, for appellant. Brad E. Smith argued.

Seiniger Law Offices, P.A., Boise, for respondent. Wm. Breck Seiniger, Jr. argued.

J. JONES, Chief Justice

Mutual of Enumclaw Insurance Company (“Enumclaw” or “Appellant”) appeals a summary judgment requiring it to pay the policy limit of $300,000 on each of two separate insurance policies for the benefit of Trent Gearhart (“Trent” or “Respondent”).¹

On January 14, 2011, Trent was severely injured in an automobile accident caused by an underinsured motorist (“UIM”). After the accident, Trent's parents, Ronald M. Gearhart (“Ronald”) and Brandi L. McMahon (“Brandi”), who are divorced, each attempted to collect on their separately held auto insurance policies with Enumclaw. Each of those policies provided maximum coverage of $300,000 for accidents caused by underinsured motorists.

Enumclaw contended that because of anti-stacking language in the policies, the total UIM benefit under the combined policies was limited to $300,000. The district court held on summary judgment that the UIM anti-stacking provision in each policy was invalid and, therefore, ruled that Enumclaw was obligated for the full $300,000 policy limit on both policies. Enumclaw timely appealed.

I. Factual and Procedural Background

On or around January 14, 2011, Trent Gearhart and Tina Palmer were driving in Tina's brother's 2010 Chevrolet Impala. Trent was in the passenger seat and Tina was driving. Tina was negligent and caused an accident. The accident left Trent with a severe brain injury, which resulted in permanent cognitive defects. It is not disputed for the purposes of this action that the damages suffered by Trent are in excess of $600,000.

There were three insurance policies that covered the accident: (1) a Farmers Insurance policy held by the owner of the Impala; (2) an auto insurance policy with Enumclaw, purchased and held by Brandi; and (3) a separate auto insurance policy with Enumclaw, purchased and held by Ronald. Trent was a beneficiary under both of the Enumclaw policies. The Enumclaw policies each provided for $300,000 in UIM coverage. UIM benefits accrue to a beneficiary in the event that the beneficiary is injured in an automobile accident where the responsible party's auto insurance is insufficient to compensate the beneficiary for the harm suffered.

The UIM sections of both of the Enumclaw policies contained identical “Other Insurance” clauses:

If there is other applicable similar insurance we will pay only our share. Our share is the proportion that our limit of liability bears to the total of all applicable limits. If this policy and any other policy providing similar insurance apply to the accident , the maximum limit of liability under all the policies shall be the highest applicable limit of liability under any one policy. However, insurance we provide with respect to a vehicle you do not own shall be excess over any other collectible insurance.

The first two sentences of the clause are a pro-rata provision, the third sentence is an anti-stacking provision, and the fourth sentence is an excess provision. Respondent has thus far been paid a total of $300,000 between

378 P.3d 456

the settlement with Farmers Insurance and payments made by Enumclaw.²

On July 3, 2013, Respondent's parents filed a complaint alleging four claims: (1) “breach of contract” for Enumclaw's failure to pay $300,000 in UIM benefits under each of the Enumclaw policies; (2) “the tort of bad faith” for Enumclaw's refusal to pay the amounts due under the contract and for engaging in “adjusting practices” that were “designed to deprive Plaintiffs of the benefits owed to them”; (3) “punitive damages” for Enumclaw's “extreme deviation from reasonable standards of conduct” performed “with malice, fraud, oppression, wantonness, gross negligence and/or recklessness”; and (4) attorney fees.

Enumclaw filed a motion for summary judgment, contending that the UIM anti-stacking provision clearly and unambiguously limited Trent's maximum entitlement to UIM benefits under the combined Enumclaw policies to $300,000. Respondent filed a competing motion for summary judgment, arguing that: (1) the mirroring excess provisions in each of the Enumclaw policies create a conflict, because each policy cannot provide coverage in “excess” of the other; (2) where “other insurance” (Other Insurance) clauses conflict, they are “rejected in toto”; (3) the UIM Other Insurance clause should be rejected in full, including the anti-stacking provision; and (4) anti-stacking provisions are against public policy because they serve to deprive the insured of benefits that are needed to protect them from losses for which there otherwise would be no coverage.

On December 2, 2013, the district court granted Trent's motion for summary judgment and denied Enumclaw's. The district court opined that the excess provisions of the two policies conflicted “because, if applied strictly, each policy states that it is only excess to the other.” Accordingly, the court held the entire other insurance clause, including the UIM anti-stacking provision, must be disregarded and “each policy must be applied independently.” Enumclaw filed a timely appeal.

II. Issues on Appeal

1. Did the district court err in granting Trent's motion for summary judgment with respect to his breach of contract claim?

2. Is Trent entitled to attorney fees on appeal?

III. Standard of Review

“On appeal from the grant of a motion for summary judgment, this Court utilizes the same standard of review used by the district court originally ruling on the motion.” Arregui v. Gallegos–Main , 153 Idaho 801, 804, 291 P.3d 1000, 1003 (2012). Summary judgment is proper when the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Id. “Whether a provision in an insurance policy is ambiguous is a question of law over which this Court exercises free review.” Markel Int'l. Ins. Co., Ltd. v. Erekson , 153 Idaho 107, 109, 279 P.3d 93, 95 (2012).

IV. Analysis

Enumclaw asserts that the district court erred in holding the Other Insurance clause to be unenforceable because it was not relying on the excess provision “to deny its obligation to pay UIM benefits.” According to Enumclaw, the excess provision “was not and is not relevant to the facts of this case and the application of the anti-stacking provision sought to be enforced by Enumclaw.” On the other hand, Trent asserts that the anti-stacking provision is ambiguous and must be construed in his favor.

The Court agrees that the anti-stacking provision should be the focus of inquiry in this case. The district court declined to apply the anti-stacking provision after concluding that the conflicting excess provisions in the two policies required the entire Other Insurance clause to be discarded, but did not

378 P.3d 457

directly consider the anti-stacking provision. The issue is whether the anti-stacking provision is ambiguous or, perhaps, violative of public policy.

This Court has been sensitive to the situation of insurance buyers in light of their unequal bargaining power vis-à -vis insurance carriers. “The general rule is that, because insurance contracts are adhesion contracts, typically not subject to negotiation between the parties, any ambiguity that exists in the contract must be construed most strongly against the insurer.” Arreguin v. Farmers Ins. Co. of Idaho , 145 Idaho 459, 461, 180 P.3d 498, 500 (2008).

[W]hen interpreting their insurance policies, we do not expect policyholders to know how most courts around the country have construed certain words or to have the knowledge of those who have spent their careers working in or with the insurance industry. “ ‘Unless contrary intent is shown, common, non-technical words are given the meaning applied by laymen in daily usage—as opposed to the meaning derived from legal usage—in order to effectuate the intent of the parties.’ ” Armstrong v. Farmers Ins. Co. of Idaho , 147 Idaho 67, 69, 205 P.3d 1203, 1205 (2009).

Weinstein v. Prudential Prop. & Cas. Ins. Co. , 149 Idaho 299, 320–21, 233 P.3d 1221, 1242–43 (2010). “A provision that seeks to exclude the insurer's coverage must be strictly construed in favor of the insured. ... The burden is on the insurer to use clear and precise language if it wishes to restrict the scope of its coverage.” Id.

The language employed in the Other Insurance provision of the two Enumclaw policies is confusing to the extent of being an ineffective barrier to the coverage afforded by both policies. The provision reads:

If there is other applicable similar insurance we will pay only our share. Our share is the proportion that our limit of

...