Grange Ins. Ass'n v. Great American Ins. Co.

• Decision Date: 23 February 1978
• Docket Number: No. 44631,44631
• Parties: GRANGE INSURANCE ASSOCIATION, Respondent, v. GREAT AMERICAN INSURANCE COMPANY, City of Tacoma, a Municipal Corporation, Melvin A. Ehrlichman and Jane Doe Ehrlichman, husband and wife, and Donald R. Vogt, Appellants.
• Court: Washington Supreme Court

Page 710

89 Wn.2d 710

575 P.2d 235

GRANGE INSURANCE ASSOCIATION, Respondent, v. GREAT AMERICAN INSURANCE COMPANY, City of Tacoma, a Municipal Corporation, Melvin A. Ehrlichman and Jane Doe Ehrlichman, husband and wife and Donald R. Vogt, Appellants.

No. 44631.

Supreme Court of Washington, En Banc.

Feb. 23, 1978.

Reed, McClure, Moceri & Thonn, P.S., William R. Hickman, Seattle, for appellants.

Rush, Hayes & Kleinwachter, Frederick B. Hayes, Nicholas D. N. Harvey, Jr., Tacoma, for respondent.

HOROWITZ, Associate Justice.

This declaratory judgment action was brought to determine which of two insurance companies, if either, is obligated to provide uninsured motorist coverage (UMC) to an injured City of Tacoma policeman.

Two issues are presented. The first is whether the preparation and publication of bid specifications for Tacoma's liability insurance policy without a provision for UMC constituted a valid rejection of UMC within the meaning of RCW 48.22.030, the uninsured motorist coverage statute. Upon that question depends the liability of appellant Great American Insurance Company (Great American), which provides Tacoma's automobile liability coverage. The second issue is whether a clause excluding UMC when the insured is injured while occupying a vehicle furnished for his regular use is valid. That question determines the liability of respondent Grange Insurance Association (Grange), whose automobile liability policy with the injured man (apparently issued in Washington) includes a UMC endorsement with that exclusionary clause. We hold that the preparation and publication of Tacoma's bid specifications did constitute a valid rejection of UMC, and that the exclusion clause in Grange's policy is repugnant to the statute and void. The consequence of this result is that Great American does not provide UMC to this injured man, and Grange does.

The injured policeman, Donald Vogt, was sitting in a Tacoma police car in the course of his duties when the car was struck from the rear by a vehicle operated by an uninsured driver. Vogt's own automobile insurance policy with respondent Grange includes a UMC endorsement. The Great American policy issued to the City of Tacoma provides automobile liability coverage to city employees acting on behalf of the City, and states that it is primary insurance. It does not, however, contain a UMC endorsement.

Grange brought this action against Great American, the City of Tacoma, Donald Vogt, and the uninsured driver seeking a declaration that Great American provides UMC to Vogt and Grange does not. The parties entered into a On appeal, Great American contends UMC was rejected by its insured, the City of Tacoma, in compliance with the requirements of RCW 48.22.030, by the omission from its bid proposal of any provision for UMC. Pointing to Grange's UMC endorsement, Great American maintains Grange alone is liable to Officer Vogt for the minimum UMC coverage of $15,000 required by RCW 48.22.030, and must bear the full cost of the settlement. Thus, it is argued, Grange must reimburse Great American for the $7500 it contributed to the settlement.

stipulation as to partial settlement and dismissal, whereby Vogt accepted $15,000 and released both insurance companies from any further liability. All parties were dismissed except the two companies. Each had contributed $7500 to the settlement without admitting liability, and determined to litigate the question of which, if either, is liable. The Pierce County Superior Court entered an order granting summary judgment in favor of Grange, holding that Great American provides UMC which is applicable to Officer Vogt's accident, and that coverage is primary. It further held that Great American is obligated to reimburse Grange in the amount of $7500. We reverse and hold that Grange must reimburse Great American in the amount of $7500.

