Hephner By and Through Hephner v. Traders Ins. Co.

• Decision Date: 10 December 1993
• Docket Number: No. 68875,68875
• Citation: 864 P.2d 674,254 Kan. 226
• Parties: Tiphani J. HEPHNER, a minor, By and Through her father and next friend, Claude R. HEPHNER, Appellee, v. TRADERS INSURANCE COMPANY, Appellant.
• Court: Kansas Supreme Court

Page 674

864 P.2d 674

254 Kan. 226

Tiphani J. HEPHNER, a minor, By and Through her father and next friend, Claude R. HEPHNER, Appellee, v. TRADERS INSURANCE COMPANY, Appellant.

No. 68875.

Supreme Court of Kansas.

Dec. 10, 1993.

Syllabus by the Court

1. "Substitution benefits" means allowances for appropriate and reasonable expenses incurred in obtaining other ordinary

and necessary services in lieu of those that, but for the injury, an injured person would have performed for the benefit of such person or such person's family, subject to a maximum of $25 per day for not longer than 365 days after the date such expenses are incurred. K.S.A.1992 Supp. 40-3103(w).

2. To recover substitution benefits, an insured must provide proof of genuine economic loss or liability for expenses incurred.

3. A liberal construction of the notice provision of K.S.A. 40-3110 requiring payment of PIP benefits upon receipt of reasonable proof of such loss and the amount of expenses and loss incurred is necessary to attainment of the purpose and objectives of the Kansas Automobile Injury Reparations Act.

4. An insured has provided reasonable proof of his right to recover PIP benefits whenever he furnishes to his insurer a bill for medical treatment which, when viewed with other objective facts furnished to the insurer, shows a clear relation to a covered loss.

5. Under the provisions of the Kansas Automobile Injury Reparations Act, compensation for substitution services provided by family members is available to a survivor.

William A. Vickery, of McMaster and McMaster, Wichita, argued the cause and Kevin M. McMaster, of the same firm, was with him on the briefs, for appellant.

Bill H. Raymond, of Alpha-Omega Law Office, Wichita, argued the cause, and Clay Cox, of the same firm, was on the briefs, for appellee.

ABBOTT, Justice:

The issues in this appeal are what must be proved to recover "substitution benefits" under an automobile insurance policy and whether attorney fees should be paid by the insurance carrier.

The trial court held the minor child did not have to prove an "actual economic loss or any incurred expense" to receive "substitution benefits" under the policy. The Court of Appeals reversed the trial court's decision in 18 Kan.App.2d 344, 852 P.2d 520 (1993). The Court of Appeals held a plaintiff must prove actual economic loss in order to recover for reasonable expenses incurred. This court granted plaintiff's petition for review.

This case was tried on stipulated facts. Tisha J. Hephner was killed in an automobile accident on January 25, 1991. Tisha was the mother of Tiphani J. Hephner, born March 17, 1987.

At the time of her death, Tisha had an automobile insurance policy with Traders Insurance Company which provided Personal Injury Protection (PIP) benefits, as required by the Kansas Automobile Injury Reparations Act (KAIRA), K.S.A. 40-3101 et seq.

Tiphani Hephner is Tisha's sole survivor under the insurance policy and KAIRA. Prior to Tisha's death, she and Tiphani resided with Tisha's parents (Tiphani's grandparents), Claude and Judy Hephner. Tisha was employed at the time of her death, and Judy assisted with Tiphani's care during Tisha's work hours. Tiphani was born with multiple disabilities, and she attended Rainbows Unlimited for preschool and for physical and speech therapy both before and after Tisha's death. After Tisha's death, Claude and Judy cared for Tiphani and formally adopted her on September 20, 1991. Judy died on December 28, 1991.

KAIRA requires that all automobile owners provide motor vehicle liability insurance coverage, including PIP benefits. K.S.A. 40-3101 et seq. PIP benefits include substitution benefits and survivors' benefits. K.S.A.1992 Supp. 40-3103(q). " 'Substitution benefits' means allowances for appropriate and reasonable expenses incurred in obtaining other ordinary and necessary services in lieu of those that, but for the injury, the injured person would have performed for the benefit of such person or such person's family, subject to a maximum of $25 per day for not longer than 365 days after the date such expenses are incurred." K.S.A.1992 Supp. 40-3103(w). " 'Survivors' benefits' means total allowances to all survivors for: (1) Loss of an injured person's monthly earnings after such person's death, up to a maximum of not less than $900 per month; and (2) substitution benefits following the injured person's death." K.S.A.1992 Supp. 40-3103(y). A "survivor" is defined as "a decedent's spouse, or child under the age of 18 years." K.S.A.1992 Supp. 40-3103(x).

The Court of Appeals phrased the issue before it as "Must a plaintiff prove actual economic loss in order to recover for reasonable expenses incurred?" Hephner, 18 Kan.App.2d at 345, 852 P.2d 520. This construction was evidently based on two conclusions of law made by the trial court: (1) "It is sufficient for Plaintiff to recover survivors benefits if the Claimant is within the statutory definition of a 'survivor' without the necessity of proving actual economic loss or any incurred expense," and (2) "Since Tiphani Hephner is a 'survivor' she falls into the definition of benefits to be provided by 'substitution benefits' under Defendant's insurance policy and the Kansas Statutes. It is not necessary for Plaintiff to establish actual economic loss or expenses incurred to recover these benefits." The Court of Appeals answered its question in the affirmative, holding that a plaintiff must prove genuine economic loss in order to recover substitution benefits. Hephner, 18 Kan.App.2d at 345-46, 852 P.2d 520.

The Court of Appeals based its holding requiring genuine economic loss on three factors. First, the court considered the definition of "incur": " 'To become liable or subject to, to bring down upon oneself, as to incur debt, danger, displeasure and penalty, and to become through one's own action liable or subject to.' Black's Law Dictionary 768 (6th ed. 1990). See Webster's Third New International Dictionary 1146 (1986)." Hephner, 18 Kan.App.2d at 345, 852 P.2d 520.

The Court of Appeals next discussed the comments to the Uniform Motor Vehicle Accident Reparations Act, which includes a provision for replacement services benefits similar to the substitution benefits under KAIRA. The definition of "survivor's replacement services loss" under § 1(a)(5)(v) of the Uniform Motor Vehicle Accident Reparations Act means "expenses reasonably incurred." 14 U.L.A. 35, 43 (1990). The comments state that recovery is limited to "reasonable expenses incurred, such as those in hiring a substitute to perform the services. For example, a housewife whose injury prevented her from performing services in the home could not attribute loss to the incapacity itself, but loss would be suffered if domestic help were hired to perform the services." 14 U.L.A. at 46. In other words, recovery is permitted "to cover the cost of hiring someone to perform the services, rather than to compensate for the mere loss of the ability to perform them." Hephner, 18 Kan.App.2d at 346, 852 P.2d 520 (citing 1 No-Fault and Uninsured Motorist Automobile Insurance § 11.40, p. 11-46 [1992].

Finally, the Court of Appeals cited cases from other jurisdictions which support a requirement of genuine economic loss or expenses actually incurred. These cases and others support such a requirement. See France v. Ky. Farm Bureau Mut. Ins., 605 S.W.2d 773 (Ky.App.1980), rev. denied October 28, 1980; Schaible v. Mich. Mutual, 116 Mich.App. 116, 321 N.W.2d 860 (1982), lv. to appeal denied 417 Mich. 920 (1983); Adkins v. Auto Owners Ins. Co., 105 Mich.App. 431, 306 N.W.2d 312 (1980) (cited in Hephner), lv. to appeal denied 411 Mich. 912 (1981); Youmans v. Citizens Ins. Co., 89 Mich.App. 387, 280 N.W.2d 539, lv. to appeal denied 407 Mich. 894 (1979); Nadeau v. Austin Mut. Ins. Co., 350 N.W.2d 368 (Minn.1984); Fandray v. Nationwide Mut. Ins. Co., 313 Pa.Super. 186, 459 A.2d 801 (1983) (cited in Hephner).

Two cases which hold that the plaintiff was entitled to replacement service benefits without having to prove actual economic loss are distinguishable because those cases turned on the language of the statute which made payment of the benefits mandatory. Rindahl v. National Farmers Union Ins., 373 N.W.2d 294 (Minn.1985); Maros v. Transamerica Insurance Company, 76 N.J. 572, 388 A.2d 971 (1978). The provision for substitution services in KAIRA is different than the provisions in Rindahl and Maros; thus, those cases are of no assistance in the instant case.

The provision in KAIRA for substitution benefits providing coverage for "appropriate and reasonable expenses incurred" requires proof of genuine economic loss. The Court of Appeals did not err in so holding. This does not end the inquiry.

Tiphani argued in her petition for review and in her supplemental brief that she has proven actual expenses were incurred in obtaining ordinary and necessary services from Claude to replace those that her mother would have provided. She notes extensively the services Claude and Judy provided to Tiphani although they had no duty or obligation to do so and the expense she incurred in obtaining their services even though she has not yet paid the amount owed.

The Court of Appeals stated in its opinion that "Claude and Judy did not hire anyone to care for Tiphani; they have incurred no genuine economic loss." Hephner, 18 Kan.App.2d at 346, 852 P.2d 520. This statement, while correct, is irrelevant. Claude and Judy are not "survivors" under Tisha's insurance policy and they are not eligible to recover these insurance benefits. Rather, their status and involvement in this case is only as the providers of ordinary and necessary services for Tiphani that her mother would have performed but for her death. In other words, Claude and Judy are the people performing the services Tisha was no longer able to perform. Claude's name in the caption of this action as Tiphani's "next friend" does not...