Grange, on the other hand, claims Great American's policy does provide UMC because Tacoma did not expressly reject it. Grange further argues it bears no liability for this accident for two reasons. First, it contends Great American's coverage is primary and Grange's secondary. It relies on Condition No. 10 of its endorsement, the "excess insurance" clause, which makes Grange's coverage applicable only after other insurance has been fully paid. If the Great American policy provides UMC, it must do so in the statutory minimum amount of $15,000, which is equal to the amount of the settlement with Officer Vogt. Thus, Grange claims, its own coverage is not applicable. We do not reach this issue because we hold that Great American provides no UMC whatsoever. The argument that Great American's Grange also argues, however, that it does not provide coverage for this accident because Officer Vogt was injured while sitting in a police car. It relies on an exclusion in its endorsement which excludes coverage when the insured is injured while occupying a vehicle furnished for his regular use. For this additional reason Grange maintains it bears no liability here.

coverage is primary and Grange's "excess" is therefore irrelevant. ¹

The first issue presented, whether the Great American policy provides UMC by operation of law, requires us to interpret for the first time the rejection clause of the uninsured motorist coverage statute, RCW 48.22.030. Under the terms of that statute every motor vehicle liability policy issued in this state must provide UMC, "except that the named insured may be given the right to reject such coverage." Absent a valid rejection, the required coverage will be read into any policy which does not contain a UMC endorsement. See Touchette v. Northwestern Mutual Ins. Co., 80 Wash.2d 327, 494 P.2d 479 (1972). The question before us here is whether the preparation and publication of bid specifications for the City of Tacoma's liability policy without provision for UMC constitutes a rejection of UMC within the meaning of the statute. We hold that it does.

Washington's UMC statute is one of several such state statutes which do not expressly require a rejection to be in writing. Those of Georgia and Mississippi, for example, do require a writing. Ga.Code Ann. § 56-407.1; Miss.Code Annot. § 83-11-101 (Supp.1976). In states where no writing is required by the statute, courts have required some showing that the insured knew of the existence of Respondent Grange argues the Washington statute requires an express written rejection of UMC, and the bid proposal sent out by the City of Tacoma was not sufficient. Respondent points to language in Touchette v. Northwestern Mutual Ins. Co., supra, which suggests that a written rejection, or some other express communication, is required. Touchette does not control this case, however, for the court there was not interpreting the statutory requirements for a valid rejection. Our statute does not expressly require a written rejection, and we will not read such a requirement into the statute. The question of whether the City of Tacoma exercised its right to reject UMC is a question of fact to be determined from the circumstances of this particular case.

UMC and understood his right to reject it. See Aetna Casualty & Surety Co. v. Green, 327 So.2d 65 (Fla.Dist.Ct.App.) cert. denied 336 So.2d 1179 (Fla.1976). Thus, where the issue is whether the documents or other transaction between a layperson and insurance agent constitute a rejection of UMC, courts have required the rejection to be "specific," "express," or "manifest." Aldcroft v. Fidelity & Casualty Co., 106 R.I. 311, 259 A.2d 408 (1969) (insured must reject in "specific terms"); Abate v. Pioneer Mutual Casualty, 22 Ohio St.2d 161, 258 N.E.2d 429 (1970) (insured must "expressly reject"); Lamb v. Midwest Mutual, 296 F.Supp. 131 (D.Ark.1969) (Arkansas statute requires insured to "manifest his choice."). Under these circumstances, execution of an unambiguous rejection or waiver clause, while not necessary, will be sufficient. Koenig v. Mission Ins. Co., 106 Ariz. 75, 471 P.2d 271 (1970); Lamb v. Midwest Mutual, supra; Brady v. Universal Underwriters Ins. Group, 37 Ohio App.2d 107, 307 N.E.2d 548 (1973).

We distinguish this case from the more common situation of a layperson applying for insurance. There the insured relies heavily on the agent for information and guidance in choosing appropriate liability coverage. He is not likely to know the requirements of laws regulating insurance in this state, or of his options regarding coverage and policy limits.

Under those circumstances some overt and unambiguous expression of rejection is arguably required to ensure the applicant is apprised of the existence of UMC and of his right...